UNITED STATES
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 Report): FEBRUARY 6, 1997
THE NATIONAL REGISTRY INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation)
0-20270 95-4346070
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(Commission File Number) (I.R.S. Employer
Identification Number)
2502 ROCKY POINT DRIVE
TAMPA, FLORIDA 33607
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(Address of Principal Executive Offices) (Zip Code)
(813) 636-0099
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(Registrant's Telephone Number, Including Area Code)
2501-118TH AVENUE NORTH
ST. PETERSBURG, FLORIDA 33716
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(Former Name or Former Address, if Changed Since Last Report)
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Exhibit Index at Page 5
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ITEM 1. CHANGE IN CONTROL OF REGISTRANT
Not applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 5. OTHER EVENTS
The attached exhibits are incorporated by reference herein, and
the description set forth below is qualified in its entirety by
reference to such exhibits.
On February 6, 1997, The National Registry, Inc. (the "Company")
completed a new financing pursuant to which two accredited
investment funds purchased from the Company an aggregate of
350,000 shares of Series C Preferred Stock, $.01 par value per
share (the "Series C Preferred Stock"), for a gross cash purchase
price of $7 million before commissions and expenses. Shares of
the Series C Preferred Stock are convertible at the option of the
holder into shares of the Company's common stock, $.01 par value
per share (the "Common Stock"), at the lesser of (i) $2.375 per
share or (ii) 82.5% of a floating price equal to the average
closing bid price of the Common Stock for the five trading days
immediately preceding the date of conversion. The Series C
Preferred Stock is convertible, as to one-third of such shares,
beginning 121 days after the closing date, as to an additional
one-third of such shares, beginning 151 days after the closing
date and, as to the remaining shares, beginning 181 days after
the closing date. All shares of Series C Preferred Stock issued
and outstanding as of February 4, 2000 will automatically convert
into shares of Common Stock. The Company may redeem the Series C
Preferred Stock at any time based on a formula relating to the
then applicable conversion price or under certain other
circumstances. In addition, as part of such transaction, the
Company issued to such accredited investment funds warrants to
purchase, within five years of the date of closing, up to 400,000
shares of Common Stock at an exercise price of $2.6125 per share,
subject to certain adjustments from time to time. The Company has
agreed to file a registration statement for the underlying Common
Stock prior to March 17, 1997 and to use its reasonable best
efforts to cause such registration statement to become effective
by June 5, 1997.
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ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibits
The exhibits listed on the Exhibit Index on page 5 are filed as
part of this Report.
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE NATIONAL REGISTRY INC.
By: /s/ JOHN GUSTAFSON
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Name: John Gustafson
Title: President and Chief Executive
Officer
Date: February 14, 1997
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EXHIBIT INDEX
EXHIBIT PAGE NO.
- ------- -------
3 Statement of Rights and Preferences of Series C 6
Convertible Preferred Stock of The National Registry
Inc., filed February 5, 1997
10.1 Convertible Preferred Stock Purchase Agreement, 23
dated as of January 31, 1997, by and among The National
Registry Inc., Clearwater Fund IV, LLC, and JNC
Opportunity Fund Ltd.
10.2 Form of Warrant 44
99 Press release dated February 6, 1997 55
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EXHIBIT 3
STATEMENT OF RIGHTS AND PREFERENCES OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
THE NATIONAL REGISTRY INC.
The undersigned, John Gustafson and David Brogan, hereby
certify that:
IX. They are the duly elected and acting President and
Secretary, respectively, of The National Registry Inc., a Delaware corporation
(the "COMPANY").
X. The Certificate of Incorporation of the Company authorizes
1,000,000 shares of preferred stock, $.01 par value per share, of which 100,000
shares have been authorized and are issued and outstanding.
XI. The following is a true and correct copy of resolutions
duly adopted by the Board of Directors of the Company (the "BOARD OF DIRECTORS")
at a meeting duly held February 4, 1997, which constituted all requisite action
on the part of the Company for adoption of such resolutions.
RESOLUTIONS
WHEREAS, the Board of Directors is authorized to provide for
the issuance of the shares of preferred stock in series, and by filing a
certificate pursuant to the applicable law of the State of Delaware, to
establish and issue one or more series of Preferred Stock with such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and with such
qualifications, limitations or restrictions thereon as the Board of Directors
may determine.
WHEREAS, the Board of Directors desires, pursuant to its
authority as aforesaid, to designate a new series of preferred stock, set the
number of shares constituting such series and fix the rights, preferences,
privileges and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
hereby designates a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of
preferred stock shall be designated as the Series C Convertible Preferred Stock
(the "PREFERRED STOCK"), and the number of shares so designated shall be 350,000
(which shall not be subject to increase). Each
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share of Preferred Stock shall have a par value of $.01 per share and a stated
value of $20 per share (the "STATED VALUE").
Section 2. DIVIDENDS.
(a) Holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) equal to 6% per annum, payable,
at the option of the Company in cash or shares of Common Stock, quarterly in
arrears, but in no event later than the Conversion Date (as hereinafter defined)
applicable to such share of Preferred Stock. Dividends on the Preferred Stock
shall accrue daily commencing on the Original Issue Date (as defined in SECTION
7), and shall be deemed to accrue on such date whether or not earned or declared
and whether or not there are profits, surplus or other funds of the Company
legally available for the payment of dividends. The party that holds the
Preferred Stock on an applicable record date for any dividend payment after the
Board of Directors declared such dividends or on a Conversion Date with respect
to shares of Preferred Stock being converted on such date will be entitled to
receive such dividend payment and any other accrued and unpaid dividends which
accrued prior to such dividend payment date, without regard to any sale or
disposition of such Preferred Stock subsequent to the applicable record date but
prior to the applicable dividend payment date. Except as otherwise provided
herein, if at any time the Company pays less than the total amount of dividends
then accrued on account of the Preferred Stock, such payment shall be
distributed ratably among the holders of the Preferred Stock based upon the
number of shares held by each holder on such applicable record date. Payment of
dividends on the Preferred Stock is further subject to the provisions of SECTION
5(C)(I).
(b) Notwithstanding anything to the contrary contained herein,
the Company may not issue shares of Common Stock in payment of dividends (and
must deliver cash in respect thereof) on the Preferred Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to issue such dividends to be paid in shares of Common Stock;
(ii) the shares of Common Stock to be issued in
respect of such dividends are not registered for resale pursuant to an effective
registration statement that names the recipient of such dividend as a selling
stockholder thereunder;
(iii) the shares of Common Stock to be issued in
respect of such dividends are not listed on the Nasdaq SmallCap Market (or
Nasdaq National Market, The American Stock Exchange or The New York Stock
Exchange) or any other exchange or quotation system on which the Common Stock is
then listed for trading; or
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(iv) the issuance of such shares would result in the
recipient thereof beneficially owning, in accordance with Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, more than 4.9% of the
issued and outstanding shares of Common Stock.
(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
SECTION 7), nor shall the Company directly or indirectly pay or declare any cash
dividend or make any cash distribution (other than a dividend or distribution
described in SECTION 5) upon, nor shall any cash distribution be made in respect
of, any Junior Securities, nor shall any monies be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities unless all accrued and unpaid dividends on the Preferred Stock for
all past dividend periods shall have been paid.
Section 3. VOTING RIGHTS. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights. However, so long as any shares of Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the holders of a majority of
the shares of the Preferred Stock then outstanding, (a) alter or change
adversely the powers, preferences or rights given to the Preferred Stock or (b)
authorize or create any class of stock ranking as to dividends or distribution
of assets upon a Liquidation (as defined in Section 4) senior to or prior to
with the Preferred Stock.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "LIQUIDATION"),
the holders of Preferred Stock shall be entitled to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid
dividends per share, whether declared or not, before any distribution or payment
shall be made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the holders of Preferred Stock shall be distributed
among the holders of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. A sale, conveyance or disposition of all or substantially all of
the assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of the
Company is disposed of, or a consolidation or merger of the Company with or into
any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of SECTION 5. The Company shall mail
written notice of any such Liquidation, not less than 30 days prior to the
payment date stated therein, to each record holder of Preferred Stock.
Section 5. CONVERSION.
(a) (i) Each share of Preferred Stock may be convertible into
shares of Common Stock (subject to reduction pursuant to SECTION 5(A)(II)) at
the Conversion Ratio (as defined in SECTION 7) at the option of the holder in
whole or in part as follows: (1) 33% of the
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shares of Preferred Stock purchased pursuant to the Purchase Agreement may be
converted pursuant to this Section at any time after 121 days after the Original
Issue Date, PROVIDED, HOWEVER, that a transferee, directly or indirectly, from
an original Purchaser of Preferred Stock may only convert that number of shares
of Preferred Stock that such original Purchaser would be entitled to convert,
after considering all conversions by such Purchaser and all transferees,
directly or indirectly, from such Purchaser, but for such transfer; (2) an
additional 33% of the shares of Preferred Stock owned by any holder thereof (as
measured on the Original Issue Date) may be converted at any time after the date
which is 151 days after the Original Issue Date, PROVIDED, HOWEVER, that a
transferee, directly or indirectly, from an original purchaser of Preferred
Stock may only convert that number of shares of Preferred Stock that such
original purchaser would be entitled to convert, after considering all
conversions by such Purchaser and all transferees, directly or indirectly, from
such Purchaser, but for such transfer; and (3) the balance of the shares of
Preferred Stock owned by any holder may be converted at any time after the date
which is 181 days after the Original Issue Date. The holder shall effect
conversions by surrendering the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, together with a
completed and executed conversion notice substantially in the form attached
hereto as EXHIBIT A (the "HOLDER CONVERSION NOTICE"). Each Holder Conversion
Notice shall specify the number of shares of Preferred Stock to be converted and
the date on which such conversion is to be effected, which date may not be prior
to the date the holder delivers to the Company such Holder Conversion Notice by
facsimile (the "HOLDER CONVERSION DATE"). If no Holder Conversion Date is
specified in a Holder Conversion Notice, the Holder Conversion Date shall be the
date that the Holder Conversion Notice is deemed received pursuant to SECTION
5(I). Subject to SECTIONS 5(B) and 5(A)(II) and, as to the original holder (or
its designee), subject to SECTION 4.8 of the Purchase Agreement (as defined in
SECTION 7), each Holder Conversion Notice, once given, shall be irrevocable. If
the holder is converting less than all shares of Preferred Stock represented by
the certificate or certificates tendered by the holder with the Holder
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall promptly deliver to such holder (in the manner
within the time set forth in Section 5(b)) a certificate for such number of
shares as have not been converted.
(ii) CERTAIN REGULATORY APPROVAL. If on the Holder
Conversion Date applicable to any conversion under this SECTION 5(A), (A) the
Common Stock is then listed for trading on the Nasdaq National Market or if the
rules of the Nasdaq Stock Market are hereafter amended to extend Rule 4460(i)
promulgated thereby (or any successor or replacement provision thereof) to the
Nasdaq SmallCap Market and such rule is applicable to the Company, (B) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion of all outstanding
shares of Preferred Stock, together with any shares of Common Stock previously
issued upon conversion of Preferred Stock, would exceed 20% of the number of
shares of Common Stock outstanding on the Original Issue Date (the "ISSUABLE
MAXIMUM"), and (C) the Company has not previously obtained Shareholder Approval
(as defined below), then the Company shall issue to the holder so requesting
conversion of Preferred Stock the Issuable Maximum and, with respect to any
shares of Common Stock that otherwise would have been issuable to such holder in
respect of such Holder Conversion Notice at issue in excess of the Issuable
Maximum, the holder shall have the
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option to require the Company to either (1) as promptly as possible, but in no
event later than 90 days after such Holder Conversion Date, convene a meeting of
the holders of the Common Stock and obtain the Shareholder Approval or (2)
redeem, from funds legally available therefor at the time of such redemption,
the balance of the Preferred Stock subject to such Holder Conversion Notice at a
price per share equal to the product of (i) the average Per Share Market Value
for the five (5) Trading Days immediately preceding (1) the applicable Holder
Conversion Date or (2) the date of payment in full by the Company of such
redemption price, whichever is greater, and (ii) the Conversion Ratio calculated
on (1) the applicable Holder Conversion Date or (2) the date of payment by the
Company of such redemption price, whichever date yields a lower Conversion Price
denominator for the determination of the Conversion Ratio; PROVIDED, HOWEVER,
that if the holder has requested that the Company obtain Shareholder Approval
under paragraph (1) above and the Company fails for any reason to obtain such
Shareholder Approval within the time period set forth in (1) above, the Company
shall be obligated to redeem the Preferred Stock not converted as a result of
the provisions of this Section in accordance with the provisions of paragraph
(2) above, and in such case the interest contemplated by the immediately
succeeding sentence shall be deemed to accrue from the applicable Holder
Conversion Date. If the holder has requested that the Company redeem shares of
Preferred Stock pursuant to this Section and fails for any reason to pay the
redemption price under (2) above within seven days after the applicable Holder
Conversion Date, the Company will pay interest on such redemption price at a
rate of 10% per annum to the converting holder of Preferred Stock, accruing from
the applicable Holder Conversion Date until the redemption price plus any
accrued interest thereon is paid in full. The entire redemption price, including
interest thereon, shall be paid in cash. "SHAREHOLDER APPROVAL" means the
approval by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Company held in accordance with
the Company's Certificate of Incorporation and by-laws, of the issuance by the
Company of shares of Common Stock exceeding the Issuable Maximum as a
consequence of the conversion of Preferred Stock into Common Stock at a price
less than the greater of the book or market value on the Original Issue Date as
and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock Market
(or any successor or replacement provision thereof).
(b) Not later than three Trading Days after the applicable
Holder Conversion Date, the Company will deliver to the applicable holder (i) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the
conversion of shares of Preferred Stock (subject to reduction pursuant to
SECTION 5(A)(II) and SECTION 4.8 of the Purchaser Agreement) and (ii) one or
more certificates representing the number of shares of Preferred Stock not
converted; PROVIDED, HOWEVER, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Preferred Stock until certificates evidencing such shares of
Preferred Stock are either delivered for conversion to the Company or any
transfer agent for the Preferred Stock or Common Stock, or the holder of such
Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security reasonably
acceptable to the Company) reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon
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request of a holder of the Preferred Stock, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section. If such certificate or certificates are not delivered by the date
required under this SECTION 5(B), the holder shall be entitled by written notice
to the Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the Company
shall immediately return the certificates representing the shares of Preferred
Stock tendered for conversion. If the Company fails to deliver to the holder
such certificate or certificates representing shares of Common Stock pursuant to
this Section, including for purposes hereof, any shares of Common Stock to be
issued on the applicable Holder Conversion Date on account of accrued but unpaid
dividends hereunder, prior to the fifth Trading Day after the applicable Holder
Conversion Date, except in the case that such failure to deliver certificate(s)
was not in the control of the Company or could not be accomplished without undue
or unreasonable effort or expense, then the Company shall pay to such holder, in
cash, as liquidated damages and not as a penalty, $1,500 for each day after such
fifth Trading Day until such certificates are delivered. If the Company fails to
deliver to the holder such certificate or certificates pursuant to this Section
prior to the 30th day after the applicable Holder Conversion Date, the Company
shall, at such holder's option (i) redeem, from funds legally available therefor
at the time of such redemption, such number of shares of Preferred Stock then
held by such holder as to which such Common Stock certificate(s) were not
delivered timely as required hereby, as requested by such holder, and (ii) pay
all accrued but unpaid dividends on account of the Preferred Stock for which the
Company shall have failed to issue Common Stock certificates hereunder, in cash.
The redemption price per share shall be equal to the product of (A) the average
Per Share Market Value for the five (5) Trading Days immediately preceding (1)
the applicable Holder Conversion Date or (2) the date of payment in full by the
Company of such redemption price, whichever is greater, and (B) the Conversion
Ratio calculated on (1) the Conversion Date or (2) the date of payment by the
Company of such redemption price, whichever date yields a lower Conversion Price
denominator for the determination of the Conversion Ratio. If the holder has
requested that the Company redeem shares of Preferred Stock pursuant to this
Section and the Company fails for any reason to pay the redemption price under
(2) above within seven days after such notice is deemed received by the Company
pursuant to SECTION 5(I), the Company will pay interest on the redemption price
at a rate of 10% per annum, in cash to such holder, accruing from such seventh
day until the redemption price and any accrued interest thereon is paid in full.
(c) (i) The conversion price for each share of Preferred Stock
(the "CONVERSION PRICE") in effect on any Conversion Date shall be the lesser of
(a) $2.375 (the "INITIAL CONVERSION PRICE") and (b) 82.5% of the average Per
Share Market Value for the five (5) Trading Days immediately preceding the
Conversion Date (the "ADJUSTABLE CONVERSION PRICE"); provided that, (a) if the
registration statement contemplated by the Registration Rights Agreement, dated
the Original Issue Date (the "REGISTRATION RIGHTS AGREEMENT"), by and between
the Company and the original holders of the Preferred Stock, pursuant to which
the Company is, among other things, required to register the resale of the
shares of Common Stock issuable upon conversion of the Preferred Stock (the
"UNDERLYING SHARES REGISTRATION STATEMENT") is not filed on or prior to the 40th
day after the Original Issue Date, or (b) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461 promulgated
under the
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Securities Act of 1933, as amended or Rule 12d1-2 promulgated under the
Securities Exchange Act of 1934, as amended, or other similar rule, as
applicable, within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that an
Underlying Shares Registration Statement will not be "reviewed," or (c) if the
Underlying Shares Registration Statement is not declared effective by the
Commission on or prior to the 120th day after the Original Issue Date (which
period shall be extended to 150 days after the Original Issue Date in the event
that the Commission notifies the Company that the Underlying Shares Registration
Statement can not be filed on Form S-3 promulgated under the Securities Act
solely because the shares of Preferred Stock are convertible or the Warrants are
exercisable prior to the 180th day after the Original Issue Date), or (d) if
such Underlying Shares Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective at any time
when a registration statement covering the Underlying Shares is required to be
maintained effective pursuant to the Registration Rights Agreement prior to the
expiration of the "Effectiveness Period" (as such term as defined in the
Registration Rights Agreement), without being succeeded within 10 Business Days
by a subsequent Underlying Shares Registration Statement or an amendment or
supplement to or other action with respect to the Underlying Shares Registration
Statement filed with and declared effective by the Commission, or (e) if trading
in the Common Stock shall be suspended for any reason on the principal market or
exchange for such shares (other than as a result of the suspension of trading in
securities on such market or exchange generally or temporary suspension pending
the release of material information) for more than three Trading Days (PROVIDED,
HOWEVER; that this paragraph (e) shall not be applicable to a Purchaser if such
Purchaser exercises its rights under Section 4.10 of the Purchase Agreement, or
(f) if the conversion rights of the holders of Preferred Stock hereunder are
suspended for any reason other than due to the fault of a holder of Preferred
Stock, in each case under clauses (b), (d), (e) and (f) if such event occurs on
or after the date which is 121 days after the Original Issue Date (any such
failure being referred to as an "Event," and for purposes of clauses (a), (c)
and (f) the date on which such Event occurs, or for purposes of clause (b) the
date on which such five (5) Business Days period is exceeded, or for purposes of
clause (d) the date which such 10 Business Day-period is exceeded, or for
purposes of clause (e) the date on which such three Trading Day period is
exceeded, being referred to as "Event Date"), the Conversion Price shall be
decreased by 2.5% each month (i.e., 80% as of the Event Date and 77.5% as of the
one month anniversary of the Event Date) until the earlier to occur of the
second month anniversary after the Event Date and such time as the applicable
Event is cured. Commencing the second month anniversary after the Event Date,
the Company shall pay to the holders of the Preferred Stock 2.5% of the
outstanding amount of Preferred Stock (each holder being entitled to receive
such portion of such amount as equals its pro rata portion of the Preferred
Stock then outstanding) in cash as liquidated damages, and not as a penalty on
the first day of each monthly anniversary of the Event Date until such time as
the applicable Event, is cured. Any decrease in the Conversion Price pursuant to
this Section shall continue notwithstanding the fact that the Event causing such
decrease has been subsequently cured. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement.
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(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities payable
in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a larger number of shares, (c) combine outstanding shares of Common Stock into a
smaller number of shares, or (d) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, the Initial Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. In addition, the Adjustable Conversion Price
shall be calculated giving appropriate effect to the applicable event described
in (a), (b), (c) or (d) for all five Trading Days applicable to such
determination. Any adjustment made pursuant to this SECTION 5(C)(II) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value of Common Stock
at the record date mentioned below, the Initial Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the numerator
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such Per Share Market Value. Such adjustment
shall be made whenever such rights or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to this
SECTION 5(C)(III), if any such right or warrant shall expire and shall not have
been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the provisions of
this SECTION 5 after the issuance of such rights or warrants) had the adjustment
of the Initial Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to holders of Preferred Stock) evidences of its indebtedness (other than cash
dividends) or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in SECTIONS 5(C)(II) and (III)
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above), then in each such case the Initial Conversion Price at which each share
of Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Initial Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and of which the numerator shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; PROVIDED, HOWEVER, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "APPRAISER") selected in good faith by the holders of a majority in
interest of the shares of Preferred Stock then outstanding and consented to by
the Company(which consent shall not be unreasonably withheld); and PROVIDED,
FURTHER, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in good faith, in which
case the fair market value shall be equal to the average of the determinations
by each such Appraiser. In either case the adjustments shall be described in a
statement provided to the holders of Preferred Stock of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
(v) All calculations under this SECTION 5 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) Whenever the Initial Conversion Price is adjusted
pursuant to SECTION 5(C)(II),(III) or (IV), the Company shall promptly mail to
each holder of Preferred Stock, a notice setting forth the Initial Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(vii) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person pursuant
to which the Company will not be the surviving entity, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, the holders of the Preferred Stock then outstanding shall have
the right thereafter to, at their option, upon at least five (5) Business Days
prior written notice, provided that the Purchaser have received a notice of such
proposed transaction at least twenty (20) days prior to the effective date or
the date of the closing, as the case may be, of the reclassification,
consolidation, merger, sale, transfer or share exchange, (A) convert such shares
only into the shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the holders of the Preferred Stock shall be entitled upon such event to receive
such amount of securities, cash or
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<PAGE>
property as the shares of the Common Stock of the Company into which such shares
of Preferred Stock could have been converted immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange would
have been entitled or (B) prior to the six month anniversary of the date the
Underlying Shares Registration Statement has been declared effective by the
Commission, require the Company to redeem, from funds legally available therefor
at the time of such redemption, its shares of Preferred Stock at a price per
share equal to the product of (i) the average Per Share Market Value for the
five (5) Trading Days immediately preceding the effective date or the date of
the closing, as the case may be, of the reclassification, consolidation, merger,
sale, transfer or share exchange triggering such redemption right and (ii) the
Conversion Ratio calculated on the effective date or the date of the closing of
the reclassification, consolidation, merger, sale, transfer or share exchange
triggering such redemption right, as the case may be; PROVIDED, HOWEVER, that
beginning on the date 151 days after the Original Issuance Date, the maximum
amount payable, in the aggregate to all holders of Preferred Stock pursuant to
the application of this provision shall be $4,666,667; PROVIDED, FURTHER,
HOWEVER, that beginning on the date 181 days after the Original Issuance Date,
the maximum amount payable in the aggregate to all holders of Preferred Stock
pursuant to the application of this provision shall be $2,333,333. The entire
redemption price shall be paid in cash, and the terms of payment of such
redemption price shall be subject to the provisions set forth in SECTION 6(C).
The terms of any such consolidation, merger, sale, transfer or share exchange
shall include such terms so as to give to the holder of Preferred Stock the
right to receive the securities, cash or property set forth in this SECTION
5(C)(VII) as part of such consolidation, reclassifications, merger, sale,
transfer or share exchange.
(viii) If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock in
Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of any
rights; or
D. the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company, any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, of any compulsory share
of exchange whereby the Common Stock is
converted into other securities, cash or
property; or
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<PAGE>
E. the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Preferred Stock, and shall cause to be mailed to
the holders of Preferred Stock at their last addresses as they shall appear upon
the stock books of the Company, to the extent practicable, at least 30 calendar
days prior to the applicable record or effective date hereinafter specified and
with respect to paragraph D. above, after such information has become public, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; PROVIDED, HOWEVER, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert shares of Preferred Stock during
such 30-day period commencing the date of such notice to the effective date of
the event triggering such notice.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which would reasonably be
expected to materially and adversely affect the rights of the holders of
Preferred Stock (different than or distinguished from the effect generally on
rights of holders of any class of the Company's capital stock) or if at any time
any such conditions are expected to arise by reason of any action contemplated
by the Company, the Company shall mail a written notice briefly describing the
action contemplated and the material adverse effects of such action on the
rights of the holders of Preferred Stock to the extent practicable at least 30
calendar days prior to the effective date of such action, and an Appraiser
selected by the holders of majority in interest of the Preferred Stock and
consented to by the Company (such consent not to be unreasonably withheld) shall
give its opinion as to the adjustment, if any (not inconsistent with the
standards established in this SECTION 5), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which shares of Preferred
Stock may thereafter be convertible) and any distribution which is or would be
required to preserve without diluting the rights of the holders of shares of
Preferred Stock; PROVIDED, HOWEVER, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an additional
Appraiser, in good faith, in which case the adjustment shall be equal to the
average of the adjustments recommended by each such Appraiser. The Board of
Directors shall, consistent with their fiduciary obligations, make the
adjustment recommended forthwith upon the receipt of such opinion or opinions or
the taking of any such action contemplated, as the case may be.
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<PAGE>
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
holders of Preferred Stock, such number of shares of Common Stock as shall be
issuable (taking into account the adjustments and restrictions of SECTION 5(C)
to the extent known) upon the conversion of all outstanding shares of Preferred
Stock and payment of dividends hereunder. The Company shall use its best efforts
to ensure that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid and nonassessable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the holder of
a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(g) The issuance of certificates for shares of Common
Stock on conversion of Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(h) Shares of Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares of
undesignated stock.
(i) Any and all notices or other communications or deliveries
to be provided by the holders of the Preferred Stock hereunder, including,
without limitation, any Holder Conversion Notice, shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service or sent by certified or registered mail, postage prepaid,
addressed to the attention of the Chief Financial Officer of the Company at the
facsimile telephone number or address of the principal place of business of the
Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to each holder of Preferred Stock at the facsimile telephone
number or address of such holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal place of
business of the holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
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<PAGE>
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
4:30 p.m. (Eastern Time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 4:30 p.m. (Eastern Time) on any date
and earlier than 11:59 p.m. (Eastern Time) on such date, (iii) four days after
deposit in the United States mails, (iv) the Business Day following the date of
mailing, if send by nationally recognized overnight courier service, or (v) upon
actual receipt by the party to whom such notice is required to be given.
(j) All shares of Preferred Stock outstanding on the third
anniversary of the Original Issue Date shall automatically be converted into the
right to receive that number of shares of Common Stock which would otherwise
have been issuable to the holder thereof is such holder had delivered a Holder
Conversion Notice and such date was the Holder Conversion Date. Thereafter, all
shares of Preferred Stock shall cease to be outstanding and shall have the
status of authorized by unissued shares of undesignated stock.
Section 6. REDEMPTIONS.
(a) The Company shall have the right, exercisable at any time
upon 30 days notice to the holders of the Preferred Stock given at any time
after the Original Issue Date, to redeem, from funds legally available therefor
at the time of such redemption, all or any portion of the shares of Preferred
Stock which have not previously been converted or redeemed, at a price per share
equal to the product of (i) the average Per Share Market Value for the five
Trading Days immediately preceding the date of the redemption notice referenced
above and (ii) the Conversion Ratio calculated on the date of such redemption
notice. The entire redemption price shall be paid in cash. Holders of Preferred
Stock may convert any shares of Preferred Stock, including shares subject to a
redemption notice given under this Section, during the period from the date of
such redemption notice through the 30th day thereafter.
(b) If any portion of the redemption price under Section 6(a)
shall not be paid by the Company within 7 calendar days after the date due under
such Sections, such redemption price shall be increased by 10% per annum until
paid (which amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of such redemption price remains unpaid for more than 7
calendar days after the date due, the holder of the Preferred Stock subject to
such redemption may elect, by written notice to the Company given within 45 days
after the date due, to either (i) demand conversion in accordance with the
formula and the time frame therefor set forth in Section 5 of all of the shares
of Preferred Stock for which such redemption price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid Redemption Shares"), in
which event the Per Share Market Price for such shares shall be the lower of the
Per Share Market Price calculated on the date such redemption price was
originally due and the Per Share Market Price as of the holder's written demand
for conversion, or (ii) invalidate AB INITIO such redemption, notwithstanding
anything herein contained to the contrary. If the holder elects option (i)
above, the Company shall within five Trading Days of its receipt of such
election deliver to the holder the shares of Common Stock issuable upon
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<PAGE>
conversion of the Unpaid Redemption Shares subject to such holder conversion
demand and otherwise perform its obligations hereunder with respect thereto; or,
if the Holder elects option (ii) above, the Company shall promptly, and in any
event not later than five Trading Days from receipt of holder's notice of such
election, return to the holder all of the Unpaid Redemption Shares.
Section 7. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"COMMON STOCK" means the Company's common stock, $.01 par
value per share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, of which
the numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid interest thereon), and of which the denominator is the
Conversion Price at such time.
"JUNIOR SECURITIES" means the Common Stock and all other
equity securities of the Company which are junior in rights and liquidation
preference to the Preferred Stock.
"ORIGINAL ISSUE DATE" shall mean the date of the first
issuance of any applicable share of Preferred Stock regardless of the number of
transfers of any particular share of Preferred Stock and regardless of the
number of certificates which may be issued to evidence such Preferred Stock.
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
SmallCap Market or other principle national stock exchange or market on which
the Common Stock is then listed or if there is no such price on such date, then
the closing bid price on such exchange or market on the date nearest preceding
such date, or (b) if the Common Stock is not listed then on the Nasdaq SmallCap
Market or any stock exchange or market, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the Nasdaq Stock
Market at the close of business on such date, or (c) if the Common Stock is not
quoted on the Nasdaq Stock Market, the closing bid price for a share of Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), or (d) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as reasonably determined in
good faith by the holder, or (e) if the Common Stock is not then publicly traded
the fair market value of a share of Common Stock as determined by an Appraiser
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<PAGE>
selected in good faith by the holders of a majority in interest of the shares of
the Preferred Stock and consented to by the Company (which consent shall not be
unreasonably withheld); PROVIDED, HOWEVER, that the Company, after receipt of
the determination by such Appraiser, shall have the right to select an
additional Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Appraiser.
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity or any kind.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock
Purchase Agreement, dated as of January 31, 1997, between the Company and the
original purchasers of the Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the Original Issue Date, by and between the Company and the
original purchasers of Preferred Stock.
"TRADING DAY" means (a) a day on which the Common Stock is
traded on the Nasdaq SmallCap Market or other principal national securities
exchange or market on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the Nasdaq SmallCap Market or any such stock
exchange or market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices).
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of Shares in accordance with the terms hereof and the Purchase
Agreement.
RESOLVED FURTHER, that the President and Secretary of the
Company be, and they hereby are, authorized and directed to prepare, execute,
verify, and file with the Secretary of State of Delaware, a Certificate of
Designation in accordance with these resolutions and as required by law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, The National Registry Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by John
Gustafson its President, and attested by David Brogan, its Secretary, this 5th
day of February.
THE NATIONAL REGISTRY INC.
By: /s/JOHN GUSTAFSON
---------------------
Name: John Gustafson
Title: President
Attest:
By:/s/ DAVID E. BROGAN
---------------------
Name: David Brogan
Title: Secretary
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<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series C Convertible Preferred Stock indicated below, into shares of Common
Stock, $.01 par value per share (the "Common Stock"), of The National Registry
Inc. (the "Company") according to the conditions set forth in the applicable
Certificate of Designation, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations: --------------------------------------------------
Date to Effect Conversion
--------------------------------------------------
Number of shares of Preferred Stock to be Converted
--------------------------------------------------
Number of shares of Common Stock to be Issued
--------------------------------------------------
Applicable Conversion Price
--------------------------------------------------
Number of shares of Common Stock beneficially
owned by the undersigned as of the date of this
notice
--------------------------------------------------
Signature
--------------------------------------------------
Name:
--------------------------------------------------
Address:
The Company undertakes to promptly upon its receipt of this conversion notice
(and, in any case prior to the time it effects the conversion requested hereby),
notify the converting holder by facsimile of the number of shares of Common
Stock outstanding on such date and the number of shares of Common Stock which
would be issuable to the holder if the conversion requested in this conversion
notice were effected in full, whereupon, if the Company determines that such
conversion would result in it owning in excess of 4.9% of the outstanding shares
of Common Stock on such date, the Company shall convert up to an amount equal to
4.9% of the outstanding shares of Common Stock and issue to the holder one or
more certificates representing shares of Preferred Stock which have not been
converted as a result of this provision.
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EXHIBIT 10.1
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of January
31, 1997 (this "AGREEMENT"), by and among The National Registry Inc., a Delaware
corporation (the "COMPANY"), Clearwater Fund IV, LLC, a Delaware limited
liability company ("CLEARWATER"), and JNC Opportunity Fund Ltd., a corporation
organized and existing under the laws of the Cayman Islands ("JNC"). Clearwater
and JNC are each a "PURCHASER" and are collectively, the "PURCHASERS."
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire shares of the Company's Series C Convertible
Preferred Stock, $.01 par value per share (the "PREFERRED STOCK").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE XII
CERTAIN DEFINITIONS
Section 1.1. CERTAIN DEFINITIONS. As used in this Agreement, unless
the context requires a different meaning, the following terms have the meanings
indicated:
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "CONTROL" (including,
with correlative meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government actions
to close.
"CERTIFICATE OF DESIGNATION" shall have the meaning set forth in
Section 2.1(a).
"CLEARWATER WARRANT" shall have the meaning set forth in Section
4.15.
"CLOSING" shall have the meaning set forth in Section 2.1(b).
"CLOSING DATE" shall have the meaning set forth in Section 2.1(b).
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder as in effect on the date hereof.
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<PAGE>
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, $.01 par value per
share.
"DISCLOSURE MATERIALS" means, collectively, the SEC Documents, the
disclosure package delivered to the Purchasers in connection with the offering
by the Company of the Shares and the Schedules to this Agreement furnished by or
on behalf of the Company pursuant to Section 3.1.
"ESCROW AGENT" means Robinson Silverman Pearce Aronsohn & Berman LLP.
"ESCROW AGREEMENT" means the escrow agreement, dated as of the date
hereof, by and among the Company, the Purchasers and the Escrow Agent,
substantially in the form of EXHIBIT E, as the same may be amended, supplemented
or otherwise modified in accordance with its terms.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"JNC WARRANT" shall have the meaning set forth in Section 4.15.
"LEGAL OPINION" means the legal opinion letter of Kaye, Scholer,
Fierman, Hays & Handler, LLP, counsel for the Company, substantially in the form
of EXHIBIT C, dated the Closing Date, addressed to the Purchasers and delivered
in accordance with Section 2.1(c).
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, right of first refusal, charge or security interest of any kind in
or on such asset or the revenues or income thereon or therefrom.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in Section
3.1(a).
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
any Shares, regardless of the number of transfers of any particular Share and
regardless of the number of certificates which may be issued to evidence any
particular Share.
"PER SHARE MARKET VALUE" shall have the meaning set forth in the
Certificate of Designation.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PREFERRED STOCK" shall have the meaning set forth in the recitals
hereto.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.1(a).
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<PAGE>
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement, dated as of the date hereof, by and among the Company and the
Purchasers, substantially in the form of EXHIBIT B, as the same may be amended,
supplemented or otherwise modified in accordance with its terms.
"REQUIRED APPROVALS" shall have the meaning set forth in Section
3.1(f).
"SEC DOCUMENTS" shall have the meaning set forth in Section 3.1(l).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Preferred Stock to be purchased by the
Purchasers pursuant to this Agreement.
"STATED VALUE" shall have the meaning set forth in Section 2.1(a).
"SUBSEQUENT FINANCING NOTICE" shall have the meaning set forth in
Section 4.7.
"SUBSEQUENT SALE" shall have the meaning set forth in Section 4.7.
"SUBSIDIARIES" shall have the meaning set forth in Section 3.1(a).
"TRADING DAY" shall have the meaning set forth in the Certificate of
Designation.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in Section
3.1(b).
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of Shares in accordance with the terms hereof and the Certificate of
Designation.
"UNDERLYING SHARES REGISTRATION STATEMENT" shall have the meaning set
forth in Section 3.1(f).
"WARRANTS" shall have the meaning set forth in Section 4.15.
"WARRANT SHARES" shall have the meaning set forth in Section 3.1(d).
ARTICLE XIII
PURCHASE OF SHARES
Section 2.1. PURCHASE OF SHARES; CLOSING.
(a) Subject to the terms and conditions herein set forth, the Company
shall issue and sell to the Purchasers, and the Purchasers shall purchase from
the Company, on the Closing Date an aggregate of 350,000 Shares, which shall
have the respective rights, preferences and privileges
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<PAGE>
substantially as set forth in EXHIBIT A (the "CERTIFICATE OF DESIGNATION"), at a
price per Share of $20 (the "STATED VALUE"). The aggregate "PURCHASE PRICE" for
the Shares is $7,000,000.
(b) The closing of the purchase and sale of the Shares (the
"CLOSING") shall take place at the offices of the Escrow Agent, 1290 Avenue of
the Americas, New York, New York 10104, immediately following the execution
hereof, or at such other time and/or place as the Purchasers and the Company may
agree. The date of the Closing is referred to herein as the "CLOSING DATE".
(c) At the Closing, the Escrow Agent, in accordance with and subject
to the terms and conditions of the Escrow Agreement, shall, pursuant to
instructions delivered with respect thereto by the Company and the Purchasers,
deliver (i) to Clearwater, (A) one or more stock certificates representing the
250,000 Shares purchased by it hereunder, registered in the name of Clearwater,
(B) the Clearwater Warrant and (C) a Legal Opinion; (ii) to JNC, (A) one or more
stock certificates representing the 100,000 Shares purchased by it hereunder
registered in the name of JNC, (B) the JNC Warrant and (C) a Legal Opinion;
(iii) to the Company the Purchase Price, less the legal fees and disbursements
contemplated in Section 5.1, in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company prior
to the Closing; and (iv) to the party entitled thereto, all documents,
instruments and writings required to have been delivered at or prior to Closing
by either the Company or the Purchasers pursuant to this Agreement.
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to each Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in or contemplated by the SEC Documents or in SCHEDULE 3.1(A) (collectively, the
"SUBSIDIARIES"). Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not reasonably be expected, individually or in the
aggregate, to have a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and the Subsidiaries,
taken as a whole (a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and by the Regis-
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tration Rights Agreement, the Warrants, the Escrow Agreement and Certificate of
Designation (collectively with this Agreement, the "TRANSACTION DOCUMENTS") and
to otherwise carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the Company. Each of
the Transaction Documents has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other general principles of equity. Neither the Company nor any Subsidiary is in
material violation of any of the provisions of its respective certificate of
incorporation, bylaws or other charter documents.
(c) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company is set forth in SCHEDULE 3.1(C). No shares of Common Stock
are entitled to preemptive or similar rights. Except as specifically disclosed
in SCHEDULE 3.1(C), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or,
except as a result of the purchase and sale of the Shares hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as disclosed in or contemplated by the
Disclosure Materials, no Person beneficially owns (as determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) or has the right to acquire by
agreement with the Company in excess of 5% of the Common Stock.
(d) ISSUANCE OF SHARES, WARRANTS, UNDERLYING SHARES AND WARRANT
SHARES. The Shares and Warrants have been duly authorized and, when paid for in
accordance with the terms hereof, the Shares and the Warrants shall be validly
issued, fully paid and nonassessable, free and clear of any Liens created by the
Company. The Company has and at all times while the Shares and any Warrants are
outstanding shall use its best efforts to maintain a reserve of shares of Common
Stock to enable it to perform its conversion and other obligations under this
Agreement, the Warrants and the Certificate of Designation, which reserve shall
be no less than the sum of (i) one and three-fourths times the number of shares
of Common Stock issuable hereunder and pursuant to the terms of the Certificate
of Designation, assuming a conversion of all of the Shares occurred on the
Original Issue Date, and (ii) the number of shares of Common Stock issuable upon
the exercise in full of the Warrants (the "WARRANT SHARES"). When issued in
accordance with the terms hereof, the Certificate of Designation and the
Warrants, the Underlying Shares and Warrant Shares will be duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens
created by the Company.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions
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<PAGE>
contemplated thereby do not and will not (i) conflict with or violate any
provision of its certificate of incorporation or bylaws (each as amended through
the date hereof) or (ii) subject to obtaining the consents specified in SECTION
3.1(F), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, or (iii) to
the knowledge of the Company result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or govern
mental authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), such conflicts, defaults, terminations, amendments, accelera tions,
cancellations and violations as would not reasonably be expected, individually
or in the aggregate, to (x) adversely affect the legality, validity or
enforceability of any of the Transaction Documents, (y) have a Material Adverse
Effect or (z) adversely and materially impair the Company's ability to perform
fully on a timely basis its obligations under the Transaction Documents. The
business of the Company is not being conducted in material violation of any
applicable law, ordinance or regulation of any governmental authority.
(f) CONSENTS AND APPROVALS. Except as specifically set forth in
SCHEDULE 3.1(F), the Company is not required to obtain any consent, waiver,
authorization or order of, or make any filing or registration with, any court or
other Federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, except for (i) the filing of the Certificate of
Designation with respect to the Shares with the Secretary of State of Delaware,
which filing shall be effected prior to the Closing, (ii) the filing of the
registration statement covering the Underlying Shares and Warrant Shares (the
"UNDERLYING SHARES REGISTRATION STATEMENT") with the Commission and the making
of the applicable blue-sky or similar filings under state securities laws, each
as contemplated by the Registration Rights Agreement, and (iii) other than, in
all other cases, where the failure to obtain such consent, waiver, authorization
or order, or to give or make such notice or filing, would not reasonably be
expected, individually or in the aggregate, to (x) adversely affect the
legality, validity or enforceability of any of the Transaction Documents, (y)
have a Material Adverse Effect or (z) adversely and materially impair the
Company's ability to perform fully on a timely basis its obligations under the
Transaction Documents (collectively with the consents, waivers, authorizations,
orders, notices and filings referred to in SCHEDULE 3.1(F), the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, state, county, local or
foreign) which (i) relates to or challenges the legality, validity or
enforceability of the Transaction Documents, Shares, Warrants, Underlying Shares
or Warrant Shares, (ii) would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect or (iii) would reasonably be
expected, individually or in the aggregate, to adversely and materially impair
the Company's ability to perform fully on a timely basis its obligations under
the Transaction Documents.
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<PAGE>
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, except as would not
reasonably be expected, individually or in the aggregate, to (x) adversely
affect the legality, validity or enforceability of any of the Transaction
Documents, (y) have a Material Adverse Effect or (z) adversely and materially
impair the Company's ability to perform fully on a timely basis its obligations
under the Transaction Documents.
(i) CERTAIN FEES. Except for fees payable by the Company to Wharton
Capital Partners, Ltd. and Corporate Communications Network, Inc., no fees or
commissions will be payable by the Company to any broker, finder, investment
banker or bank with respect to the consummation of the transactions contemplated
hereby. The Purchasers shall have no obligation with respect to such fees or
with respect to any claims made by other Persons for fees due in connection with
this transaction.
(j) DISCLOSURE MATERIALS. The Disclosure Materials (other than the
SEC Documents) do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(k) PRIVATE OFFERING. Neither the Company nor any Person acting on
its behalf has taken or will take any action (including, without limitation, any
offering of any securities of the Company under circumstances which would
reasonably be expected to require the integration of such offering with the
offering of the Shares, the Warrants, the Underlying Shares or the Warrant
Shares under the Securities Act) which would reasonably be expected to subject
the offering, issuance or sale of the Shares, the Warrants, the Underlying
Shares or the Warrant Shares to the registration requirements of Section 5 of
the Securities Act.
(l) SEC DOCUMENTS. The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the three years preceding the date hereof (or such shorter period
as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC DOCUMENTS") on a
timely basis, or has received a valid extension of such time of filing. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements, as applicable, of the Securities Act and the Exchange Act and
the published rules and regulations of the Commission promulgated thereunder,
and none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the financial statements and balance sheets of the Company included in
the SEC Documents complied in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto. Such financial statements and balance sheets have been prepared in
accordance with generally
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<PAGE>
accepted accounting principles applied on a consistent basis during the periods
involved, except as may be otherwise indicated in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal year-end audit
adjustments. Since the date of the financial statements and balance sheets
included in the last filed Quarterly Report on Form 10-Q, there has been no
event, occurrence or development that would reasonably be expected to have had a
Material Adverse Effect which is not disclosed in or contemplated by the
Disclosure Materials.
(m) SENIORITY. No class of equity securities of the Company is senior
to the Shares in right of payment, whether upon liquidation, dissolution or
otherwise other than the Series A Convertible Preferred Stock, $.01 par value
per share (the "SERIES A PREFERRED"). The Series A Preferred and shares of
Common Stock beneficially owned by RMS Limited Partnership and J. Anthony
Forstmann are subject to the volume restrictions on resale set forth in Rule
144(e) promulgated under the Securities Act.
(n) FORM S-3 ELIGIBILITY. The Company meets, and at the Closing Date
will meet, the registrant eligibility requirements set forth in General
Instruction I. A. to Form S-3 promulgated under the Securities Act.
(o) INVESTMENT COMPANY. The Company is not and is not an Affiliate of
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(p) EXCLUSIVITY. The Company shall not issue and sell the Preferred
Stock to any Person other than the Purchasers.
(q) NASDAQ. The Company has not received any notice (oral or written)
from the Nasdaq indicating a failure by the Company to be in compliance with
Nasdaq SmallCap Market maintenance requirements or otherwise threatening a
delisting of the Common Stock therefrom. The Company knows of no basis for such
action other than as disclosed in or contemplated by the Disclosure Material or
in connection with the new proposed Nasdaq rules.
(r) USE OF PROCEEDS. The proceeds from the placement of the Shares
and Warrants are to be used by the Company for working capital purposes only,
and not to repay, redeem or otherwise retire any equity or debt securities of
the Company or any other indebtedness not incurred in the ordinary course.
The Purchasers acknowledge and agree that the Company makes no
representation or warranty with respect to the transactions contemplated hereby
or otherwise other than those specifically set forth in this Section 3.1.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
of the Purchasers, severally and not jointly, hereby represents and warrants to
the Company as follows:
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<PAGE>
(a) ORGANIZATION; AUTHORITY. Such Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Such Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and Escrow Agreement and otherwise to
carry out its obligations hereunder and thereunder. The purchase of the Shares
and the applicable Warrant by such Purchaser hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement,
the Registration Rights Agreement and the Escrow Agreement has been duly
executed and delivered by such Purchaser or on its behalf and constitutes the
valid and legally binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Shares, the
Warrants to be issued to it hereunder and the Underlying Shares and the Warrant
Shares issuable in connection therewith for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Shares, Warrants, Underlying Shares or Warrant Shares or any part thereof or
interest therein, without prejudice, however, to such Purchaser's right, subject
to the provisions of the Agreement and the Registration Rights Agreement, at all
times to sell or otherwise dispose of all or any part of such Shares, Warrants,
Underlying Shares or Warrant Shares under an effective registration statement
under the Securities Act and in compliance with applicable State securities or
blue sky laws or under an exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Shares and the Warrants to be purchased by it hereunder, it was, and at the date
hereof, it is, and at the Closing Date, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF PURCHASER; RELIANCE. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares and the
Warrants to be issued to it hereunder, and has so evaluated the merits and risks
of such investment. Such Purchaser has relied on the advise of, or has consulted
with, its own tax, investment, legal or other advisors and has not relied upon
the Company or any of its Affiliates, officers, directors, attorneys,
accountants or any representatives, agents or employees of any of the foregoing
for advice or other information, whether written or oral, other than reliance on
the Disclosure Material.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser
is able to bear the economic risk of an investment in the Shares and the Warrant
to be issued to it hereunder and, at the present time, is able to afford a
complete loss of such investment.
(f) PROHIBITED TRANSACTIONS. Such Purchaser is not acquiring,
directly or indirectly, the Shares and the Warrant to be issued to it hereunder
with the assets of any "employee benefit plan",
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<PAGE>
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended.
(g) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it or its representatives has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares and the
Warrants and the merits and risks of investing in the Shares and the Warrants;
(ii) access to information about the Company and the Company's financial
condition, results of operations, business, properties and management sufficient
to enable it to evaluate its investment in the Shares and the Warrants; and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the Shares and
the Warrants and to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(h) RELIANCE ON REPRESENTATIONS OF PURCHASERS. Such Purchaser
understands and acknowledges with respect to the Shares and Warrants to be
acquired by it hereunder that (i) such Shares and Warrants are being offered and
sold, and the Underlying Shares and the Warrant Shares are being offered, to it
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act and (ii) the
availability of such exemption depends in part on, and that the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
warranties and such Purchaser hereby consents to such reliance.
(i) CERTAIN FEES. No fees or commissions will be payable or has been
committed to be paid by or on behalf of the Purchasers (or any of them) to any
broker, finder, investment banker or bank with respect to the consummation of
the transactions contemplated hereby. Neither the Company nor any Affiliate
thereof shall have any obligation with respect to such fees or with respect to
any claims made by other Persons for fees due in connection with this
transaction due to, arising from or in connection with the Purchasers.
(j) NO GENERAL SOLICITATION. The Shares, the Warrants, the Underlying
Shares and the Warrant Shares were not offered and are not being offered to the
Purchaser through, and the Purchase is now aware of, any form of general
solicitation or general advertising, including, without limitation, (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
The Company acknowledges and agrees that the Purchasers make no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in this Section 3.2.
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<PAGE>
ARTICLE XV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. TRANSFER RESTRICTIONS. If any Purchaser should decide to
dispose of any of the Shares or any portion of the Warrant to be purchased by it
hereunder (and upon conversion or exercise thereof, any Underlying Shares or
Warrant Shares), such Purchaser understands and agrees that it may do so only
pursuant to an effective registration statement under the Securities Act and any
applicable state securities or blue sky laws, to the Company or pursuant to an
available exemption from the registration requirements thereof. In connection
with any transfer of any Shares, Warrants, Underlying Shares or Warrant Shares
other than pursuant to an effective registration statement or to the Company,
the Company may require that the transferor of such securities provide to the
Company an opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be reasonably satis factory to the Company, to the effect that
such transfer does not require registration of such Shares, Warrants, Underlying
Shares or Warrant Shares, as the case may be, under the Securities Act or any
state securities or blue sky laws.
The Purchasers agree to the imprinting, so long as required under
this Section 4.1, of the following legend on certificates representing the
Shares, Warrants, Underlying Shares and Warrant Shares:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE HAVE BEEN]] [THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN] REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS THEREOF AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.
The legend set forth above shall be removed upon the conversion of
Shares or exercise of Warrants at any time while the Underlying Shares
Registration Statement is effective under the Securities Act and any applicable
state securities or blue sky laws or at such earlier time as, in the opinion of
counsel to the Company experienced in the area of United States securities laws,
such legend is no longer required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission) or any applicable state securities or blue sky
laws. The certificates representing the Shares, the Warrants, the Underlying
Shares and Warrant Shares shall also bear any other legends required by
applicable state securities or blue sky laws, which legends shall be removed in
accordance with the immediately prior sentence. The Company agrees that it will
provide the Purchasers, upon request, with a certificate
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<PAGE>
or certificates representing Underlying Shares or Warrant Shares, free from such
legend at such time as such legend is no longer required hereunder. The
Purchasers agree that, in connection with any transfer of Underlying Shares or
Warrant Shares by it pursuant to an effective registration statement under the
Securities Act, it will comply with all prospectus delivery requirements of the
Securities Act.
Section 4.2. STOP TRANSFER INSTRUCTION. The Company shall not be
entitled to make any notation on its records or give instructions to any
transfer agent of the Company to implement restrictions on transfer on the
Underlying Shares or Warrant Shares except in accordance with the limitation of
transfer contemplated by Section 4.1 above.
Section 4.3. FURNISHING OF INFORMATION. For so long as either
Purchaser owns Shares, Warrants, Underlying Shares or Warrant Shares, the
Company covenants to use its reasonable best efforts to timely file (or obtain
valid extensions in respect thereof) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act and to promptly furnish or make available to the Purchasers with true and
complete copies of all such filings. If the Company is not at the time required
to file reports pursuant to such sections, it will prepare and furnish to the
Purchasers annual and quarterly financial statements, together with a discussion
and analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act in the time period that
such filings would have been required to have been made under the Exchange Act.
Section 4.4. SECURITIES OR BLUE SKY LAWS. In accordance with the
Registration Rights Agreement, the Company shall qualify the Underlying Shares
and the Warrant Shares under the securities or Blue Sky laws of such United
States jurisdictions as the Purchasers may reasonably request and continue such
qualification at all times a registration statement is required to be maintained
effective in accordance with the Registration Rights Agreement; PROVIDED,
HOWEVER, that neither the Company nor its Subsidiaries shall be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such jurisdiction or subject
the Company to any material tax in any such jurisdiction.
Section 4.5. INTEGRATION. The Company shall not and shall use its
reasonable best efforts to ensure that no Affiliate shall sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Shares, the Warrants, the Underlying Shares or Warrant
Shares in a manner that would require the registration under the Securities Act
of the sale of the Shares, the Warrants, Underlying Shares or Warrant Shares to
the Purchasers.
Section 4.6. SOLICITATION MATERIALS. Neither the Company nor the
Purchasers shall (i) distribute any offering materials in connection with the
offering and sale of the Shares, the Warrants, Underlying Shares or Warrant
Shares other than the Disclosure Materials and any amendments and supplements
thereto prepared in compliance herewith or (ii) solicit any offer to
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buy or sell the Shares, the Warrants, Underlying Shares or Warrant Shares by
means of any form of general solicitation or advertising.
Section 4.7. RIGHT OF FIRST REFUSAL; SUBSEQUENT REGULATIONS; CERTAIN
CORPORATE ACTIONS. (a) The Company shall not, directly or indirectly, without
the prior written consent of the Purchasers (not to be unreasonably withheld),
offer, sell, grant any option to purchase, or otherwise dispose (or announce any
offer, sale, grant or any option to purchase or other disposition) of any of its
or its Affiliates equity or equity-equivalent securities at a price which is, or
the face thereof, or implied therein, less than the market price or fair market
value for such securities (a "SUBSEQUENT SALE") for a period of 180 days after
Closing Date, except (i) the granting of options to employees, officers and
directors, and the issuance of shares upon exercise of options granted, under
any stock option plan heretofore or hereinafter duly adopted by the Company,
(ii) shares issued upon exercise of any currently outstanding options, warrants
and upon conversion of any currently outstanding convertible preferred stock in
each case disclosed in SCHEDULE 3.1(C), (iii) shares of Common Stock issued upon
conversion of Shares in accordance herewith and the Certificate of Designation
and (iv) the sale of approximately 300,000 shares of Common Stock as disclosed
in SCHEDULE 3.1(C), unless (A) the Company delivers to the Purchasers a written
notice (the "SUBSEQUENT FINANCING NOTICE") of its intention to effect such
Subsequent Sale, which Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Sale, the Person to whom such
Subsequent Sale shall be made, the term sheet or similar document relating
thereto and the amount of proceeds intended to be raised thereunder and (B)
either Purchaser shall not have notified the Company by 5:00 p.m. (Eastern Time)
on the third Business Day after its receipt of the Subsequent Financing Notice
of its agreement to provide (or to cause its sole designee to provide) financing
to the Company, subject to the Purchasers' reasonable due diligence to be
completed as soon as practicably possible thereafter and in no event later than
ten (10) days after such notice, on the terms set forth in the Subsequent
Financing Notice. If neither Purchaser notifies the Company of its agreement to
provide such financing within such time period, the Company may effect the
Subsequent Sale upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Financing Notice; PROVIDED, that the
Company shall provide each Purchaser with a second Subsequent Financing Notice,
and each Purchaser shall again have the right of first refusal set forth above
in this paragraph (a), if the Subsequent Sale subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 60 Business Days after the date
of the initial Subsequent Financing Notice with the Person (or an Affiliate of
such Person) identified in the Subsequent Financing Notice.
(b) Except Underlying Shares, Warrant Shares and other Registrable
Securities (as such term is defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, securities
included in the Company's Form S-3 Registration Statement (Registration No.
333-1510), approximately 300,000 additional shares of Common Stock, any shares
of Common Stock issuable pursuant to an existing stock option plan, agreement or
arrangement and Common Stock issuable upon the conversion of the Series A
Preferred or securities sold by the Company to redeem the Series A Preferred,
the Company shall not, without the prior written consent of the Purchaser (not
to be unreasonably withheld) register for resale any
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securities of the Company for a period of not less than 90 Trading Days after
the date that the Underlying Shares Registration Statement is declared effective
by the Commission. Any days that the Purchasers are unable to sell Underlying
Shares and Warrant Shares under the Underlying Shares Registration Statement
shall be added to such 90 Trading Day period, PROVIDED, HOWEVER holders of
securities issued to redeem the Series A Preferred shall not have the right to
sell such securities pursuant to an effective registration statement until 150
days after the date that the Underlying Shares Registration Statement is
declared effective by the Commission.
(c) As long as there are Preferred Shares and Warrants outstanding,
the Company shall not and shall cause the Subsidiaries not to, without the
consent of the Purchasers (not to be unreasonably withheld), (i) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely and materially affect any rights of the Purchasers; (ii) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock, other than in connection with the Series A Preferred or the Common
Stock issuable upon the conversion thereof; or (iii) enter into any agreement
with respect to any of the foregoing.
Section 4.8. PURCHASER OWNERSHIP OF COMMON STOCK. Neither Purchaser
may use its ability to convert Shares hereunder or under the terms of the
Certificate of Designation or exercise Warrants to the extent that such
conversion or exercise would result in that Purchaser beneficially owning (for
purposes of Rule 13d-3 under the Exchange Act) more than 4.9% of the outstanding
shares of the Common Stock; PROVIDED, HOWEVER, that if ten days have elapsed
since a Purchaser has properly and reasonably declared an event of default under
any Transaction Document and such event of default shall not have been cured by
the Company prior to such ten day period, the provisions of this Section 4.8
shall be null and void AB INITIO.
Section 4.9. LISTING OF UNDERLYING SHARES. The Company shall, not
later than the tenth Business Day following the Closing Date, prepare and file
with the Nasdaq SmallCap Market (and each other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application covering 5,157,895 Underlying Shares and 400,000 Warrant Shares, and
shall provide to the Purchasers reasonable evidence of such listing and shall
use its reasonable best efforts to maintain the listing of its Common Stock on
the Nasdaq SmallCap Market or such exchange. If the shares included in such
listing applications are not adequate to list all shares issuable upon exercise
of the Warrants and conversion of the Shares, the Company shall promptly file
additional listing applications covering such number of shares as the parties
may agree, but no less than 15% more than the number so issuable in connection
therewith at that time.
Section 4.10. PURCHASER'S RIGHTS IF TRADING IN COMMON STOCK IS
SUSPENDED. In the event that at any time after the date Shares are convertible
into Underlying Shares and within the three-year period after the Closing Date
trading in the shares of the Common Stock is suspended on the principal market
or exchange for such shares (other than as a result of the suspension of trading
in securities on such market or exchange generally or temporary suspensions
pending the release of material information) for more than three Business Days
at each Purchaser's option exercisable by five Business Days prior written
notice to the Company, the Company shall repurchase all Shares (which are then
convertible), Warrants (which are then exercisable), Underlying Shares and
Warrant
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Shares then held by such Purchaser and any applicable transferee, at an
aggregate purchase price equal to the sum of (I) the product of (1) the average
Per Share Market Value for the five (5) Trading Days immediately preceding (a)
the day of such notice or (b) the date of payment in full of the repurchase
price calculated under this Section 4.10, whichever is greater, multiplied by
(2) the Conversion Ratio (as defined in the Certificate of Designation) or the
number of Warrant Shares, as applicable, which would be exercisable on the date
of the repurchase notice with respect to Preferred Stock and Warrants then held
by such Purchaser and any applicable transferee, (II) the number of Underlying
Shares and Warrant Shares then held by each Purchaser multiplied by the average
Per Share Market Value for the five (5) Trading Days immediately preceding (A)
the date of the notice or (B) the date of payment in full by the Company of the
repurchase price calculated under this Section 4.10, whichever is greater, and
(III) interest on the amounts set forth in I - II above accruing from the 5th
day after such notice until the repurchase price under this Section 4.10 is paid
in full at the rate 10% per annum, PROVIDED, HOWEVER, that if prior to the
expiration of such five Business Day notice period set forth herein, such
suspension is terminated or the Common Stock is listed for trading on the Nasdaq
National Market System, the American Stock Exchange or the New York Stock
Exchange, such exercise by such Purchaser for the Company to repurchase such
Shares, Warrants, Underlying Shares and Warrant Shares shall be deemed null and
void.
Section 4.11. NO VIOLATION OF APPLICABLE LAW. Notwithstanding any
provision of this Agreement to the contrary, if any redemption of Shares,
Warrants, Underlying Shares or Warrant Shares otherwise required under the
Transaction Documents would be prohibited by the relevant provisions of the
Delaware General Corporation Law, such redemption shall be effected as soon as
it is permitted under such law; PROVIDED, however, that, interest payable by the
Company with respect to any such redemption shall continue to accrue in
accordance with Section 4.10 during any such period.
Section 4.12. REDEMPTION RESTRICTIONS. Notwithstanding any provision
of this Agreement to the contrary, if any redemption of Shares, Warrants
Underlying Shares or Warrant Shares otherwise required under this Agreement
would be prohibited in the absence of consent from any lender of the Company or
of any Subsidiary, or by the holders of any class of securities of the Company,
the Company shall use its best efforts to obtain such consent as promptly as
practicable after the redemption is required. Interest payable by the Company
with respect to any such redemption shall continue to accrue in accordance with
Section 4.10 until such consent is obtained. Nothing contained in this Section
shall be construed as a waiver by the Purchasers of any rights it may have by
virtue of any breach of any representation or warranty of the Company herein as
to the absence of any requirement to obtain any such consent.
Section 4.13. NOTICE OF BREACHES. Each of the Company and the
Purchasers shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to the Closing Date, which could reasonably be
likely to cause any representation or warranty or other agreement of such party,
as the case may be, contained herein or therein to be incorrect or breached as
of such Closing Date. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any
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<PAGE>
representation, warranty or other agreement contained herein or in the
Registration Rights Agreement. The Company and the Purchasers will use their
respective reasonable best efforts to not take, or not agree to commit to take,
any action that is intended to make any representation or warranty of the
Company or the Purchasers, as the case may be, contained herein or in the
Registration Rights Agreement inaccurate in any respect at the Closing Date.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchasers of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated by any of the Transaction Documents violates or
would violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to the holders of
the Shares and Warrants a copy of any written statement in support of or
relating to such claim or notice.
Section 4.14. CONVERSION PROCEDURES. The Company shall use its
reasonable best efforts to provide the Purchasers, within ten Business Days of
the date hereof, with the procedures with respect to the conversion of the
Shares, including the forms of conversion notice to be provided upon conversion,
instructions as to the procedures for conversion, the form of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Purchasers to exercise its right of conversion smoothly and expeditiously.
Section 4.15. THE WARRANTS. The Company shall issue (i) to Clearwater
or as otherwise directed by Clearwater, a Common Stock purchase Warrant,
substantially in the form of EXHIBIT D(1) (the "CLEARWATER WARRANT"), pursuant
to which Clearwater shall have the right at any time thereafter through the
fifth anniversary of the date of issuance thereof, to acquire 285,714 shares of
Common Stock at an exercise price per share equal to $2.6125, (ii) to JNC a
Common Stock purchase warrant, substantially in the form of EXHIBIT D(2) (the
"JNC WARRANT"), pursuant to which JNC shall have the right at any time
thereafter through the fifth anniversary of the date of issuance thereof, to
acquire 114,286 shares of Common Stock at an exercise price per share equal to
$2.6125. The Clearwater Warrant and the JNC Warrant are collectively known as
the "WARRANTS."
Section 4.16. PURCHASER'S RIGHTS IF COMMON STOCK IS DELISTED. In the
event that at any time after the date Shares are convertible into Underlying
Shares and within the three-year period after the Closing Date the shares of the
Common Stock are delisted from the Nasdaq SmallCap Market, unless immediately
therewith the Common Stock is listed for trading in the Nasdaq National Market,
the American Stock Exchange or the New York Stock Exchange, at each Purchaser's
option exercisable by five Business Days prior written notice to the Company,
the Company shall repurchase all Shares, Warrants, Underlying Shares and Warrant
Shares then held by such Purchaser and any applicable transferee, at an
aggregate purchase price equal to the sum of (I) the product of (1) the average
Per Share Market Value for the five (5) Trading Days immediately preceding (a)
the day of such notice or (b) the date of payment in full of the repurchase
price calculated under this Section 4.16, whichever is greater, multiplied by
(2) the Conversion Ratio or the number of Warrant Shares, as applicable, which
would be exercisable on the date of the repurchase notice with respect to
Preferred Stock and Warrants then held by such Purchaser and any
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<PAGE>
applicable transferee, (II) the number of Underlying Shares and Warrant Shares
then held by each Purchaser multiplied by the average Per Share Market Value for
the five (5) Trading Days immediately preceding (A) the date of the notice or
(B) the date of payment in full by the Company of the repurchase price
calculated under this Section 4.16, whichever is greater, and (III) interest on
the amounts set forth in I - II above accruing from the 5th day after such
notice until the repurchase price under this Section 4.16 is paid in full at the
rate 10% per annum, PROVIDED, HOWEVER, that if prior to the expiration of such
five Business Day notice period set forth herein, the Common Stock is listed for
trading on the Nasdaq SmallCap Market, Nasdaq National Market System, the
American Stock Exchange or the New York Stock Exchange, such exercise by such
Purchaser for the Company to repurchase such Shares, Warrants, Underlying Shares
and Warrant Shares shall be deemed null and void.
ARTICLE XVI
MISCELLANEOUS
Section 5.1. FEES AND EXPENSES. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
set forth in the Registration Rights Agreement and except that the Company shall
reimburse the Purchasers up to $10,000 for its legal fees and disbursements
incurred in connection with the transactions contemplated hereby. The Company
shall pay all stamp and other taxes and duties levied in connection with the
original issuance of the Shares (and upon conversion thereof, the Underlying
Shares) pursuant hereto. The Purchasers shall be responsible for its own tax
liability that may arise as a result of the investment hereunder, the
transactions contemplated by this Agreement and any subsequent transfers of
Shares.
Section 5.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together
with the Exhibits and Schedules hereto, and each of the other Transaction
Documents contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
Section 5.3. NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered on
a Business Day during normal business hours where such notice is to be
received), or the first Business Day following such delivery (if delivered other
than on a Business Day during normal business hours where such notice is to be
received) or (b) on the second Business Day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such notice or communications shall be:
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<PAGE>
If to the Company: The National Registry Inc.
2502 Rocky Point Drive
Tampa, Florida 33607
Facsimile No.: (813) 636-0422
Attn: Chief Financial Officer
With copies to: Kaye, Scholer, Fierman, Hays
& Handler, LLP
1999 Avenue of the Stars
Los Angeles, CA 90067
Facsimile No.: (310) 788-1200
Attn: Barry L. Dastin, Esq.
If to JNC: JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Williams House
20 Reid Street
Hamilton HM11
Bermuda
Facsimile No.: (441) 295-2305
Attn: Philip Pedro
with copies to: Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Jim Chau
- and -
Robinson Silverman Pearce Aronsohn
& Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen, Esq.
If to Clearwater: Clearwater Fund IV, LLC
611 Druid Road E. #200
Clearwater, Florida 34616
Facsimile No.: (813) 443-0143
Attn: Hans Frederic Heye
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<PAGE>
with copies to: Encore Capital Management, L.L.C.
12007 Sunrise Valley Drive
Suite 460
Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Jim Chau
- and -
Robinson Silverman Pearce Aronsohn
& Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 5.4. AMENDMENTS; WAIVERS. No provision of this Agreement may
be waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the applicable Purchaser or Purchasers, or,
in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 5.5. HEADINGS. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 5.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Purchasers may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other,
except that the Purchasers may assign its rights hereunder and under the
Registration Rights Agreement to an Affiliate thereof, provided, that such
assignee demonstrates to the reasonable satisfaction of the Company its
satisfaction of the representations and warranties set forth in Section 3.2
herein and agrees in writing to be bound by this Agreement and to make such
representations and warranties. The assignment by a party of this Agreement or
any rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 5.7. NO THIRD-PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
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<PAGE>
Section 5.8. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
Section 5.9. SURVIVAL. The representations and warranties of the
Company and the Purchasers contained in ARTICLE III and the agreements and
covenants of the parties contained in ARTICLE IV and this ARTICLE V shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Shares and exercise of Warrants hereunder.
Section 5.10. COUNTERPART SIGNATURES. This Agreement may be executed
in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
Section 5.11. PUBLICITY. The Company and the Purchasers shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law (including the Securities Act,
the Exchange Act or the rules and regulations promulgated thereunder by the
Commission), in which such case the disclosing party shall use its best efforts
to provide the other party with prior notice of such public statement.
Section 5.12. SEVERABILITY. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 5.13. REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchasers hereunder. Each of the Company
and the Purchasers agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first indicated above.
Company:
THE NATIONAL REGISTRY INC.
By:/s/ JOHN GUSTAFSON
--------------------
Name: John Gustafson
Title: President
Purchasers:
JNC OPPORTUNITY FUND LTD.
By:/s/ PHILIP C. PEDRO
---------------------
Name: Philip C. Pedro
Title:
CLEARWATER FUND IV, LLC
By:/s/ HANS F. HEYE
----------------------
Name: Hans F. Heye
Title: Managing Member
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EXHIBIT 10.2
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
THE NATIONAL REGISTRY INC.
FORM OF WARRANT
Dated February 5, 1997
THE NATIONAL REGISTRY INC., a Delaware corporation (the "Company"), hereby
certifies that, for value received, ________________, or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to a total of ________ shares of Common Stock, $.01 par value per
share (the "Common Stock"), of the Company (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at an exercise price equal to $2.6125
per share (as adjusted from time to time as provided in Section 7, the "Exercise
Price"), at any time and from time to time from and after the date hereof and
through and including February 4, 2002 (the "Expiration Date"), and subject to
the following terms and conditions:
17. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
18. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) The Company shall register the transfer of any portion
of this Warrant in the Warrant Register, upon surrender of this Warrant, with
the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at the office specified in or pursuant to
Section 3(b). Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"),
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<PAGE>
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender
hereof by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.
19. DURATION AND EXERCISE OF WARRANTS.
(a) This Warrant shall be exercisable by the registered
Holder on any business day before 5:30 P.M., New York time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 5:30 P.M., New York time on the Expiration Date, the portion of this Warrant
not exercised prior thereto shall be and become void and of no value.
(b) Subject to Sections 2(b), 4 and 8, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its office at 2502 Rocky Point Drive,
Tampa, Florida 33607, Attention: Chief Financial Officer, or at such other
address as the Company may specify in writing to the then registered Holder, and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in lawful money of the United
States of America, in cash or by certified or official bank check or checks, all
as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the date of
exercise) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Warrant Shares issuable upon such exercise,
free of restrictive legends other than as required by applicable law. Any person
so designated by the Holder to receive Warrant Shares shall be deemed to have
become holder of record of such Warrant Shares as of the Date of Exercise of
this Warrant.
A "Date of Exercise" means the date on which the Company
shall have received (i) this Warrant (or any New Warrant, as applicable), with
the Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(c) This Warrant shall be exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant Shares so
long as at least 10,000 Warrant Shares are purchased in any one exercise. If
less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at its
expense,
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<PAGE>
a New Warrant evidencing the right to purchase the remaining number of Warrant
Shares for which no exercise has been evidenced by this Warrant.
(d) This Warrant shall only be exercisable if, and shall
be only exercisable to the extent, it is legal to do so because, among other
things, the Warrant Shares are registered pursuant to a registration statement
which has been declared effective by the Securities and Exchange Commission, and
which is still effective on the applicable date of exercise, or the issuance of
such Warrant Shares are exempt from the registration requirements of the
Securities Act of 1933, as amended.
20. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder, and the Company shall not be required to issue or cause
to be issued or deliver or cause to be delivered the certificates for Warrant
Shares unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid. The Holder shall
be responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise hereof.
21. REPLACEMENT OF WARRANT. If this Warrant is mutilated,
lost, stolen or destroyed, the Company may in its discretion issue or cause to
be issued in exchange and substitution for and upon cancellation hereof, or in
lieu of and substitution for this Warrant, a New Warrant, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants for a
New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges as
the Company may prescribe.
22. RESERVATION OF WARRANT SHARES. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holders (taking into
account the adjustments and restrictions of Section 7). The Company agrees to
use its best efforts to ensure that all Warrant Shares that shall be so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.
23. CERTAIN ADJUSTMENTS. The Exercise Price and number of
Warrant Shares issuable upon exercise of this Warrant are subject to adjustment
from time to time as set forth in this Section 7. Upon each such adjustment of
the Exercise Price pursuant to this Section 7, the Holder shall thereafter prior
to the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in
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<PAGE>
effect immediately prior to such adjustment by the number of Warrant Shares
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities (as such term is defined in the
Debenture) payable in shares of Common Stock, (ii) subdivide outstanding shares
of Common Stock into a larger number of shares, or (iii) combine outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any, but including warrants or
options that would be included for purposes of determining earnings per share in
accordance with generally accepted accounting principals) outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock (excluding treasury shares, if any, but including warrants or options that
would be included for purposes of determining earnings per share in accordance
with generally accepted accounting principals) outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
(b) In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to give to the Holder
the right to receive the securities or property set forth in this Section 7(b)
as part of such reclassification, consolidation, merger, sale, transfer or share
exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets (other than cash
dividends) or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Sections 7(a), (b) and (d)), then in each such
case the Exercise Price shall be determined by multiplying the Exercise Price in
effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Exercise Price determined as of the record date
mentioned above, and of which the numerator shall be such Exercise Price on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of
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<PAGE>
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by a nationally recognized or major regional investment banking
firm or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "APPRAISER") selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and consented to by the Company (which
consent shall not be unreasonably withheld).
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Exercise Price then in effect,
then, forthwith upon such issue or sale, the Exercise Price shall be reduced to
the price (calculated to the nearest cent) determined by dividing (i) an amount
equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Exercise Price, and
(B) the consideration, if any, received or receivable by the Company upon such
issue or sale by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(e) For the purposes of this Section 7, the following
clauses shall also be applicable:
(i) RECORD DATE. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) TREASURY SHARES. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 7 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to
Section 7(c) above or Section 7(i) below, the Company, after receipt of the
determination by the Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the adjustment shall be equal to the
average of the adjustments recommended by each Appraiser. The Company shall
promptly mail or cause to be mailed to each Holder, a notice setting forth the
Exercise Price after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Such adjustment shall become effective
immediately after the record date mentioned above. All
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<PAGE>
determinations with respect to adjustments by the Company hereunder shall be
made by the Board of Directors in good faith.
(h) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock in
Common
Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which
the Company is a party, any sale or transfer of
all or substantially all of the assets of the
Company, or any compulsory share exchange
whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, to the extent practicable at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up; PROVIDED, HOWEVER, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
(i) If at any time conditions shall arise by reason of
action taken by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which would reasonably
be expected to materially affect the rights of the Holders (different than or
distinguished from the effect generally on rights of holders of any class of
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<PAGE>
the Company's capital stock) or if any time such conditions are expected to
arise by reason of any action contemplated by the Company, the Company shall
mail a written notice briefly describing the action contemplated and the
material adverse effects of such action on the rights of the Holders to the
extent practicable at least 20 calendar days prior to the effective date of such
action, and an Appraiser selected by the Holders of majority in interest of the
Warrants then outstanding and consented to by the Company (which consent shall
not be unreasonably withheld) shall give its opinion as to the adjustment, if
any (not inconsistent with the standards established in Section 7(e)), of the
Exercise Price (including, if necessary, any adjustment as to the Warrant Shares
to be purchased upon exercise of this Warrant) and any distribution which is or
would be required to be preserved without diluting the rights of the Holders.
24. FRACTIONAL SHARES. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 8,
be issuable on the exercise of this Warrant, the Company shall, at its option,
(a) pay an amount in cash equal to the Exercise Price multiplied by such
fraction or (b) shall round the number of Warrant Shares issuable, up to the
next whole number of such shares.
25. NOTICES. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (Eastern Standard Time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern Standard Time) on any date and earlier
than 11:59 p.m. (Eastern Standard Time) on such date, (iii) the business day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (i) if to
the Company, to The National Registry Inc., 2502 Rocky Point Drive, Tampa,
Florida 33607, Attention: Chief Financial Officer, or to facsimile no. (813)
636-0422, or (ii) if to the Holder, to the Holder at the address or facsimile
number appearing on the Warrant Register or such other address or facsimile
number as the Holder may provide to the Company in accordance with this Section
9.
26. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a
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<PAGE>
successor warrant agent under this Warrant without any further act. Any such
successor warrant agent shall promptly cause notice of its succession as warrant
agent to be mailed (by first class mail, postage prepaid) to the Holder at the
Holder's last address as shown on the Warrant Register.
27. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Warrant may be amended only in writing signed by the Company and
the Holder.
(b) Subject to Section 11(a), above, nothing in this
Warrant shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under this
Warrant; this Warrant shall be for the sole and exclusive benefit of the Company
and the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
THE NATIONAL REGISTRY INC.
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To The National Registry Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of The
National Registry Inc. and encloses herewith $________ in cash or certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
___________________________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated:____________,_____ Name of Holder:
(Print)____________________________________
(By:)______________________________________
(Name:)____________________________________
(Title:)___________________________________
(Signature must conform in all respects
to name of holder as specified on the face of the
Warrant)
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<PAGE>
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of The National Registry
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of The National Registry Inc. with full
power of substitution in the premises.
Dated:
_________________,_____
__________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
__________________________________________________
Address of Transferee
__________________________________________________
__________________________________________________
In the presence of:
____________________________
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EXHIBIT 99
FOR IMMEDIATE RELEASE
CONTACT: Laura Overstreet
(703) 708-9281
THE NATIONAL REGISTRY INC. COMPLETES $7 MILLION EQUITY FINANCING
TAMPA, FL (FEBRUARY 6, 1997)--The National Registry Inc. (NRI) announced
today that it has completed a new Regulation D private financing pursuant to
which NRI issued an aggregate of 350,000 shares of NRI Series C Preferred Stock
to two accredited investment funds for a gross cash purchase price of $7 million
before commissions and expenses.
"The purpose of this financing is to provide NRI with additional operating
funds, including funds to complete the NRIdentity(TM) product line and our
recently announced Secure Authentication Facility for Windows NT(R), believed to
be the industry's first client/server biometric authentication product for the
Windows NT environment," said John L. Gustafson, NRI's president and chief
executive officer.
Shares of Series C Preferred Stock are convertible at the option of the
holder into shares of NRI Common Stock at the lesser of (i) $2.375 per share or
(ii) 82.5% of a floating price equal to the average closing bid price of the
Common Stock for the five trading days immediately preceding the date of
conversion. The Series C Preferred Stock is convertible, as to one-third of such
shares, beginning 121 days after the closing date, as to an additional one-third
of such shares, beginning 151 days after the closing date and, as to the
remaining shares, beginning 181 days after the closing date. All shares of
Series C Preferred Stock issued and outstanding as of February 4, 2000 will
automatically be converted into shares of Common Stock. The Company may redeem
the Series C Preferred Stock at any time based upon a formula relating to the
then applicable conversion price. In addition, as part of such transaction, the
Company issued to such accredited investment funds warrants to purchase, within
five years of the date of closing, up to 400,000 shares of Common Stock at an
exercise price of $2.6125 per share, subject to certain adjustments from time to
time. The Company has agreed to file a registration statement covering the
underlying Common Stock.
The Series C Preferred Stock referred to above has not been registered
under the Securities Act of 1933, as amended, and may not be offered or sold in
the United States, or to U.S. persons, absent registration or an applicable
exemption from such registration requirements.
The National Registry Inc., based in Tampa, Florida, brings The Power of
Positive Identification(TM) to business and government. The Company provides
cost-effective finger imaging technology to verify individual identity, protect
business and personal information, and to replace or enhance passwords and PINs
to safeguard and simplify access to electronic systems and enable new on-line
services for customers. NRI is a leading supplier of finger image-based personal
identification systems for use by state and local governments. NRI stock is
traded on Nasdaq (symbol NRID). Further information is available through NRI's
World Wide Web Site:
HTTP://WWW.NRID.COM.
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