UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)
NESTOR, INC.
____________________________________________________________
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01
____________________________________________________________
(Title of Class and Securities)
64107410
____________________________________________________________
(CUSIP Number of Class of Securities)
Bruce W. Schnitzer, Wand (Nestor) Inc., 630 Fifth Avenue,
Suite 2435, New York, New York 10111
_____________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
January 31, 1996
____________________________________________________________
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the
subject of this Schedule 13D, and is filing this schedule
because of Rule 13d-1(b)(3) or (4), check the following ( ):
Check the following box if a fee is being paid with this
Statement ( ):
SCHEDULE 13D
CUSIP NO. 64107410
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WAND/NESTOR INVESTMENTS L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ( )
(b) ( )
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
2,735,208
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 2,735,208
PERSON
WITH
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,735,208
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* ( )
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.08%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
SCHEDULE 13D
CUSIP NO. 64107410
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WAND/NESTOR INVESTSMENTS II L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ( )
(b) ( )
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
382,536
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 382,536
PERSON
WITH
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
382,536
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* ( )
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
4.66%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
SCHEDULE 13D
CUSIP NO. 64107410
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WAND/NESTOR INVESTMENTS III L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ( )
(b) ( )
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
1,756,696
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,756,696
PERSON
WITH
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,756,696
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* ( )
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.44%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
SCHEDULE 13D
CUSIP NO. 64107410
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WAND (NESTOR) INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ( )
(b) ( )
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
4,874,440
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 4,874,440
PERSON
WITH
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,874,440
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* ( )
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.87%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
SCHEDULE 13D
CUSIP NO. 64107410
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MR. BRUCE W. SCHNITZER
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) ( )
(b) ( )
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES OF AMERICA
7 SOLE VOTING POWER
4,874,440
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 4,874,440
PERSON
WITH
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,874,440
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES* ( )
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38.87%
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
The Statement on Schedule 13D filed on August
15, 1994, and amended on April 18, 1995, July 12, 1995
and October 5, 1995, with respect to the common stock,
par value $.01 per share (the "Common Stock") of Nestor,
Inc., a Delaware corporation (the "Company"), is hereby
further amended as follows:
Item 2. Identity and Background.
Item 2 is hereby supplemented as follows:
Pursuant to a Securities Purchase and Exchange
Agreement, dated as of January 31, 1996 (the "Securities
Purchase and Exchange Agreement"), the Wand/Nestor
Partnership transferred approximately 44.84% of the
Company securities that it owned to Wand/Nestor
Investments III L.P. (the "Wand/Nestor III Partnership"),
a Delaware limited partnership. The Wand/Nestor III
Partnership was formed specifically for the purpose of
acquiring and holding the shares of Common Stock and
other Company securities reported in this Statement and
has not engaged in any business other than as disclosed
herein. The General Partner serves as the general
partner of both the Wand/Nestor Partnership, the
Wand/Nestor II Partnership and the Wand/Nestor III
Partnership. The term "Filing Persons" as used herein
shall refer collectively to the Wand/Nestor Partnership,
the Wand/Nestor II Partnership, the Wand/Nestor III
Partnership, the General Partner and Mr. Schnitzer.
The Wand/Nestor III Partnership has not during
the past five year (i) been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding
of a judicial or administrative body of competent
jurisdiction and as a result of such proceedings was or
is subject to a judgment, decree, or final order
enjoining future violations of or prohibiting or
mandating activities subject to United States federal or
state securities laws or finding any violations with
respect to such laws.
Item 3. Source and Amount of Funds or Other
Consideration.
Item 3 is hereby supplemented as follows:
The transfer of the Company Common Stock and
other Company securities from the Wand/Nestor Partnership
to the Wand/Nestor III Partnership pursuant to the
Securities Purchase and Exchange Agreement represented a
redemption by certain partners in the Wand/Nestor
Partnership of all or a portion of their interest in the
Wand/Nestor Partnership. A corresponding portion of the
capital accounts of the redeeming partners was
simultaneously transferred from the Wand/Nestor
Partnership to the Wand/Nestor III Partnership.
In addition to the transfer of Company
securities from the Wand/Nestor Partnership to the
Wand/Nestor III Partnership, the Securities Purchase and
Exchange Agreement provides for the following
transactions:
* the sale by the Company to the Wand/Nestor
Partnership and the Wand/Nestor II
Partnership of (i) an aggregate of 599
shares of a new class of convertible
preferred stock of the Company, par value
$1.00 per share, designated as Series F
(the "Series F Preferred Stock") and (2)
related warrants to purchase up to an
aggregate of 173,710 shares of Company
Common Stock initially at an exercise
price of $1.25 per share (the "Regular
Warrants");
* the sale to the Wand/Nestor III
Partnership of (1) 401 shares of a new
class of convertible preferred stock of
the Company, par value $1.00 per share,
designated as Series G (the "Series G
Preferred Stock") and (2) related warrants
to purchase up to an aggregate of 116,290
shares of Company Common Stock initially
at an exercise price of $1.25 per share
(the "Restricted Warrants");
* the exchange of the 1,776 shares of Series
C Preferred Stock owned by the Wand/Nestor
Partnership and the 250 shares of Series C
Preferred Stock owned by the Wand/Nestor
II Partnership for an aggregate of 2,026
shares of a new class of convertible
preferred stock of the Company designated
as Series H (the "Series H Preferred
Stock");
* the exchange of the 1,444 shares of Series
C Preferred Stock owned by the Wand/Nestor
III Partnership for an aggregate of 1,444
shares of a new class of convertible
preferred stock of the Company, par value
$1.00 per share, designated as Series E,
which contains restrictions on the
Wand/Nestor III Partnership's right to
vote, convert and transfer such securities
(the "Series E Preferred Stock");
* the imposition of restrictions on exercise
and transferability on (1) warrants to
acquire 416,115 shares of Company Common
Stock at $.65 per share and (2) warrants
to acquire 291,281 shares of Company
Common Stock at $1.00 per share, each of
such warrants held by the Wand/Nestor III
Partnership;
* the cancellation of the Series C Preferred
Stock acquired by the Company upon
exchange of the Series C Preferred Stock
for the Series E Preferred Stock and the
Series H Preferred Stock.
The exchange of the Series C Preferred Stock
for Series E Preferred Stock and Series H Preferred Stock
and the revision of the warrants described above were
effected on January 31, 1996. The sale of the Series F
Preferred Stock, and related warrants, to the Wand/Nestor
Partnership and the Wand/Nestor II Partnership described
above was also consummated on January 31, 1996. The sale
of the Series G Preferred Stock, and related warrants, to
the Wand/Nestor III Partnership is pending and will be
consummated only if certain regulatory approvals are
obtained.
Item 4. Purpose of the Transaction.
Item 4 is hereby supplemented as follows:
The Wand/Nestor Partnership and the Wand/Nestor
II Partnership acquired the securities of the Company
pursuant to the Securities Purchase and Exchange
Agreement for investment.
The Wand/Nestor III Partnership acquired the
securities of the Company pursuant to the Securities
Purchase and Exchange Agreement (and will acquire the
additional securities contemplated by the Securities
Purchase and Exchange Agreement) for investment.
Item 5. Interest in Securities of the Issuer.
Item 5(a) is hereby amended as follows:
(a) As of the date hereof, as a result of the
consummation on January 31, 1996 of certain of the
transactions contemplated by the Securities Purchase and
Exchange Agreement, the Wand/Nestor Partnership, the
Wand/Nestor II Partnership and the Wand/Nestor III
Partnership may each be deemed pursuant to the Exchange
Act and the rules and regulations promulgated thereunder
to beneficially own respectively 26.08%, 4.66% and 18.44%
of the outstanding shares of Common Stock of the Company.
As of the date hereof, as a result of the relationships
and stock ownership discussed above, the General Partner
and Mr. Schnitzer may each be deemed, pursuant to the
Exchange Act and the rules and regulations promulgated
thereunder, to beneficially own approximately 38.87% of
the outstanding shares of Common Stock of the Company.
Except as set forth in this Item 5(a), none of the Filing
Persons or, to the best knowledge of the Filing Persons,
Mr. Callard, beneficially owns any shares of Company
Common Stock.
Item 5(b) is hereby amended as follows:
(b) The Wand/Nestor Partnership and the
Wand/Nestor II Partnership each has sole power to vote or
direct the vote and sole power to dispose or direct the
disposition of the shares of Company Common Stock
beneficially owned by it as a consequence of its
ownership, of record and beneficially, of Common Stock,
Series D Preferred Stock, Series H Preferred Stock,
Series F Preferred Stock and the several warrants to
acquire Common Stock. The Wand/Nestor III Partnership
has sole power to vote or direct the vote and sole power
to dispose or direct the disposition of shares of Company
Common Stock beneficially owned by it as a consequence of
its ownership, of record and beneficially, of Common
Stock, Series D Preferred Stock, Series E Preferred Stock
and warrants to acquire Common Stock of the Company. By
virtue of their relationship to the Wand/Nestor
Partnership, the Wand/Nestor II Partnership and the
Wand/Nestor III Partnership, the General Partner and Mr.
Schnitzer may each be deemed to have concurrent indirect
power to vote or to direct the vote and to dispose or to
direct the disposition of all such shares. Holders of
Series F Preferred Stock and Series H Preferred Stock are
entitled to vote on all matters as to which shareholders
of the Company are entitled to vote, with each holder
entitled to cast a number of votes equal to the greatest
number of whole shares of Common Stock into which such
holder's shares of Series F Preferred Stock and Series H
Preferred Stock could be converted.
(c) Except for the transactions related to the
consummation of the Securities Purchase and Exchange
Agreement, none of the Filing Persons, nor, to the best
knowledge of the Filing Persons, Mr. Callard has effected
any transactions in Common Stock of the Company during
the past 60 days.
Item 6. Contracts, Understandings or Relationships with
respect to Securities of the Issuer.
Item 6 is hereby supplemented as follows:
Upon consummation of the Securities Purchase
and Exchange Agreement, the Company, the Wand/Nestor
Partnership, the Wand/Nestor II Partnership, the
Wand/Nestor III Partnership and certain other
stockholders of the Company entered into the Amended and
Restated Registration Rights Agreement dated as of
January 31, 1996, a copy of which is attached hereto as
Exhibit 2.
Item 7. Material to Be Filed as Exhibits.
Exhibit 1 - Securities Purchase and Exchange
Agreement, dated as of January
31, 1996, among the Company, the
Wand/Nestor Partnership, the
Wand/Nestor II Partnership and
the Wand/Nestor III Partnership
Exhibit 2 - Amended and Restated
Registration Rights Agreement,
dated as of January 31, 1996
Exhibit 3 - Certificate of Powers,
Designations, Preferences and
Special Rights of Series E
Convertible Preferred Stock of
the Company
Exhibit 4 - Certificate of Powers,
Designations, Preferences and
Special Rights of Series F
Convertible Preferred Stock of
the Company
Exhibit 5 - Certificate of Powers,
Designations, Preferences and
Special Rights of Series G
Convertible Preferred Stock of
the Company
Exhibit 6 - Certificate of Powers,
Designations, Preferences and
Special Rights of Series H
Convertible Preferred Stock of
the Company
Exhibit 7 - Common Stock Purchase Warrant
No. W-S, respecting 511,885
shares of Company Common Stock,
dated January 31, 1996 and
issued to the Wand/Nestor
Partnership upon cancellation of
Warrant W-N
Exhibit 8 - Common Stock Purchase Warrant
No. W-T, respecting 358,319
shares of Company Common Stock,
dated January 31, 1996 and
issued to the Wand/Nestor
Partnership upon cancellation of
Warrant W-Q
Exhibit 9 - Common Stock Purchase Warrant
No. W-U, respecting 152,830
shares of Company Common Stock,
dated January 31, 1996 and
issued to the Wand/Nestor
Partnership in connection with
its purchase of Series F
Preferred Stock
Exhibit 10 - Common Stock Purchase Warrant
No. W-V, respecting 20,880
shares of Company Common Stock,
dated January 31, 1996 and
issued to the Wand/Nestor II
Partnership in connection with
its purchase of Series F
Preferred Stock
Exhibit 11 - Common Stock Purchase Warrant
No. W-W, respecting 416,115
shares of Company Common Stock,
dated January 31, 1996 and
issued to the Wand/Nestor III
Partnership to reflect warrants
transferred to it from the
Wand/Nestor Partnership
Exhibit 12 - Common Stock Purchase Warrant
No. W-X, respecting 291,281
shares of Company Common Stock,
dated January 31, 1996 and
issued to the Wand/Nestor III
Partnership to reflect warrants
transferred to it from the
Wand/Nestor Partnership
Exhibit 13 - Joint Filing Agreement
SIGNATURE
After reasonable inquiry and to the best of its
knowledge and belief, the undersigned certifies that the
information set forth in this Statement is true, complete
and correct.
Dated: February 13, 1996
WAND/NESTOR INVESTMENTS L.P.
By: WAND (NESTOR) INC.,
as general partner
By: /s/ Bruce W. Schnitzer
___________________________
Name: Bruce W. Schnitzer
Title: Chairman
SIGNATURE
After reasonable inquiry and to the best of its
knowledge and belief, the undersigned certifies that the
information set forth in this Statement is true, complete and
correct.
Dated: February 13, 1996
WAND/NESTOR INVESTMENTS II L.P.
By: WAND (NESTOR) INC.,
as general partner
By: /s/ Bruce W. Schnitzer
___________________________
Name: Bruce W. Schnitzer
Title: Chairman
SIGNATURE
After reasonable inquiry and to the best of its
knowledge and belief, the undersigned certifies that the
information set forth in this Statement is true, complete and
correct.
Dated: February 13, 1996
WAND/NESTOR INVESTMENTS III L.P.
By: WAND (NESTOR) INC.,
as general partner
By: /s/ Bruce W. Schnitzer
___________________________
Name: Bruce W. Schnitzer
Title: Chairman
SIGNATURE
After reasonable inquiry and to the best of its
knowledge and belief, the undersigned certifies that the
information set forth in this Statement is true, complete and
correct.
Dated: February 13, 1996
WAND (NESTOR) INC.
By: /s/ Bruce W. Schnitzer
___________________________
Name: Bruce W. Schnitzer
Title: Chairman
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth
in this Statement is true, complete and correct.
Dated: February 13, 1996
By: /s/ Bruce W. Schnitzer
___________________________
Name: Bruce W. Schnitzer
EXHIBIT INDEX
Exhibit No. Exhibit Name Page No.
1 Securities Purchase and Exchange
Agreement, dated as of January
31, 1996, among the Company, the
Wand/Nestor Partnership, the
Wand/Nestor II Partnership and
the Wand/Nestor III Partnership . . . . . . . .
2 Amended and Restated Registration
Rights Agreement, dated as of
January 31, 1996 . . . . . . . . . . . . . . . .
3 Certificate of Powers,
Designations, Preferences and
Special Rights of Series E
Convertible Preferred Stock of
the Company . . . . . . . . . . . . . . . . . .
4 Certificate of Powers,
Designations, Preferences and
Special Rights of Series F
Convertible Preferred Stock of
the Company . . . . . . . . . . . . . . . . . .
5 Certificate of Powers,
Designations, Preferences and
Special Rights of Series G
Convertible Preferred Stock of
the Company . . . . . . . . . . . . . . . . . .
6 Certificate of Powers,
Designations, Preferences and
Special Rights of Series H
Convertible Preferred Stock of
the Company . . . . . . . . . . . . . . . . . .
7 Common Stock Purchase Warrant No.
W-S, respecting 511,885 shares
of Company Common Stock, dated
January 31, 1996 and issued to
the Wand/Nestor Partnership upon
cancellation of Warrant W-N . . . . . . . . . .
8 Common Stock Purchase Warrant No.
W-T, respecting 358,319 shares of
Company Common Stock, dated
January 31, 1996 and issued to
the Wand/Nestor Partnership upon
cancellation of Warrant W-Q . . . . . . . . . .
9 Common Stock Purchase Warrant No.
W-U, respecting 152,830 shares of
Company Common Stock, dated
January 31, 1996 and issued to
the Wand/Nestor Partnership in
connection with its purchase of
Series F Preferred Stock . . . . . . . . . . . .
10 Common Stock Purchase Warrant No.
W-V, respecting 20,880 shares of
Company Common Stock, dated
January 31, 1996 and issued to
the Wand/Nestor II Partnership in
connection with its purchase of
Series F Preferred Stock . . . . . . . . . . . .
11 Common Stock Purchase Warrant No.
W-W, respecting 416,115 shares of
Company Common Stock, dated
January 31, 1996 and issued to
the Wand/Nestor III Partnership
to reflect warrants transferred
to it from the Wand/Nestor
Partnership . . . . . . . . . . . . . . . . . .
12 Common Stock Purchase Warrant No.
W-X, respecting 291,281 shares of
Company Common Stock, dated
January 31, 1996 and issued to
the Wand/Nestor III Partnership
to reflect warrants transferred
to it from the Wand/Nestor
Partnership . . . . . . . . . . . . . . . . . .
13 Joint Filing Agreement . . . . . . . . . . . . .
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
THIS SECURITIES PURCHASE AND EXCHANGE AGREEMENT
("Agreement") is made as of the 31st day of January, 1996
by and among Nestor, Inc., a Delaware corporation (the
"Company"), Wand/Nestor Investments L.P., a Delaware
limited partnership ("Wand I"), Wand/Nestor Investments
II L.P., a Delaware limited partnership, and Wand/Nestor
Investments III L.P., a Delaware limited partnership
("Wand III"). Wand I, Wand II and Wand III are referred
to herein collectively as the "Purchasers."
RECITALS
A. Wand I and Wand II are each currently
owners of the following securities of the Company: (1)
common stock, par value $.01 per share ("Company Common
Stock"); (2) Series C Convertible Preferred Stock, par
value $1.00 per shares ("Series C Preferred Stock"); (3)
Series D Convertible Preferred Stock, par value $1.00 per
share ("Series D Preferred Stock"); (4) certain common
stock purchase warrants to purchase shares of Company
Common Stock at various exercise prices (the "Old
Warrants").
B. Certain of the Company securities
currently held by Wand I will be transferred to Wand III,
as follows:
(1) 74,151 shares of Company Common Stock (the
"Wand III Company Common Stock");
(2) 1,444 shares of Series C Preferred Stock
(the "Wand III Series C Preferred Stock");
(3) 8,322 shares of Series D Preferred Stock
(the "Wand III Series D Preferred Stock");
(4) Warrants to acquire 4,161 shares of
Company Common Stock at an exercise price
of $2.00 per share (the "$2.00 Warrants");
(5) Warrants to acquire 416,115 shares of
Company Common Stock at an exercise price
of $.65 per share (the "$.65 Warrants");
and
(6) Warrants to acquire 291,281 shares of
Company Common Stock at $1.00 per share
(the "$1.00 Warrant").
C. the Company desires to sell to Wand I and
Wand II, and Wand I and Wand II desires to purchase from
the Company, in the aggregate, (1) 599 shares of a new
class of convertible preferred stock of the Company, par
value $1.00 per share (the "Series F Preferred Stock")
having the terms set forth in the Company's Certificate
of Designation of the Terms of the Series F Preferred
Stock in the form set forth as Exhibit I, and (2)
Warrants to purchase up to an aggregate of 173,710 shares
of Company Common Stock in the form set forth as Exhibit
II (the "Regular Warrants");
D. The Company desires to sell to Wand III,
and Wand III desires to purchase from the Company, (1)
401 shares of a new class of convertible preferred stock
of the Company, par value $1.00 per share (the "Series G
Preferred Stock") having the terms set forth in the
Company's Designation of the Terms of the Series G
Preferred Stock set forth as Exhibit III and (2) warrants
to purchase up to an aggregate of 116,290 shares of
Company Common Stock in the form set forth as Exhibit IV
(the "Restricted Warrants").
E. In order to facilitate this purchase and
sale of the Company securities to the Purchasers, the
Company and the Purchasers have agreed that (1) the 1,776
Series C Preferred Stock owned by Wand I (excluding the
1,444 shares of such stock to be transferred to Wand III)
and the 250 shares of Series C Preferred Stock owned by
Wand II shall be exchanged for an aggregate of 2,026
shares of a new class of convertible preferred stock of
the Company, par value $1.00 per share (the "Series H
Preferred Stock") having the terms set forth in the
Company's Certificate of Designation of Terms of the
Series H Preferred Stock set forth as Exhibit V, (2) the
1,444 shares of Series C Preferred Stock transferred to
Wand III shall be exchanged for an aggregate of 1,444
shares of a new class of convertible preferred stock of
the Company, par value $1.00 per share (the "Series E
Preferred Stock") having the terms set forth in the
Company's Certificate of Designation of terms of the
Series E Preferred Stock set forth as Exhibit VI, and (3)
the $1.00 Warrants and the $.65 Warrants shall be
exchanged for revised Warrants having the terms set forth
in Exhibits VII (the "Revised $1.00 Warrants") and VIII
(the "Revised $.65 Warrants"), respectively. The Revised
$1.00 Warrants and the Revised $.65 Warrants are herein
referred to in the aggregate as the "Revised Warrants."
F. Concurrently herewith the parties are
entering into the Amended and Restated Registration
Agreement, dated as of January 31, 1996, in the form set
forth as Exhibit IX (the "Registration Rights
Agreement").
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, and of other good and
valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, each
intending to be legally bound, do hereby agree as
follows:
1. SALE AND PURCHASE OF COMPANY SECURITIES; OTHER
TRANSACTIONS.
(a) The Company has authorized the issuance
and sale to Wand I and Wand II, in the respective amounts
set forth on Schedule I, (i) 599 shares (the "Series F
Preferred Shares") of the Series F Preferred Stock and
(ii) the Regular Warrants. Subject to the terms and
conditions herein set forth, the Company will issue and
sell to Wand I and Wand II, and Wand I and Wand II will
purchase from the Company, at the Closing ( as defined
below) the Series F Preferred Shares and the Regular
Warrants in the respective amounts set forth on Schedule
I. The aggregate purchase price for the Series F
Preferred Shares and Regular Warrant shall be $599,000 in
cash (the "Series F Purchase Price").
(b) The Company has authorized the issuance
and sale to Wand III as set forth on Schedule I (i) 401
shares (the "Series G Preferred Shares") of the Series G
Preferred Stock and (ii) the Restricted Warrants.
Subject to the terms and conditions herein set forth,
including the receipt of all requisite regulatory
approvals, the Company will issue and sell to Wand III,
and Wand III will purchase from the Company, at the
Closing (as defined below) the Series G Preferred Shares
and the Restricted Warrants in the amount set forth on
Schedule I. The purchase price for the Series G
Preferred Shares and the Restricted Warrants shall be
$401,000 in cash (the "Series G Purchase Price").
(c) The Company has authorized the issuance to
Wand III of 1,444 shares (the "Series E Preferred
Shares") in exchange for 1,444 shares of Series C
Preferred Stock (the "Wand III Series C Preferred
Shares"). The Wand III Series C Preferred Shares shall
be cancelled and retired.
(d) The Company has authorized the issuance to
Wand III of the Revised $1.00 Warrant in exchange for the
$1.00 Warrant and the Revised $.65 Warrant in exchange
for the $.65 Warrant. The $1.00 Warrant and the $.65
Warrant shall be cancelled and retired.
(e) The Company has authorized the issuance to
Wand I and Wand II in the respective amounts set forth on
Schedule I, of an aggregate of 2,026 shares (the "Series
H Preferred Shares") in exchange for an aggregate of
2,026 shares of Series C Preferred Stock (the "Wand I and
Wand II Series C Preferred Shares"). The Wand I and Wand
II Series C Preferred Shares shall be cancelled and
retired.
(f) The Series E Preferred Shares, the Series
F Preferred Shares, the Series G Preferred Shares, and
the Series H Preferred Shares are referred to herein in
the aggregate as the "Preferred Shares" and the Regular
Warrants and the Restricted Warrants are referred to
herein in the aggregate as the "New Warrants."
2. CLOSING.
(a) Subject to the applicable provisions of
Sections 7, 8, and 9 hereof, the closing of (i) the sale
of the Series F Preferred Shares, the Series G Preferred
Shares, the Regular Warrants and the Restricted Warrants,
(ii) the exchange of the Series C Preferred Stock for the
Series E Preferred Shares and the Series H Preferred
Shares, and (iii) the exchange of the $.65 Warrants and
the $1.00 Warrants for the Revised Warrants (the
"Closing") shall take place at the offices of Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, New York,
New York 10022, as soon as practicable following the
satisfaction or waiver of the applicable conditions set
forth in Sections 7, 8 and 9 hereof.
(b) At the Closing, (i) the Company shall
deliver to the Purchasers certificates evidencing the
respective number of Series F Preferred Shares, Series G
Preferred Shares, Regular Warrants and Restricted
Warrants to be purchased by the Purchasers, (ii) the
Purchasers shall deliver to the Company the Series F
Purchase Price and the Series G Purchase Price by wire
transfer of immediately available funds to an account
designated by the Company, and (iii) the parties shall
make such other deliveries as are contemplated hereby.
(c) In addition, at the Closing (i) the
Company shall deliver to the Purchaser certificates
evidencing the respective number of Series E Preferred
Shares, Series H Preferred Shares and Revised Warrants to
be acquired by the Purchasers, (ii) the Purchasers shall
deliver to the Company for cancellation the Wand I and
Wand II Series C Preferred Shares, the Wand III Series C
Preferred Shares, the $1.00 Warrants and the $.65
Warrants, and (iii) the parties shall make such other
deliveries as are contemplated hereby.
(d) The Closing of the purchase and sale of
the Company securities contemplated by this Agreement and
the Closing of the exchange of Company securities
contemplated by this Agreement may take place at
different times if the parties mutually agree.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to
the Purchasers as follows:
(a) Organization, Standing and Power of the
Company. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Delaware. The Company has all requisite
power and authority to own, lease and operate its
properties, assets and business and to conduct its
business as now being conducted and is duly qualified to
do business as a foreign corporation in good standing in
those jurisdictions, other than the state of its
incorporation, in which the nature of the business
conducted or property owned by it makes such
qualification necessary, except for any failures so to
qualify which would not have, individually or in the
aggregate, a material adverse effect on the business,
condition or results of operations of the Company (a
"Company Material Adverse Effect").
(b) Authority; Enforceability; No Conflict.
The Company has all requisite corporate power and
authority to enter into this Agreement, the Registration
Rights Agreement, the New Warrants and the Revised
Warrants (such agreements other than this Agreement are
collectively referred to hereafter as the "Related
Agreements") to issue and sell the Preferred Shares, the
New Warrants and the Revised Warrants and to carry out
its obligations hereunder and under the Related
Agreements. The execution, delivery and performance of
this Agreement and the Related Agreements by the Company
and the issuance and sale of the Preferred Shares, the
New Warrants and the Revised Warrants by the Company have
been duly and validly authorized by all requisite
corporate proceedings on the part of the Company. This
Agreement is, and the Related Agreements when executed
and delivered by the Company will be, and when issued and
sold each of the New Warrants and the Revised Warrants
will be, a valid and binding obligation of the Company,
enforceable against it in accordance with its terms,
except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium,
rehabilitation, liquidation, conservatorship,
receivership or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii)
the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Subject to the receipt of the consents or approvals set
forth in Section 3(b) of the disclosure schedule
delivered by the Company to the Purchasers concurrently
with the execution and delivery of this Agreement (the
"Disclosure Schedule"), the execution and delivery of
this Agreement and each Related Agreement by the Company
do not, and the consummation by the Company of the
transactions contemplated hereby and thereby will not,
the issuance and sale of the Preferred Shares, the New
Warrants and the Revised Warrants will not, and the
performance by the Company of its obligations under the
terms of the Preferred Shares, the New Warrants and the
Revised Warrants will not, result in or constitute: (i)
a default, breach or violation of or under the
Certificate of Incorporation or the By-laws of the
Company, or (ii) a default, breach or violation of or
under any mortgage, deed of trust, indenture, note, bond,
license, lease agreement or other instrument or
obligation to which the Company is a party or by which
any of their properties or assets are bound, except for
any defaults, breaches or violations which would not
have, individually or in the aggregate, a Company
Material Adverse Effect, or (iii) a violation of any
statute, rule, regulation, order, judgment or decree of
any court, public body or authority by which the Company
or any of its properties or assets are bound, except for
any violations which would not have, individually or in
the aggregate, a Company Material Adverse Effect, or (iv)
an event which (with notice or lapse of time or both)
would permit any person to terminate, accelerate the
performance required by, or accelerate the maturity of,
any indebtedness or obligation of the Company under any
agreement or commitment to which the Company is a party
or by which the Company is bound or by which any of its
properties or assets are bound, except for any
accelerations or terminations which would not have,
individually or in the aggregate, a Company Material
Adverse Effect, or (v) the creation or imposition of any
lien, charge or encumbrance on any property of the
Company under any agreement or commitment to which the
Company is a party or by which the Company is bound or by
which any of its respective properties or assets are
bound, except for any liens, charges or encumbrances
which would not have, individually or in the aggregate, a
Company Material Adverse Effect, or (vi) an event which
would require any consent under any agreement to which
the Company is a party or by which the Company is bound
or by which any of its respective properties or assets
are bound, except for any consents which, if not
received, would not have, individually or in the
aggregate, a Company Material Adverse Effect.
(c) Capitalization. The authorized capital
stock of the Company consists of (i) 30,000,000 shares of
Common Stock, par value $.01 per share, of which
7,844,908 shares (excluding shares held in treasury) are
outstanding and 10,000,000 shares of preferred stock, par
value $1.00 per share (the "Preferred Stock"), of which
(i) 452,064 shares of Series A Preferred Stock, par value
$1.00 per share (the "Series A Preferred Stock"), of
which 452,064 shares are outstanding; (ii) 2,380,000
shares of Series B Preferred Stock, par value $1.00 per
share, of which 2,380,000 shares are outstanding; (iii)
3,500 shares of Series C Preferred Stock, par value $1.00
per share, of which 3,470 shares are outstanding; (iv)
210,549 shares of Series D Preferred Stock, par value
$1.00 per share, (the "Series D Preferred Stock"), of
which 210,549 shares are outstanding; (v) 1,444 shares of
Series E Preferred Stock, of which no shares are
outstanding; (vi) 599 shares of Series F Preferred Stock,
of which no shares are outstanding; (vii) 401 shares of
Series G Preferred Stock, of which no shares are
outstanding; and (viii) 2,026 shares of Series H
Preferred Stock, of which no shares are outstanding. All
of the outstanding shares of Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock have been
duly authorized and validly issued, and are fully paid
and non-assessable. Immediately following the Closing,
(i) 7,844,908 shares of Common Stock will be outstanding;
(ii) 452,064 shares of Series A Preferred Stock will be
outstanding; (iii) 2,380,000 shares of Series B Preferred
Stock will be outstanding; (iv) no shares of Series C
Preferred Stock will be outstanding; (v) 210,549 shares
of Series D Preferred Stock will be outstanding; (vi)
1,444 shares of Series E Preferred Stock will be
outstanding; (vii) 599 shares of Series F Preferred Stock
will be outstanding; (viii) 401 shares of Series G
Preferred Stock will be outstanding, and (ix) 2,026
shares of Series H Stock will be outstanding. Except for
the outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, and except as set forth in
Section 3(c) of the Disclosure Schedule, there are no
outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or
binding upon the Company for the purchase or acquisition
of any shares of capital stock of the Company or any
other securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of such
capital stock. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of the capital
stock of the Company or any convertible securities,
rights or options of the type described in the preceding
sentence. The Company is not a party to, and does not
have knowledge of, any agreement expressly restricting
the transfer of any shares of the capital stock of the
Company.
(d) No Subsidiaries or Other Ventures. The
Company has no subsidiaries. Except as set forth in
Section 3(d)(i) of the Disclosure Schedule, the Company
does not own, directly or indirectly, any interest in any
corporation, partnership, joint venture, association or
other entity.
(e) Status of Shares. The Preferred Shares to
be issued at the Closing have been duly authorized by all
necessary corporate action on the part of the Company.
When issued and paid for as provided in this Agreement,
the Preferred Shares will be validly issued and
outstanding, fully paid and nonassessable, and the
issuance of such Preferred Shares is not and will not be
subject to preemptive rights of any other stockholder of
the Company. The shares of Common Stock to be issued
upon conversion of the Preferred Shares and upon exercise
of the New Warrants and the Revised Warrants have been
duly authorized by all necessary corporate action on the
part of the Company and, as of the Closing, will be duly
reserved for issuance. When the shares of Common Stock
are issued upon conversion of the Preferred Shares and
upon exercise of the New Warrants and the Revised
Warrants, such shares will be validly issued and
outstanding, fully paid and nonassessable and the
issuance of such shares will not be subject to preemptive
rights of any other stockholder of the Company.
(f) Financial Statements. (1) The Company has
heretofore delivered or made available to the Purchaser
the audited consolidated balance sheets at June 30, 1995,
1994 and 1993 of the Company and the related consolidated
statements of income, stockholders' equity and cash flows
for the years then ended, including the related notes and
auditor's report thereon (the "Financial Statements").
The Financial Statements (i) present fairly the
consolidated financial condition of the Company at the
dates thereof and present fairly its consolidated results
of operations and cash flows for the years then ended and
(ii) have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied
consistently with respect to the immediately preceding
fiscal year period except as set forth in the notes to
the Financial Statements or in the auditor's report
thereon.
(2) The Company has heretofore delivered or
made available to the Purchaser the unaudited
consolidated balance sheet at September 30, 1995 of the
Company (the "September Balance Sheet") and the related
consolidated statements of income and cash flows for the
three months then ended (such September Balance Sheet and
related consolidated statements, collectively, the
"September Financial Statements"), each of which (i)
presents fairly, in all material respects, the
consolidated financial condition of the Company at
September 30, 1995, and presents fairly its consolidated
results of operations and cash flows for the nine months
then ended and (ii) has been prepared in compliance with
all of the requirements of Section 15(d) of the
Securities Exchange Act of 1934, as amended, (the
"Exchange Act") and the applicable rules and regulations
thereunder.
(g) SEC Reports. The Company has filed all
reports, statements, forms and documents with the
Securities Exchange Commission ("SEC") that it was
required to file since December 31, 1990 (the "SEC
Reports"), all of which have complied in all material
respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities
Act"), and the Exchange Act. As of their respective
dates, each such report, statement, form or document,
including without limitation any financial statements or
schedules included therein, did not contain any untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances
under which they were made, not misleading.
(h) Liabilities. As of the date hereof,
except (i) as set forth on the September Balance Sheet,
(ii) as set forth in Section 3(h) of the Disclosure
Schedule or (iii) for liabilities or obligations which
were incurred after September 30, 1995 in the ordinary
course of business and consistent with past practices,
the Company has no liabilities, obligations, claims or
losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise)
that would be required to be disclosed on a consolidated
balance sheet of the Company (including the notes
thereto) in conformity with GAAP.
(i) Indebtedness of the Company. Section 3(i)
of the Disclosure Schedule sets forth all outstanding
secured and unsecured Indebtedness (as defined
hereinafter) of the Company in excess of $50,000 in any
individual case, or for which the Company has
commitments, on the date of this Agreement. The Company
is not in default with respect to any such Indebtedness.
"Indebtedness" means at any time, (i) all indebtedness
for borrowed money, (ii) all obligations evidenced by
bonds, debentures, notes or other similar instruments,
(iii) all reimbursement obligations and other liabilities
under letters of credit, (iv) all obligations to pay the
deferred purchase price of property or services, other
than normal trade creditors in the ordinary course, (v)
all obligations in respect of capitalized leases, (vi)
all guarantees and contractual obligations of the
Company, contingent or otherwise, with respect to any
indebtedness or obligation of another, and (vii) all
obligations of the Company secured by any mortgage,
pledge, lien, security interest or other encumbrance on
any asset or property of the Company, whether or not such
obligation has been assumed.
(j) Title to Properties; Liens. The Company
does not own any real property. Section 3(j) of the
Disclosure Schedule correctly describes all real property
leased by the Company, together with a description of the
lease payment obligations and lease termination
provisions relating thereto. The Company enjoys peaceful
and undisturbed possession under all leases necessary in
any material respect for the operation of its properties
and assets, and all such leases are valid and subsisting
and are in full force and effect.
(k) Actions Pending. There is no action, suit,
claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against the Company
which questions the validity of this Agreement or the
Related Agreements or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit,
claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or
involving the Company or any of its properties or assets.
There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company.
(l) Compliance with Law. The business of the
Company has been and is presently being conducted so as
to comply with all applicable federal, state, and local
governmental laws, rules, regulations and ordinances.
The Company has all material franchises, permits,
licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of
its business as now being conducted by it, and the
Company is in compliance therewith except for any non-
compliances which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(m) No Violations. The Company is not in
violation of or default under (i) any term of its
Certificate of Incorporation or By-Laws, (ii) any of its
contracts or agreements or under any instrument by which
the Company is bound, or (iii) any outstanding indenture
or other debt instrument or with respect to the payment
of principal of or interest on any outstanding
obligations for borrowed money.
(n) Taxes.
(i) The Company has duly and timely
filed, or caused to be filed, and will duly and
timely file, or cause to file, with the appropriate
taxing authority all Tax Returns (as defined below)
required to be filed on or before the date hereof by
or with respect to the Company and such Tax Returns
were or will be true, correct and complete in all
material respects when filed.
(ii) The Company has paid or caused to be
paid in full or has made adequate provision for on
its balance sheet all material Taxes (as defined
below) shown to be due on such Tax Returns. There
are no liens for Taxes upon the assets of either the
Company except for statutory Liens for current Taxes
not yet due.
(iii) None of the Tax Returns filed by or
on behalf of the Company has been examined by the
appropriate taxing authorities.
(iv) Except as set forth in Schedule
3(n)(iv) hereto, the Company has not received any
notice of deficiency or assessment from any taxing
authority with respect to liabilities or obligations
for Taxes with respect to the Company which has not
been fully paid or finally settled, and any such
deficiency or assessment shown in Schedule 3(n)(iv)
hereto is being contested in good faith through
appropriate proceedings. The Company has not given
any outstanding waivers or comparable consents
extending the application of the statute of
limitations with respect to any Taxes or Tax Returns
with respect to the Company.
(v) The Company has complied in all
material respects with all applicable laws, rules
and regulations relating to the payment and
withholding of payroll and employment taxes and
have, within the time and in the manner prescribed
by law, withheld from employee wages and paid over
to the proper governmental authorities all material
payroll and employment taxes required to be so
withheld and paid over.
(vi) No audit or other administrative
proceeding or court proceeding which is material to
the financial condition of Company is presently
pending with regard to any Taxes or Tax Returns.
(vii) The amount and character of the tax
loss carryforwards as set forth in the Company's
financial statements for the year ending June 30,
1995 are materially accurate and, to the Company's
best knowledge, are not subject to any "Section 382
limitation" under Section 382 of the Code, and any
regulations promulgated thereunder. To the
Company's best knowledge, at the Closing Date, the
issuance of the Preferred Shares, the Warrants and
the Fee Warrants in accordance with the terms of
this Agreement and the Related Agreements will not
result in an "ownership change" under Section 382 of
the Code, and any regulations promulgated
thereunder. As of the Closing Date, the Company
shall not have any plan or intention to take any
action after the Closing Date, which to its best
knowledge would result in an "ownership change"
under Section 382 of the Code and any regulations
promulgated thereunder.
(viii) For purposes of this Agreement,
"Taxes" shall mean any and all taxes, charges, fees,
levies or other like assessments (and all related
interest, additions to tax and penalties),
including, but not limited to, income, transfer,
gains, gross receipts, excise, inventory, property
(real, personal or intangible), custom, duty, sales,
use, license, withholding, payroll, employment,
capital stock and franchise taxes, imposed by the
United States, or any state, local or foreign taxing
authority, whether computed on a unitary, combined
or any other basis and "Tax Return" shall mean any
report, return or other information filed with any
taxing authority with respect to Taxes imposed upon
or attributable to the operations of the Company.
(o) ERISA. Section 3(o) of the Disclosure
Schedule contains a true and complete list of each
employee benefit plan, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and any other bonus, severance or
termination pay, stock option or stock purchase,
incentive pay or other plan, program or arrangement
covering present or former employees of the Company which
is maintained or contributed to by the Company or any of
its subsidiaries (the "Plans"). None of the Plans is
subject to the provisions of Title IV of ERISA, and none
of the Plans is a multiemployer Plan as defined in
Section 3(37) of ERISA (a "Multiemployer Plan"). The
Company has not incurred (directly or indirectly) any
liability to the Pension Benefit Guaranty Corporation or
with respect to a Multiemployer Plan. None of the Plans
is subject to the minimum funding standards set forth in
Section 302 of ERISA or Section 412 of the Internal
Revenue Code of 1986, as amended (the "Code"). None of
the Company or any of its officers or employees has
engaged in a "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code with
respect to any Plan which would subject any of such
parties to a civil penalty under Section 502(i) of ERISA
or an excise tax under Section 4975 of the Code. Each of
the Plans has been operated in all material respects in
accordance with applicable law, including ERISA and the
Code. None of the Plans is an employee welfare plan, as
defined in Section 3(1) of ERISA, which provides health
or life insurance benefits to employees of the Company
following their retirement (other than coverage mandated
by applicable law). Each Plan that is intended to be
qualified under Section 401(a) of the Code is so
qualified.
(p) Absence of Specified Changes. Except as
set forth in Section 3(p) of the Disclosure Schedule,
during the period from June 30, 1995 to the date hereof,
there has not been any:
(1) material adverse change in the
business, condition or results of operations of the
Company;
(2) transactions involving the Company
except in the ordinary course of business;
(3) change in accounting principles,
methods or practices of the Company;
(4) amendment to the Certificate of
Incorporation or By-Laws of the Company; or
(5) agreement or understanding to take
any of the actions described above in this paragraph.
(q) Certain Fees. No broker's, finder's or
financial advisory fees or commissions will be payable by
the Company with respect to the transactions contemplated
by this Agreement and the Related Agreements.
(r) Use of Proceeds. The Company will apply
the proceeds from the sale of the Series F Preferred
Shares, the Series G Preferred Shares and the New
Warrants to general working capital purposes.
(s) Intellectual Property Rights.
(i) The Company is the owner of or has
rights to use (including the right to sue for past
infringement) the intellectual and similar property
of every kind and nature used at any time in or
necessary for the conduct of its business, including
without limitation, (A) Patents (meaning all United
States and foreign patents and patent applications,
patent disclosures and inventions, and all patents
issued upon said patent applications or based upon
said disclosures and inventions, including all
reissues, divisions, continuations, continuations-
in-part, substitutions, extensions or renewals of
any of the foregoing), (B) Trademarks (meaning all
United States, any political subdivision thereof,
and foreign trademarks, service marks, trade names,
corporate names, company names, business names,
fictitious business names, trade styles, logos,
designs and general intangibles of like nature, all
registrations and recordings thereof, and all
applications in connection therewith, including
registrations, recordings and applications in the
United States Patent and Trademark Office (the
"PTO"), any State of the United States or any other
country or jurisdiction or any political subdivision
thereof, and all goodwill symbolized thereby and/or
associated therewith and all extensions or renewals
thereof,), (C) Copyrights (meaning all copyrights,
United States and foreign copyright registrations,
and applications to register copyrights), (D)
inventions, formulae, processes, designs, know-how,
show-how or other data or information, (E)
confidential or proprietary technical and business
information, processes and trade secrets, (F)
computer software and databases (including all
embodiments or fixations thereof and related
documentation, registrations and franchises, and all
additions, improvements, enhancements, updated and
accessions thereto), (G) all technical manuals and
documentation made or used in connection with any of
the foregoing, and (H) all licenses and rights with
respect to the foregoing or property of like nature,
in each case as any of the foregoing have been at
any time used in or necessary for the conduct of the
business of the Company (collectively, the
"Intellectual Property Rights").
(ii) Section 3(s)(ii) of the Disclosure
Schedule sets forth a complete and accurate list of
all Copyrights, Patents, and Trademarks owned by or
under obligation of assignment to the Company. Each
owner identified thereon is listed in the records of
the appropriate United States, State or foreign
agency as the sole owner of record.
(iii) Section 3(s)(iii) of the Disclosure
Schedule sets forth a complete and accurate list of
(a) all material agreements and (b) all other
agreements entered into since January 1, 1990, in
each case between the Company and any third party
granting any right to use or practice any rights
under any Intellectual Property Right (collectively,
the "Intellectual Property Licenses"), except for
single-user licenses granting the right to use on a
single personal computer a single copy of
application software incorporating any of the
Company's Intellectual Property Rights.
(iv) There is no restriction or limitation
on the right of the Company to transfer any of the
Intellectual Property Rights.
(v) No trade secret, formula, process,
invention, design, know-how, show-how or any other
confidential information relating to the Company's
business has been disclosed or authorized to be
disclosed to any third party unless any such third
party has entered into, or is bound by, a
confidentiality agreement that is sufficient to
protect fully the Company's proprietary interest and
right in and to such Intellectual Property Right.
(vi) The use of the Intellectual Property
Rights by the Company is not in conflict with the
rights of others. There are no pending legal or
governmental proceedings, including oppositions,
interferences, proceedings or suits, relating to the
Intellectual Property Rights, and, to the best
knowledge of the Company, no such proceedings are
threatened. To the best knowledge of the Company,
the conduct of the business of the Company and the
exercise of the Intellectual Property Rights does
not infringe upon or otherwise violate, and the
exercise of any rights granted to the Company under
any Intellectual Property License would not infringe
upon or violate any intellectual property rights of
any third party. To the best knowledge of the
Company, except as set forth in Section 3(s)(vi), no
person is infringing upon or otherwise violating any
of the Intellectual Property Rights. None of the
Company or its affiliates has received notice of any
claims, and there are no pending claims, of any
persons relating to the scope, ownership or use of
any of the Intellectual Property Rights.
(vii) Each copyright registration,
patent, and registered trademark and application
therefor listed in Section 3(s)(ii) of the
Disclosure Schedule is valid, subsisting and in
proper form, and has been duly maintained, including
the submission of all necessary filings in
accordance with the legal and administrative
requirements of the appropriate jurisdictions.
There have been no failures in complying with such
requirements. No such Copyright, Patent or
Trademark has lapsed and there has been no
cancellation or abandonment thereof.
(viii) With respect to each patent and
patent application listed in Section 3(s) of the
Disclosure Schedule, there are no defects of form in
the preparation or filing of the applications
thereof. Each pending application is being
diligently prosecuted. During the prosecution of
each Patent, (A) all pertinent prior art references
known to the Company or its counsel was properly
disclosed to the PTO, and (B) neither such counsel
nor the Company made any misrepresentation to, or
concealed any material fact from, the PTO.
(ix) The execution and delivery of this
Agreement and the Related Agreements and the taking
of the actions contemplated hereby and thereby will
not alter any of the rights of the Company in or to
the Intellectual Property Rights.
(t) Environmental Matters. The Company is in
compliance with the provisions of all federal, state and
local laws relating to pollution or protection of the
environment applicable to it or to real property leased
by it or to the use, operation or occupancy thereof,
except for violations or liabilities which individually
or in the aggregate could not reasonably be expected to
have a Company Material Adverse Effect. The Company has
not engaged in any activity in violation of any provision
of any federal, state or local law relating to pollution
or protection of the environment, which violation could
reasonably be expected to have a Company Material Adverse
Effect. The Company has no liability, absolute or
contingent, under any federal, state or local law
relating to pollution or protection of the environment,
except for liabilities which individually or in the
aggregate could not reasonably be expected to have a
Company Material Adverse Effect.
(u) Registration Rights. Except as set forth
in Section 3(u) of the Disclosure Schedule, the Company
is not a party to any agreement granting registration
rights to any person with respect to any of its equity or
debt securities.
(v) Agreements. Section 3(v) of the
Disclosure Schedule contains a list of each agreement or
instrument (including any and all amendments thereto) to
which the Company is a party as of the date hereof and
which is or, immediately following the consummation of
the transactions contemplated by this Agreement, will be,
material to the business, condition or results of
operations of the Company. Each such agreement or
instrument (including any and all amendments thereto) is
in full force and effect and constitutes a legal, valid
and binding obligation of (i) the Company and (ii) to the
best knowledge of the Company, the other respective
parties thereto, and, to the best knowledge of the
Company, no person is in default or breach of (with or
without the giving of notice or the passage of time) any
such agreement or instrument.
(w) Availability of Documents. Section 3(w)
of the Disclosure Schedule contains a true, correct and
complete copy of the Company's Certificate of
Incorporation, together with all amendments thereto. The
Company has also heretofore provided or made available to
the Purchaser an accurate copy of its by-laws and has
heretofore made available for inspection by the Purchaser
all written agreements, arrangements, commitments and
documents referred to herein or in the Disclosure
Schedule, in each case, together with all amendments and
supplements thereto. The Company has heretofore made
available for inspection by the Purchaser its corporate
minute books. Such corporate minute books contain the
minutes of all the meetings of stockholders, board of
directors and any committees thereof which have been held
since the Company's date of incorporation and all written
consents to action executed in lieu thereof.
(x) Business Relations. To the knowledge of
the Company, no client, customer or supplier will cease
to do business with the Company due to the consummation
of the transactions contemplated by this Agreement or the
Related Agreements.
(y) Interest in Competitors, Suppliers,
Customers, etc. Except as set forth on Section 3(y) of
the Disclosure Schedule or with respect to the ownership
of less than 1% of the outstanding publicly traded
securities of an entity, neither the Company nor its
officers, directors, or affiliates have any ownership
interest in any competitor, supplier, customer or
franchisee of the Company.
(z) Private Offering. Assuming the accuracy
of the Purchaser's representations set forth in Section
4(c) herein, the offer and sale of the Shares hereunder
is exempt from the registration and prospectus delivery
requirements of the Securities Act. Neither the Company
nor any person acting on behalf of it has taken or will
take any action which would subject the offering and
issuance of any of such securities to the provisions of
Section 5 of the Securities Act or to the provisions of
any securities law, rule or regulation of any applicable
jurisdiction.
(aa) Disclosure. No representation or
warranty to Purchaser contained in this Agreement and no
statement contained in the Disclosure Schedule or any
Officer's Certificate of the Company furnished pursuant
to the provisions hereof, contains any untrue statement
of a material fact or omits to state a material fact
necessary in order to make the statements contained
therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser represents and warrants,
severally and not jointly, to the Company as follows:
(a) Organization and Standing of the
Purchasers. The Purchaser is a partnership duly
organized, validly existing and in good standing (to the
extent such concept exists) under the laws of the
jurisdiction of its organization.
(b) Authority; Enforceability; No Conflict.
The Purchaser has all requisite power and authority
(corporate or otherwise) to enter into this Agreement and
to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by the
Purchaser have been duly and validly authorized by all
requisite partnership proceedings on the part of the
Purchaser. This Agreement is a valid and binding
obligation of the Purchaser, enforceable against it in
accordance with its terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, rehabilitation, liquidation,
conservatorship, receivership or other similar laws now
or hereafter in effect relating to creditors' rights
generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be
brought. The execution and delivery of this Agreement by
the Purchaser do not, and consummation by the Purchaser
of the transactions contemplated hereby will not, result
in or constitute (i) a default, breach or violation of or
under the organizational documents of the Purchaser, or
(ii) a default, breach or violation of or under any
mortgage, deed of trust, indenture, note, bond, license,
lease agreement or other instrument or obligation to
which the Purchaser is a party or by which any of its
properties or assets are bound, except for any defaults,
breaches or violations which would not, individually or
in the aggregate, have a material adverse effect on the
Purchaser or prevent or materially delay the consummation
by the Purchaser of the transactions contemplated hereby,
or (iii) a violation of any statute, rule, regulation,
order, judgment or decree of any court, public body or
authority, except for any violations which would not,
individually or in the aggregate, have a material adverse
effect on the Purchaser or prevent or materially delay
the consummation by the Purchaser of the transactions
contemplated hereby.
(c) Acquisition for Investment. The Purchaser
is either an "accredited investor," as that term is
defined in SECTION230.501(a) of the rules and regulations
promulgated by the SEC under the 1933 Act or a person
described in SECTION230.506(b)(ii) of such rules and
regulations. The Purchaser is acquiring the Preferred
Shares, the New Warrants and, in the case of Wand III,
the Revised Warrants solely for its own account for the
purpose of investment and not with a view to or for sale
in connection with any distribution thereof, and has no
present intention or plan to effect any distribution of
such Preferred Shares, the New Warrants or Revised
Warrants. The Purchaser acknowledges that it is able to
bear the financial risks associated with an investment in
the Preferred Shares and Warrants. The Preferred Shares
and Warrants may bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN
RELIANCE ON CERTAIN EXEMPTIONS FROM
REGISTRATION THEREUNDER. THE SALE,
PLEDGE, HYPOTHECATION OR OTHER
TRANSFER OF SUCH SECURITIES IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND
CERTAIN RESTRICTIONS AND CONDITIONS
CONTAINED IN A CERTAIN SECURITIES
PURCHASE AND EXCHANGE AGREEMENT AND
RELATED AGREEMENTS DATED AS OF
JANUARY 31, 1996. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF
AGREES TO BE BOUND BY SUCH
RESTRICTIONS AND CONDITIONS. A COPY
OF THE SECURITIES PURCHASE AND
EXCHANGE AGREEMENT IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
5. CONDUCT OF BUSINESS OF THE COMPANY.
Except as expressly contemplated by this
Agreement or the Related Agreements, during the period
from the date hereof through the Closing, the Company
will conduct its operations according to its ordinary
course of business and consistent with past practice, and
the Company will use its best efforts to preserve intact
its business organization, to keep available the services
of its officers and employees and to maintain existing
relationships with customers and others having business
relationships with it. Without limiting the generality
of the foregoing, and except as otherwise expressly
contemplated by this Agreement or the Related Agreements
or as set forth in Section 5 of the Disclosure Schedule,
prior to the Closing, the Company will not, without the
prior written consent of the Purchaser:
(a) amend its Certificate of Incorporation or
By-Laws;
(b) (i) except in accordance with the existing
terms of the convertible securities, warrants, options
and other agreements disclosed on Section 3(c) of the
Disclosure Schedule, authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase
or otherwise) any securities of any class, or (ii) amend
in any respect any of the terms of any such securities
outstanding as of the date hereof, except to the extent
required by the express terms on the date hereof of such
securities;
(c) split, combine or reclassify any shares of
its capital stock, declare, set aside or pay any dividend
or other distribution (whether in cash, stock, or
property or any combination thereof) in respect of its
capital stock (except for dividends on the existing
preferred stock in accordance with its terms), or redeem,
retire, repurchase or otherwise acquire, directly or
indirectly, any of its securities or adopt a plan of
complete or partial liquidation or resolutions providing
for or authorizing any such liquidation;
(d) incur any additional Indebtedness, except
for short-term borrowings or other Indebtedness incurred
in the ordinary course of business, or mortgage or pledge
any of its assets, tangible or intangible;
(e) acquire, sell, lease or dispose of any
assets outside the ordinary course of business;
(f) make any change in any of the accounting
principles or practices, methods or practices or business
policies used by it;
(g) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation,
partnership or other business organization or division
thereof;
(h) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, contingent
or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business
consistent with past practice or, in accordance with
their terms, of liabilities reflected or reserved against
in the September Balance Sheet (or the notes thereto) or
incurred in the ordinary course of business consistent
with past practice;
(i) increase the compensation payable to the
officers and employees of the Company, except for
increases in salary or wages (a) in accordance with past
practice or (b) in conjunction with promotions or other
changes in job status in the ordinary course of business;
(j) pay, loan or advance any amounts to,
transfer or lease any properties or assets to or enter
into any contract or agreement with any officers,
directors, employees or shareholders of the Company,
except with respect to directors' fees and compensation
to officers and employees at rates in accordance with
past practice, and except with respect to reimbursable
business expenses of a nature and in amounts reasonably
related to the requirements of the business of the
Company;
(k) waive or release any rights of material
value or terminate or fail to renew any material
contract; or
(l) take, or agree in writing or otherwise to
take, directly or indirectly, any of the actions
described in Sections 5(a) through 5(k).
6. ADDITIONAL AGREEMENTS.
(a) Access to Information; Confidentiality.
From the date hereof to the Closing, the Company shall
afford the officers, employees and agents of the
Purchasers access during normal business hours to the
Company's officers, employees, agents, properties,
offices and all books and records of the Company, and
shall furnish the Purchasers with all financial,
operating and other data and information concerning the
Company as the Purchaser, through its officers, employees
or agents, may request and shall cooperate fully with the
Purchasers and their representatives in their examination
of the Company.
Each Purchaser will, and will cause its
respective affiliates, partners, directors, officers,
employees, agents, representatives and financial advisors
(collectively, "Representatives") to, hold in strict
confidence all Confidential Information (as hereinafter
defined), and not disclose the same to any person without
the prior consent of the Company, unless compelled to
disclose any such Confidential Information by judicial or
administrative process or, in the written opinion of
their counsel, by other requirements of law. Prior to
disclosing any Confidential Information to any such
person, the Purchasers will inform such person and its
representatives of the confidential nature thereof and
will obtain from such person its agreement to be bound by
the provisions of this paragraph as if references herein
to the Purchaser were references to such person. If
this Agreement is terminated, each Purchaser will
promptly return to the Company or destroy all documents
(including all copies thereof) furnished by the Company
and received by such Purchaser or any of its
Representatives containing such Confidential Information.
For purposes hereof, "Confidential Information" shall
mean all confidential nonpublic information concerning
the Company that the Purchaser obtains from the Company,
or its representatives, excluding any such information
that subsequently becomes publicly available (other than
directly or indirectly through acts of the Purchaser.)
(b) Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto
agrees to use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement
and the Related Agreements as promptly as practicable. In
case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this
Agreement and the Related Agreements, the proper officers
and directors of each party hereto shall take all such
necessary action.
(c) Public Announcements. The Purchasers and
the Company will consult with each other before issuing
any press release or otherwise making any public
statements with respect to the transactions contemplated
by this Agreement and the Related Agreements, and shall
not issue any such press release or make any such public
statement prior to such consultation, except as may be
required by applicable law. Except as may be required by
applicable law, the Company shall not disclose the
identify of any Purchaser in any such press release or
other public statement without the prior written consent
of such Purchaser.
(d) Supplements to Disclosure Schedule. Prior
to the Closing, the Company will supplement or amend the
Disclosure Schedule with respect to any matter hereafter
arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth
or described in the Disclosure Schedule. No supplement
or amendment of the Disclosure Schedule made pursuant to
this section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless
the Purchasers specifically agrees thereto in writing.
(e) Directors. For so long as the Purchasers
shall own, in the aggregate, Common Stock (or Preferred
Shares convertible into Common Stock) equal to or
exceeding five percent of the then outstanding Common
Stock of the Company, the Purchaser shall be entitled to
propose two candidates (the "Purchaser Designees") for
election to the Board of Directors of the Company.
Subject to its fiduciary duties to shareholders, the
Company will recommend to its shareholders that the
Purchaser Designees be elected to the Company's Board of
Directors.
7. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE PREFERRED SHARES AND WARRANTS
AND OF THE PURCHASERS TO PURCHASE THE PREFERRED
SHARES AND WARRANTS.
The respective obligations hereunder of the
Company to issue and sell the Preferred Shares and
Warrants and of the Purchasers to purchase the Preferred
Shares and Warrants are subject to the satisfaction, at
or before the Closing, of each of the following
conditions set forth in paragraphs (a) through (c) below.
(a) Consents. The consents and approvals set
forth in Section 3(b) of the Disclosure Schedule shall
have been obtained.
(b) No Injunction. No statute, rule,
regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or enforced
by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(c) Related Agreements. The Related
Agreements shall have been executed and delivered by the
parties thereto.
8. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE PREFERRED SHARES AND WARRANTS.
The obligation hereunder of the Company to sell
the Preferred Shares and Warrants to the Purchasers is
further subject to the satisfaction, at or before the
Closing, of each of the following conditions set forth in
paragraphs (a) and (b) below. These conditions are for
the Company's sole benefit and may be waived by the
Company at any time in its sole discretion.
(a) Accuracy of the Purchasers' Representations
and Warranties. The representations and warranties of each
Purchaser shall be true and correct in all material respects
as of the date when made and as of the Closing as though made
at that time (except for representations and warranties that
speak as of a particular date).
(b) Performance by the Purchasers. The
Purchasers shall have performed, satisfied and complied
in all material respects with all covenants, agreements
and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchasers
at or prior to the Closing.
9. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
PURCHASERS TO PURCHASE THE PREFERRED SHARES AND
WARRANTS.
The obligation of the Purchasers hereunder to
acquire and pay for the Preferred Shares and Warrants is
subject to the satisfaction, at or before the Closing, of
each of the following conditions set forth in paragraphs
(a) through (e) below. These conditions are for the
Purchaser's sole benefit and may be waived by the
Purchasers at any time in its sole discretion.
(a) Accuracy of the Company's Representations
and Warranties. The representations and warranties of
the Company shall be true and correct in all material
respects as of the date when made and as of the Closing
as though made at that time (except for representations
and warranties that speak as of a particular date).
(b) Performance by the Company. The Company
shall have performed, satisfied and complied in all
material respects with all covenants, agreements and
conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to
the Closing.
(c) Legal Opinions. The Purchasers shall have
received the opinion of Baer Marks & Upham, substantially
in the form set forth in Exhibit IX hereto.
(d) Compliance with Securities Laws. The
offering and sale by the Company, at or prior to the
Closing, of the Preferred Shares and Warrants shall have
been made in compliance with all applicable requirements
of federal and state securities laws and each Purchaser
shall have received evidence thereof in form and
substance reasonably satisfactory to it.
(e) No Offerings. Neither the Company nor any
of its subsidiaries shall have offered, placed or sold,
or caused or agreed to be offered, placed or sold, any
securities or other obligations other than as part of the
contemplated sale of the Preferred Shares and Warrants
and the capital structure as reflected herein.
(f) Regulatory Approvals. All regulatory
approvals shall have been obtained by the Purchasers.
10. TERMINATION.
(a) Right To Terminate. Notwithstanding
anything to the contrary set forth in this Agreement,
this Agreement may be terminated and the transactions
contemplated herein abandoned at any time prior to the
Closing:
(i) at any time by mutual written consent
of the Company and the Purchasers;
(ii) by either the Company or the
Purchaser if the Closing shall not have occurred by March
1, 1996; provided, however, that the right to terminate
this Agreement under this Section 10(a)(ii) shall not be
available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or
before such date; or
(iii) by either the Company or the
Purchasers if a court of competent jurisdiction shall
have issued an order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such
order, decree, ruling or other action shall have become
final and nonappealable.
(b) Obligations to Cease. In the event that
this Agreement shall be terminated pursuant to Section
10(a) hereof, all obligations of the parties hereto under
this Agreement shall terminate and there shall be no
liability of any party hereto to any other party except
that (i) the provisions of the second paragraph of
Section 6(a), Section 11, and Section 12(g) shall
survive, and shall be and remain in full force and effect
and (ii) nothing herein will relieve any party from
liability for any willful breach of this Agreement.
11. INDEMNIFICATION.
(a) General Indemnity. The Company agrees to
indemnify and save harmless the Purchasers (and their
respective directors, officers, partners, affiliates,
representatives, advisors, successors and assigns) from
and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including,
without limitation, interest, penalties, reasonable
attorneys' fees, charges and disbursements) incurred by
the Purchasers as a result of (i) any breach of the
representations, warranties or covenants made by the
Company herein or in the Related Agreements or (ii) any
action, proceeding or claim commenced or threatened by a
third party in connection with this Agreement, the
Related Agreements and the transactions contemplated
hereby and thereby. Each Purchaser agrees to indemnify
and save harmless the Company (and its directors,
officers, partners, affiliates, representatives,
advisors, successors and assigns) from and against any
and all losses, liabilities, deficiencies, costs, damages
and expenses (including, without limitation, interest,
penalties, reasonable attorneys' fees, charges and
disbursements) incurred by the Company as a result of any
breach of the representations, warranties or covenants
made by such Purchaser herein or in the Related
Agreements. No party shall be entitled to
indemnification hereunder unless and until the aggregate
amount of such party's indemnification claims exceeds
$15,000 and then to the full extent of such claims.
(b) Indemnification Procedure. Any party
entitled to indemnification under this Section 11 (an
"indemnified party") will give prompt written notice to
the indemnifying party of any claim with respect to which
it seeks indemnification promptly after the discovery by
such party of any matters giving rise to a claim for
indemnification; provided that the failure of any party
entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party
of its obligations under this Section 11 except to the
extent that the indemnifying party is actually prejudiced
by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified
party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of
the indemnified party a conflict of interest between it
and the indemnifying party may exist in respect of such
action, proceeding or claim, to assume the defense
thereof, with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying
party advises an indemnified party that it will contest
such a claim for indemnification hereunder, or fails,
within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election
to defend, settle or compromise, at its sole cost and
expense, any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense),
then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or
claim. In any event, unless and until the indemnifying
party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the
defense, settlement or compromise of any such action,
claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall
cooperate fully with the indemnifying party in connection
with any negotiation or defense of any such action or
claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available
to the indemnified party which relates to such action or
claim. The indemnifying party shall keep the indemnified
party fully apprised at all times as to the status of the
defense or any settlement negotiations with respect
thereto. If the indemnifying party elects to defend any
such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of
its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its
written consent, provided, however, that the indemnifying
party shall not unreasonably withhold, delay or condition
its consent. Anything in this Section 11 to the contrary
notwithstanding, the indemnifying party shall not,
without the indemnified party's prior written consent,
settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by
the claimant or the plaintiff to the indemnified party of
a release from all liability in respect of such claim.
The indemnification required by this Section 11 shall be
made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability
is incurred. The indemnity agreements contained herein
shall be in addition to (i) any cause of action or
similar right of the indemnified party against the
indemnifying party or others, and (ii) any liabilities
the indemnifying party may be subject to pursuant to the
law.
12. MISCELLANEOUS.
(a) Brokers. The Company and the Purchasers
represent and warrant to each other that they have not
taken any action which will result in any liability of
the other to pay any broker's or finder's fee with
respect to this Agreement or the transactions
contemplated hereby.
(b) Expenses. Each party hereto shall pay its
own fees and expenses incurred in connection with this
Agreement except that, if the closing of the purchase of
the Series G Preferred Stock by the Wand III Partnership,
as set forth on Schedule 1 attached hereto, is
consummated, the Company shall, immediately thereafter,
pay the reasonable out-of-pocket fees and expenses, up to
a maximum amount of $10,000, incurred by the Purchasers
in connection with this Agreement, the Related Agreements
and the transactions contemplated hereby and thereby,
including the reasonable fees and expenses of Skadden,
Arps, Slate, Meagher & Flom in its capacity as
Purchasers' legal counsel.
(c) Survival of Representations, Warranties
and Covenants. The representations and warranties set
forth herein shall survive the Closing until sixty days
after the Company shall have delivered to the Purchaser
the audited financial statements of the Company and its
consolidated subsidiaries (if any) for the fiscal year
ended June 30, 1997, certified by the Company's
independent public accountants; provided that the
representations and warranties shall survive such date to
the extent written notice of any breach thereof is given
on or prior to such date and representations and
warranties relating to Taxes shall survive until a date
which is six months after the expiration of the
applicable statute of limitations. The covenants of the
Company set forth herein shall endure for so long as the
Purchaser shall continue as a stockholder of the Company
or for such shorter period as may be specified herein.
(d) Assignment and Binding Effect. Neither
the Company nor the Purchaser shall assign all or any
part of this Agreement without the prior written consent
of the other; provided, however, that the Purchaser,
without such prior written consent, may assign its rights
hereunder to any entity or entities directly or
indirectly controlled by, or under common control with,
it; provided, further, that no such assignment shall
relieve the Purchaser of its obligations under this
Agreement. This Agreement shall be binding upon and
inure to the benefit of the permitted successors and
assigns of the parties pursuant to this paragraph.
(e) Headings. Subject headings are included
for convenience only and shall not affect the
interpretation of any provisions of this Agreement.
(f) Notices. Any notice, demand, request,
waiver, or other communication under this Agreement shall
be in writing and shall be deemed to have been duly given
on the date of service if personally served or on the
third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered,
return receipt requested, postage prepaid and addressed
as follows:
To the Company: Nestor, Inc.
One Richmond Square
Providence, Rhode Island 02906
Attention: Chief Executive Officer
With copies to: Baer Marks & Upham
805 Third Avenue
New York, NY 10022-7513
Attention: Herbert S. Meeker, Esq.
To the Wand (Nestor) Inc.
Purchasers: c/o Wand Partners Inc.
630 Fifth Avenue
Suite 2435
New York, New York 10111
Attention: Bruce W. Schnitzer
With a copy to: Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022-3897
Attention: Nancy L. Henry, Esq.
(g) Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS
OF THE STATE OF DELAWARE AS APPLIED TO CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY IN THE STATE OF DELAWARE.
(h) Entire Agreement. This Agreement,
including the Exhibits and Schedules hereto, sets forth
the entire understanding and agreement of the parties
hereto relating to the matters set forth herein and
supersedes any and all other understandings, negotiations
or agreements between the parties hereto relating to the
matters set forth herein.
(i) Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed
an original, and all of which together shall constitute a
single agreement.
(j) Severability. In the event that any one
or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or
unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be
construed in a manner which, as nearly as possible,
reflects the original intent of the parties.
(k) Words in Singular and Plural Form. Words
used in the singular form in this Agreement shall be
deemed to import the plural, and vice versa, as the sense
may require.
(l) Amendment and Modification. This
Agreement may be amended or modified only by written
agreement executed by all parties hereto.
(m) Waiver. At any time prior to the Closing,
any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of
any other party hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein or in
any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by
the party granting such waiver but such waiver or failure
to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or
future failure.
(n) Specific Enforcement. The Purchaser and
the Company acknowledge and agree that irreparable damage
would occur in the event that any of the provisions of
this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction,
this being in addition to any other remedy to which they
may be entitled at law or equity.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first set forth
above.
NESTOR, INC.
By: /s/ Simon Heifetz
__________________________
Name: Simon Heifetz
Title: Vice Chairman
WAND/NESTOR INVESTMENTS L.P.
WAND/NESTOR INVESTMENTS II L.P.
WAND/NESTOR INVESTMENTS III L.P.
By: WAND (NESTOR) INC.
as General Partner
By: /s/ Malcolm P. Appelbaum
______________________________
Name: Malcolm P. Appelbaum
Title: Vice President
[150339/2a]
SCHEDULE I
SECURITIES TO BE PURCHASED BY WAND/NESTOR INVESTMENTS
L.P.
Security Purchase Price
527 Shares of Series F $527,000
Preferred Stock (together
with detachable Warrants to
purchase 152,830 shares of
Common Stock)
SECURITIES TO BE PURCHASED BY WAND/NESTOR INVESTMENTS II
L.P.
Security Purchase Price
72 Shares of Series F $72,000
Preferred Stock (together
with detachable Warrants to
purchase 20,880 shares of
Common Stock)
SECURITIES TO BE PURCHASED BY WAND/NESTOR INVESTMENTS III
L.P.
Security Purchase Price
401 Shares of Series G $401,000
Preferred Stock (together
with detachable Warrants to
purchase 116,290 shares of
Common Stock)
[The purchase of Series G Preferred Stock is subject to
Wand III's receipt of all regulatory approvals that it
deems necessary or advisable, in its sole discretion.]
Securities To Be Transferred By
Wand/Nestor Investments L.P. to Wand/Nestor Investments
III L.P.
74,151 Shares of Company Common Stock
1,444 Shares of Series C Preferred Stock
8,322 Shares of Series D Preferred Stock
416,115 $.65 Warrants
291,281 $1.00 Warrants
4,161 $2.00 Warrants
Securities To Be Exchanged By
Wand/Nestor Investments L.P.
1,776 Shares of Series C Preferred Stock for
1,776 Shares of Series H Preferred Stock
Securities To Be Exchanged By Wand/Nestor Investments II
L.P.
250 Shares of Series C Preferred Stock for
250 shares of Series H Preferred Stock
Securities To Be Exchanged By Wand/Nestor Investments III
L.P.
1,444 Shares of Series C Preferred Stock for
1,444 Shares of Series E Preferred Stock
416,115 $.65 Warrants for 416,115 Revised $.65
Warrants
291,281 $1.00 Warrants for 291,281 Revised $1.00
Warrants
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, as amended and
restated as of January 31, 1996 among Nestor, Inc., a
Delaware corporation (the "Company"), and the other
undersigned parties hereto.
1. Introduction. Pursuant to the Securities
Purchase Agreement (the "Securities Purchase Agreement"),
dated as of August 1, 1994, between Wand/Nestor
Investments L.P., a Delaware limited partnership (the
"Wand/Nestor I Partnership"), and the Company, on August
1, 1994, the Company issued 1,500 shares of its Series C
Convertible Preferred Stock, par value $1.00 per share
(the "Series C Preferred Stock"), and Common Stock
Purchase Warrants to purchase 1,000,000 shares of the
Company's common stock, par value $.01 per share (the
"Common Stock"), to the Wand/Nestor I Partnership.
Simultaneously with the Closing of the Securities
Purchase Agreement, Wand Partners L.P. and Hill &
Partners were issued Common Stock Purchase Warrants to
purchase an aggregate of 400,000 shares of Common Stock
pursuant to the Letter of Engagement, dated as of April
26, 1994, among the Company, Wand Partners Inc. and Hill
& Partners (the "Letter of Engagement"). This Agreement
became effective upon the issuance of such securities to
such parties pursuant to the Securities Purchase
Agreement and the Letter of Engagement. Pursuant to the
First Amended and Restated Standby Financing and Purchase
Agreement, dated as of June 30, 1995, between the
Wand/Nestor I Partnership and the Company, the Company
issued to the Wand/Nestor I Partnership and to
Wand/Nestor Investments II L.P., a Delaware limited
partnership (the "Wand/Nestor II Partnership") in the
aggregate (i) an additional 1,970 shares of Series C
Preferred Stock, (ii) 100,000 shares of the Company's
Common Stock as a commitment fee, (iii) 78,198 shares of
Common Stock as payment of interest pursuant to the
Company's four Promissory Notes in the aggregate original
principal amount of $1,700,000, (iv) Common Stock
Purchase Warrants to purchase 700,000 shares of Common
Stock at $1.00 per share as a takedown fee, (v) in
substitution for, and upon cancellation of, the Common
Stock Purchase Warrant issued in August 1994 pursuant to
the Securities Purchase Agreement, a Common Stock
Purchase Warrant to purchase 1,000,000 shares of Common
Stock at a reduced exercise price of $.65, and (vi)
20,000 shares of the Company's Series D Convertible
Preferred Stock, par value $1.00 per share ("Series D
Preferred Stock") and Warrants to purchase 10,000 shares
of Company Common Stock at an exercise price of $2.00 per
share (the "Rights Warrants") issued in connection with
the Company's Rights Offering made pursuant to an S-2
Registration Statement declared effective August 16,
1995. Pursuant to the Securities Purchase and Exchange
Agreement dated as of January 31, 1996 among the Company
and the three Wand/Nestor Partnerships (the "Purchase and
Exchange Agreement"), the Company has agreed (i) to
issue an aggregate of 599 shares of Series F Convertible
Preferred Stock, par value/$1.00 per share (the"Series F
Preferred Stock") of the Company and related Common Stock
Purchase Warrants to purchase 173,710 shares of Common
Stock at an initial exercise price of $1.25 to the
Wand/Nestor I Partnership and the Wand Nestor II
Partnership, (ii) to issue an aggregate of 401 shares of
Series G Convertible Preferred Stock, par value $1.00 per
share (the"Series G Preferred Stock") of the Company and
related Common Stock Purchase Warrants to purchase
116,290 shares of Common Stock at an initial exercise
price of $1.25 to Wand/Nestor Investments III L.P., a
Delaware limited partnership (the "Wand/Nestor III
Partnership"), (iii) to transfer certain of the Company
securities previously acquired by the Wand/Nestor I
Partnership to the Wand/Nestor III Partnership, (iv) to
issue an aggregate of 2,026 shares of Series H
Convertible Preferred Stock, par value/$1.00 per share
(the"Series H Preferred Stock") of the Company to the
Wand/Nestor I Partnership and the Wand Nestor II
Partnership upon cancellation of the Series C Preferred
Stock held by such partnerships, (v) to issue an
aggregate of 1,444 shares of Series E Convertible
Preferred Stock, par value $1.00 per share (the"Series E
Preferred Stock") of the Company to the Wand/Nestor III
Partnership upon cancellation of the Series C Preferred
Stock held by such partnership, and (vi) to revise the
Common Stock Purchase Warrants transferred to the
Wand/Nestor III Partnership to add certain restrictions
on their exercise and transfer. Certain capitalized
terms used in this Agreement are defined in section 3
hereof; references to sections shall be to sections of
this agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request. At any time or from time
to time after August 1, 1997, upon the written request
of one or more Initiating Holders, requesting that the
Company effect the registration under the Securities Act
of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method of
disposition thereof, the Company will promptly give
written notice of such requested registration to all
registered holders of Registrable Securities, and
thereupon the Company will, subject to the terms of this
Agreement, effect the registration under the Securities
Act of:
(i) the Registrable Securities
which the Company has been so requested to register
by such Initiating Holders for disposition in
accordance with the intended method of disposition
stated in such request;
(ii) all other Registrable
Securities the holders of which shall have made a
written request to the Company for registration
thereof within 30 days after the giving of such
written notice by the Company (which request shall
specify the intended method of disposition of such
Registrable Securities);
(iii) all other shares of Common
Stock which the Company may elect to register in
connection with the offering of Registrable
Securities pursuant to this section 2.1,
all to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be
registered. The Company's obligations pursuant to this
Section 2.1(a) shall cease after two such requested
registrations shall have been effected in which all of
the Registrable Securities requested to be included in
such registration by any holders of Registrable
Securities shall have been registered.
(b) Registration Statement Form.
Registrations under this section 2.1 shall be on such
appropriate registration form of the Commission (i) as
shall be selected by the Company and the holders of more
than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit
the disposition of such Registrable Securities in
accordance with the intended method or methods of
disposition specified in their request for such
registration. If, in connection with any registration
under section 2.1 which is proposed by the Company to be
on Form S-3 or any similar short form registration
statement which is a successor to Form S-3, the managing
underwriters, if any, shall advise the Company in
writing that in their opinion the use of another
permitted form is of material importance to the success
of the offering, then such registration shall be on such
other permitted form.
(c) Expenses. The Company will pay all
Registration Expenses in connection with any
registration requested pursuant to this section 2.1 by
any Initiating Holders of Registrable Securities prior
to the time at which two such registrations shall have
been effected in which all of the Registrable
Securities requested to be included in such registration
by any holders of Registrable Securities shall have
been registered pursuant to this section 2.1.
Underwriting discounts and commissions and transfer
taxes, if any (and, when applicable, the Registration
Expenses) in connection with each registration requested
under this section 2.1 shall be allocated pro rata among
all Persons on whose behalf securities of the Company
are included in such registration, on the basis of the
respective amounts of the securities then being
registered on their behalf.
(d) Effective Registration Statement. A
registration requested pursuant to this section 2.1
shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become
effective, provided that a registration which does not
become effective after the Company has filed a
registration statement with respect thereto solely by
reason of the refusal to proceed of the Initiating
Holders (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to
the Company) shall be deemed to have been effected by
the Company at the request of such Initiating Holders
unless the Initiating Holders shall have elected to pay
all Registration Expenses in connection with such
registration, (ii) if, after it has become effective,
such registration becomes subject to any stop order,
injunction or other order or requirement of the
Commission or other governmental agency or court for any
reason, other than by reason of some act or omission by
any Initiating Holder, or (iii) the conditions to
closing specified in the purchase agreement or
underwriting agreement entered into in connection with
such registration are not satisfied, other than by
reason of some act or omission by such Initiating
Holders.
(e) Selection of Underwriters. If a
requested registration pursuant to this section 2.1
involves an underwritten offering, the managing or lead
underwriter or underwriters thereof shall be selected by
the holders of at least a majority (by number of shares)
of the Registrable Securities as to which registration
has been requested.
(f) Priority in Requested Registrations.
If a requested registration pursuant to this section 2.1
involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a
copy to each holder of Registrable Securities requesting
registration) that, in its opinion, the number of
securities requested to be included in such registration
(including securities of the Company which are not
Registrable Securities) exceeds the number which can be
sold in such offering within a price range acceptable to
the holders of a majority of the Registrable Securities
so requested to be included, the Company will include in
such registration, to the extent of the number which the
Company is so advised can be sold in such offering,
first, Registrable Securities requested to be included
in such registration by the holder or holders of
Registrable Securities, pro rata among such holders
requesting such registration on the basis of the number
of such securities requested to be included by such
holders and (ii) second, securities the Company proposes
to sell and other securities of the Company included in
such registration by the holders thereof.
2.2 Incidental Registration.
(a) Right to Include Registrable
Securities. If the Company at any time proposes to
register any of its securities under the Securities Act
(other than by a registration on Form S-4 or on Form S-
8, or any successor or similar forms), whether or not
for sale for its own account, it will each such time
give prompt written notice to all holders of Registrable
Securities of its intention to do so and of such
holders' rights under this section 2.2. Upon the
written request of any such holder made within 30 days
after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be
disposed of by such holder and the intended method of
disposition thereof), the Company will, subject to the
terms of this Agreement, use its best efforts to effect
the registration under the Securities Act of all
Registrable Securities which the Company has been so
requested to register by the holders thereof, to the
extent requisite to permit the disposition (in
accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be
registered, by inclusion of such Registrable Securities
in the registration statement which covers the
securities which the Company proposes to register,
provided that if, at any time after giving written
notice of its intention to register any securities and
prior to the effective date of the registration
statement filed in connection with such registration,
the Company shall determine for any reason either not to
register or to delay registration of such securities,
the Company may, at its election, give written notice of
such determination to each holder of Registrable
Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its
obligation to register any Registrable Securities in
connection with such registration (but not from its
obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to
the rights of any holder or holders of Registrable
Securities entitled to do so to request that such
registration be effected as a registration under section
2.1, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay
in registering such other securities. No registration
effected under this section 2.2 shall relieve the
Company of its obligation to effect any registration
upon request under section 2.1, nor shall any such
registration hereunder be deemed to have been effected
pursuant to section 2.1. The Company will pay all
Registration Expenses in connection with each
registration of Registrable Securities requested
pursuant to this section 2.2.
(b) Priority in Incidental
Registrations. If (i) a registration pursuant to this
section 2.2 involves an underwritten offering of the
securities so being registered, whether or not for sale
for the account of the Company, to be distributed (on a
firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting
terms appropriate for such a transaction, (ii) the
Registrable Securities so requested to be registered for
sale for the account of holders of Registrable
Securities are not also to be included in such
underwritten offering (either because the Company has
not been requested so to include such Registrable
Securities pursuant to section 2.4(b) or, if requested
to do so, is not obligated to do so under section
2.4(b), and (iii) the managing underwriter of such
underwritten offering shall inform the Company and
holders of the Registrable Securities requesting such
registration by letter of its belief that the number of
securities requested to be included in such registration
exceeds the number which can be sold in (or during the
time of) such offering, then the Company will include in
such registration, to the extent of the number which the
Company is so advised can be sold in (or during the time
of) such offering, (a) first, securities of the Company
to be sold for its own account and (b) second ,
Registrable Securities and other securities of the
Company requested to be included in such registration
pro rata on the basis of the number of shares of such
securities so proposed to be sold and so requested to be
included.
2.3 Registration Procedures. If and whenever
(a) the Company is required to use its best efforts to
effect the registration of any Registrable Securities
under the Securities Act as provided in sections 2.1 and
2.2 or (b) there is a Requesting Holder in connection
with any other proposed registration by the Company
under the Securities Act, the Company shall, as
expeditiously as possible:
(i) prepare and (in the case of a
registration pursuant to section 2.1, such filing
to be made within 60 days after the initial request
of one or more Initiating Holders of Registrable
Securities or in any event as soon thereafter as
possible) file with the Commission the requisite
registration statement to effect such registration
(including such audited financial statements as may
be required by the Securities Act or the rules and
regulations promulgated thereunder) and thereafter
use its best efforts to cause such registration
statement to become and remain effective, provided
however that the Company may discontinue any
registration of its securities which are not
Registrable Securities (and, under the
circumstances specified in section 2.2(a), its
securities which are Registrable Securities) at any
time prior to the effective date of the
registration statement relating thereto, provided
further that before filing such registration
statement or any amendments thereto, the Company
will furnish to the counsel selected by the holders
of Registrable Securities which are to be included
in such registration copies of all such documents
proposed to be filed, which documents will be
subject to the review of such counsel;
(ii) prepare and file with the
Commission such amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to keep
such registration statement effective and to comply
with the provisions of the Securities Act with
respect to the disposition of all securities
covered by such registration statement until the
earlier of such time as all of such securities have
been disposed of in accordance with the intended
methods of disposition by the seller or sellers
thereof set forth in such registration statement or
(i) in the case of a registration pursuant to
section 2.1, the expiration of 180 days after such
registration statement becomes effective, or (ii)
in the case of a registration pursuant to section
2.2, the expiration of 90 days after such
registration statement becomes effective;
(iii) furnish to each seller of
Registrable Securities covered by such registration
statement, and each Requesting Holder and each
underwriter, if any, of the securities being sold
by such seller, such number of conformed copies of
such registration statement and of each such
amendment and supplement thereto (in each case
including all exhibits), such number of copies of
the prospectus contained in such registration
statement (including each preliminary prospectus
and any summary prospectus) and any other
prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements
of the Securities Act, and such other documents, as
such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or
other disposition of the Registrable Securities
owned by such seller;
(iv) use its best efforts to
register or qualify all Registrable Securities and
other securities covered by such registration
statement under such other securities laws or blue
sky laws of such jurisdictions as any seller
thereof, any underwriter of the securities being
sold by such seller and any Requesting Holder shall
reasonably request, to keep such registrations or
qualifications in effect for so long as such
registration statement remains in effect, and take
any other action which may be reasonably necessary
or advisable to enable such seller and underwriter
to consummate the disposition in such jurisdictions
of the securities owned by such seller, except that
the Company shall not for any such purpose be
required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it
would not but for the requirements of this
subdivision (iv) be obligated to be so qualified
or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to cause
all Registrable Securities covered by such
registration statement to be registered with or
approved by such other governmental agencies or
authorities as may be necessary to enable the
seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) furnish to each seller of
Registrable Securities and each Requesting Holder a
signed counterpart, addressed to such seller, such
Requesting Holder and the underwriters, if any, of:
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if
such registration includes an underwritten public
offering, an opinion dated the date of the closing under
the underwriting agreement), reasonably satisfactory in
form and substance to such seller, and
(y) a "comfort" letter (or, in the case of any such
Person which does not satisfy the conditions for receipt
of a "comfort" letter specified in Statement on Auditing
Standards No. 72, an "agreed upon procedures" letter),
dated the effective date of such registration statement
(and, if such registration includes an underwritten
public offering, a letter of like kind dated the date of
the closing under the underwriting agreement), signed by
the independent public accountants who have certified
the Company's financial statements included in such
registration statement,
covering substantially the same matters with
respect to such registration statement (and the
prospectus included therein) and, in the case of
the accountants' letter, with respect to events
subsequent to the date of such financial
statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters
delivered to the underwriters in underwritten
public offerings of securities (with, in the case
of an "agreed upon procedures" letter, such
modifications or deletions as may be required under
Statement on Auditing Standards No. 35) and, in the
case of the accountants' letter, such other
financial matters, and, in the case of the legal
opinion, such other legal matters, as such seller
or such Requesting Holder (or the underwriters, if
any) may reasonably request;
(vii) notify the holders of
Registrable Securities and the managing underwriter
or underwriters, if any, promptly and confirm such
advice in writing promptly thereafter:
(v) when the registration statement, the
prospectus or any prospectus supplement related thereto
or post-effective amendment to the registration
statement has been filed, and, with respect to the
registration statement or any post-effective amendment
thereto, when the same has become effective;
(w) of any request by the Commission for
amendments or supplements to the registration statement
or the prospectus or for additional information;
(x) of the issuance by the Commission of
any stop order suspending the effectiveness of the
registration statement or the initiation of any
proceedings by any Person for that purpose;
(y) if at any time the representations
and warranties of the Company made as contemplated by
section 2.4 below cease to be true and correct;
(z) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of any Registrable Securities for sale
under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any
proceeding for such purpose; and
(viii) notify each seller of
Registrable Securities covered by such registration
statement and each Requesting Holder, at any time
when a prospectus relating thereto is required to
be delivered under the Securities Act, upon the
Company's discovery that, or upon the happening of
any event as a result of which, the prospectus
included in such registration statement, as then in
effect, includes an untrue statement of a material
fact or omits to state any material fact required
to be stated therein or necessary to make the
statements therein not misleading in the light of
the circumstances then existing, and at the request
of any such seller or Requesting Holder promptly
prepare and furnish to such seller or Requesting
Holder and each underwriter, if any, a reasonable
number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such
securities, such prospectus shall not include an
untrue statement of a material fact or omit to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading in the light of the circumstances then
existing;
(ix) make every reasonable effort
to obtain the withdrawal of any order suspending
the effectiveness of the registration statement at
the earliest possible moment;
(x) otherwise use its best efforts
to comply with all applicable rules and regulations
of the Commission, and make available to its
security holders, as soon as reasonably
practicable, an earnings statement covering the
period of at least twelve months, but not more than
eighteen months, beginning with the first day of
the Company's first full calendar month after the
effective date of such registration statement,
which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder, and will furnish to each
such seller and each Requesting Holder at least
five business days prior to the filing thereof a
copy of any amendment or supplement to such
registration statement or prospectus and shall not
file any thereof to which any such seller or any
Requesting Holder shall have reasonably objected on
the grounds that such amendment or supplement does
not comply in all material respects with the
requirements of the Securities Act or of the rules
or regulations thereunder;
(xi) provide and cause to be
maintained a transfer agent and registrar for all
Registrable Securities covered by such registration
statement from and after a date not later than the
effective date of such registration statement;
(xii) enter into such agreements
and take such other actions as sellers of such
Registrable Securities holding 51% of the shares so
to be sold shall reasonably request in order to
expedite or facilitate the disposition of such
Registrable Securities;
(xiii) use its best efforts to list
all Registrable Securities covered by such
registration statement on any securities exchange
on which any of the securities of the same class as
the Registrable Securities are then listed;
(xiv) use its best efforts to
provide a CUSIP number for the Registrable
Securities, not later than the effective date of
the registration statement.
The Company may require each seller of Registrable
Securities as to which any registration is being
effected to furnish the Company such information
regarding such seller and the distribution of such
securities as the Company may from time to time
reasonably request in writing.
The Company will not file any registration
statement or amendment thereto or any prospectus or any
supplement thereto (including such documents
incorporated by reference and proposed to be filed after
the initial filing of the registration statement) to
which the holders of at least a majority of the
Registrable Securities covered by such registration
statement or the underwriter or underwriters, if any,
shall reasonably object, provided that the Company may
file such document in a form required by law or upon the
advice of its counsel.
Each holder of Registrable Securities agrees
that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in
subdivision (viii) of this section 2.3, such holder will
forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until
such holder's receipt of the copies of the supplemented
or amended prospectus contemplated by subdivision (viii)
of this section 2.3 and, if so directed by the Company,
will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in
such holder's possession, of the prospectus relating to
such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in paragraph
(ii) of this section 2.3 shall be extended by the length
of the period from and including the date when each
seller of any Registrable Securities covered by such
registration statement shall have received such notice
to the date on which each such seller has received the
copies of the supplemented or amended prospectus
contemplated by paragraph (viii) of this section 2.3.
If any such registration statement refers to
any holder of Registrable Securities by name or
otherwise as the holder of any securities of the
Company, then such holder shall have the right to
require (i) the insertion therein of language, in form
and substance satisfactory to such holder, to the effect
that the holding by such holder of such securities is
not to be construed as a recommendation by such holder
of the investment quality of the Company's securities
covered thereby and that such holding does not imply
that such holder will assist in meeting any future
financial requirements of the Company, or (ii) in the
event that such reference to such holder by name or
otherwise is not required by the Securities Act or any
similar federal statute then in force, the deletion of
the reference to such holder.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings.
If requested by the underwriters for any underwritten
offering by holders of Registrable Securities pursuant
to a registration requested under section 2.1, the
Company will enter into an underwriting agreement with
such underwriters for such offering, such agreement to
contain such representations and warranties by the
Company and such other terms as are generally prevailing
in agreements of this type, including, without
limitation, indemnities to the effect and to the extent
provided in section 2.7. The holders of the Registrable
Securities will cooperate with the Company in the
negotiation of the underwriting agreement and will give
consideration to the reasonable suggestions of the
Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing
obligations of the Company. The holders of Registrable
Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at
their option, require that any or all of the
representations and warranties by, and the other
agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable
Securities and that any or all of the conditions
precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to
the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities
shall not be required to make any representations or
warranties to or agreements with the Company or the
underwriters other than representations and warranties
or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method
of distribution.
(b) Incidental Underwritten Offerings.
If the Company at any time proposes to register any of
its securities under the Securities Act as contemplated
by section 2.2 and such securities are to be distributed
by or through one or more underwriters, the Company
will, if requested by any holder of Registrable
Securities as provided in section 2.2 and subject to the
provisions of section 2.2(b), use its best efforts to
arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such
holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter
of such underwritten offering shall inform the holders
of the Registrable Securities requesting such
registration and the holders of any other shares of
securities which shall have exercised, in respect of
such underwritten offering, registration rights
comparable to the rights under section 2.2 by letter of
its belief that inclusion in such underwritten
distribution of all or a specified number of such
Registrable Securities or of such other shares of
securities so requested to be included would interfere
with the successful marketing of the securities (other
than such Registrable Securities and other shares of
securities so requested to be included) by the
underwriters (such writing to state the basis of such
belief and the approximate number of such Registrable
Securities and shares of other securities so requested
to be included which may be included in such
underwritten offering without such effect), then the
Company may, upon written notice to all holders of such
Registrable Securities and of such other shares of
securities so requested to be included, exclude pro rata
from such underwritten offering (if and to the extent
stated by such managing underwriter to be necessary to
eliminate such effect) the number of such Registrable
Securities and shares of such other securities so
requested to be included, the registration of which
shall have been requested by each holder of Registrable
Securities and by the holders of such other securities,
so that the resultant aggregate number of such
Registrable Securities and of such other shares of
securities so requested to be included which are
included in such underwritten offering shall be equal to
the approximate number of shares stated in such managing
underwriter's letter. The holders of Registrable
Securities to be distributed by such underwriters shall
be parties to the underwriting agreement between the
Company and such underwriters and may, at their option,
require that any or all of the representations and
warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters
shall also be made to and for the benefit of such
holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such
underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders
of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any
representations or warranties to or agreements with the
Company or the underwriters other than representations,
warranties or agreements regarding such holder, such
holder's Registrable Securities, such holder's intended
method of distribution and any other representation
required by law.
(c) Holdback Agreements.
(i) Each holder of Registrable
Securities agrees by acquisition of such
Registrable Securities, if so required by the
managing underwriter, not to sell, make any short
sale of, loan, grant any option for the purchase
of, effect any public sale or distribution of or
otherwise dispose of any equity securities of the
Company, during the seven days prior to and the 90
days after any underwritten registration pursuant
to section 2.1 or 2.2 has become effective, except
as part of such underwritten registration.
Notwithstanding the foregoing sentence, each holder
of Registrable Securities subject to the foregoing
sentence shall be entitled to sell during the
foregoing period securities in a private sale.
(ii) The Company agrees (x) not to
sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale
or distribution of or otherwise dispose of its
equity securities or securities convertible into or
exchangeable or exercisable for any of such
securities during the seven days prior to and the
90 days after any underwritten registration
pursuant to section 2.1 or 2.2 has become
effective, except as part of such underwritten
registration or except in connection with a stock
option plan, stock purchase plan, managing
directors' plan, savings or similar plan, or an
acquisition of a business, merger or exchange of
stock for stock, and (y) to cause each holder of
its equity securities or any securities convertible
into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company
at any time after the date of this Agreement (other
than in a public offering) to agree not to sell,
make any short sale of, loan, grant any option for
the purchase of, effect any public sale or
distribution of or otherwise dispose of such
securities during such period except as part of
such underwritten registration.
(d) Participation in Underwritten
Offerings. No Person may participate in any
underwritten offering hereunder unless such Person (i)
agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the
Company and the holders of a majority of Registrable
Securities to be included in such underwritten offering
and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents
(other than powers of attorney) required under the terms
of such underwriting arrangements. Notwithstanding the
foregoing, no underwriting agreement (or other agreement
in connection with such offering) shall require any
holder of Registrable Securities to make any
representations or warranties to or agreements with the
Company or the underwriters other than representations
and warranties or agreements regarding such holder, such
holder's Registrable Securities, such holder's intended
method of distribution and any other representation
required by law.
2.5 Preparation; Reasonable Investigation.
In connection with the preparation and filing of each
registration statement under the Securities Act pursuant
to this Agreement, the Company will give the holders of
Registrable Securities registered under such
registration statement, their underwriters, if any, each
Requesting Holder and their respective counsel and
accountants, the opportunity to participate in the
preparation of such registration statement, each
prospectus included therein or filed with the
Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its
books and records and such opportunities to discuss the
business of the Company with its officers and the
independent public accountants who have certified its
financial statements as shall be necessary, in the
opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6 Rights of Requesting Holders. The
Company will not file any registration statement under
the Securities Act (other than by a registration on Form
S-8), unless it shall first have given to each holder of
Registrable Securities at the time outstanding (other
than any such Person who acquired all such securities
held by such Person in a public offering registered
under the Securities Act or as the direct or indirect
transferee of shares initially issued in such an
offering), at least 30 days prior written notice
thereof. Any such Person who shall so request within 30
days after such notice (a "Requesting Holder") shall
have the rights of a Requesting Holder provided in
sections 2.3, 2.5 and 2.7. In addition, if any such
registration statement refers to any Requesting Holder
by name or otherwise as the holder of any securities of
the Company, then such holder shall have the right to
require (a) the insertion therein of language, in form
and substance satisfactory to such holder, to the effect
that the holding by such holder of such securities does
not necessarily make such holder a "controlling person"
of the Company within the meaning of the Securities Act
and is not to be construed as a recommendation by such
holder of the investment quality of the Company's debt
or equity securities covered thereby and that such
holding does not imply that such holder will assist in
meeting any future financial requirements of the
Company, or (b) in the event that such reference to such
holder by name or otherwise is not required by the
Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such
holder.
2.7 Indemnification.
(a) Indemnification by the Company. In
the event of any registration of any securities of the
Company under the Securities Act, the Company will, and
hereby does agree to, indemnify and hold harmless (i) in
the case of any registration statement filed pursuant to
section 2.1 or 2.2, the holder of any Registrable
Securities covered by such registration statement, any
partner or affiliate of such holder, and their
respective directors, officers, stockholders, employees
and agents, each other Person who participates as an
underwriter in the offering or sale of such securities
and each other Person, if any, who controls such holder
or any such underwriter within the meaning of the
Securities Act, and (ii) in the case of any,
registration statement of the Company, any Requesting
Holder, any partner or affiliate of such Requesting
Holder, each other Person, if any, who controls such
Requesting Holder within the meaning of the Securities
Act, and their respective directors, officers,
stockholders, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to
which such holder or Requesting Holder or any such
partner, affiliate, director, officer, stockholder,
employee, agent or underwriter or controlling person may
become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue
statement of any material fact contained in any
registration statement under which such securities were
registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
and the Company will reimburse such holder, such
Requesting Holder and each such partner, affiliate,
director, officer, stockholder, employee, agent,
underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the
Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission
made in such registration statement, any such
preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the
Company through an instrument duly executed by such
holder or Requesting Holder, as the case may be,
specifically stating that it is for use in the
preparation thereof and, provided further that the
Company shall not be liable to any Person who
participates as an underwriter in the offering or sale
of Registrable Securities or to any other Person, if
any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that
any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of
such Person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented
or amended, within the time required by the Securities
Act to the Person asserting the existence of an untrue
statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation
of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on
behalf of such holder or such Requesting Holder or any
such director, officer, underwriter or controlling
person and shall survive the transfer of such securities
by such holder.
(b) Indemnification by the Sellers. The
Company may require, as a condition to including any
Registrable Securities in any registration statement
filed pursuant to section 2.3, that the Company shall
have received an undertaking satisfactory to it from the
prospective seller of such Registrable Securities, to
indemnify and hold harmless (in the same manner and to
the same extent as set forth in subdivision (a) of this
section 2.7) the Company, each director of the Company,
each officer of the Company and each other person, if
any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such
registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity
with written information furnished to the Company
through an instrument duly executed by such seller
specifically stating that it is for use in the
preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus,
amendment or supplement. Any such indemnity shall
remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any
such director, officer or controlling person and shall
survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly
after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this
section 2.7, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying
party, give written notice to the latter of the
commencement of such action, provided that the failure
of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this
section 2.7, except to the extent that the indemnifying
party is actually prejudiced by such failure to give
notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in
respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party
similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the
indemnifying party to such indemnified party of its
election so to assume the defense thereof, the
indemnifying party shall not be liable to such
indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with
the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the
consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such
action which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in
respect to such claim or litigation. No indemnified
party shall consent to entry of any judgment or enter
into any settlement of any such action the defense of
which has been assumed by an indemnifying party without
the consent of such indemnifying party.
(d) Other Indemnification.
Indemnification similar to that specified in the
preceding subdivisions of this section 2.7 (with
appropriate modifications) shall be given by the Company
and each seller of Registrable Securities with respect
to any required registration or other qualification of
securities under any Federal or state law or regulation
of any governmental authority, other than the Securities
Act.
(e) Indemnification Payments. The
indemnification required by this section 2.7 shall be
made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability
is incurred.
(f) Contribution. If the
indemnification provided for in the preceding
subdivisions of this section 2.7 is unavailable to an
indemnified party in respect of any expense, loss,
claim, damage or liability referred to therein, then
each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such
expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the
holder or underwriter, as the case may be, on the other
from the distribution of the Registrable Securities or
(ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative
fault of the Company on the one hand and of the holder
or underwriter, as the case may be, on the other in
connection with the statements or omissions which
resulted in such expense, loss, damage or liability, as
well as any other relevant equitable considerations.
The relative benefits received by the Company on the one
hand and the holder or underwriter, as the case may be,
on the other in connection with the distribution of the
Registrable Securities shall be deemed to be in the same
proportion as the total net proceeds received by the
Company from the initial sale of the Registrable
Securities by the Company to the purchasers pursuant to
the Securities Purchase Agreement bear to the gain, if
any, realized by the selling holder or the underwriting
discounts and commissions received by the underwriter,
as the case may be. The relative fault of the Company
on the one hand and of the holder or underwriter, as the
case may be, on the other shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission
to state a material fact relates to information supplied
by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of
any indemnified party if indemnification would be
unavailable to such indemnified party by reason of the
provisions contained in the first sentence of
subdivision (a) of this section 2.7, and in no event
shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount
that such indemnifying party would have been obligated
to pay by way of indemnification if the indemnification
provided for under subdivisions (a) or (b) of this
section 2.7 had been available under the circumstances.
The Company and the holders of Registrable
Securities agree that it would not be just and equitable
if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders,
Requesting Holders and any underwriters were treated as
one entity for such purpose) or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and
subdivision (c) of this section 2.7, any legal or other
expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such
action or claim.
Notwithstanding the provisions of this
subdivision (f), no holder of Registrable Securities or
underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any
such holder, the net proceeds received by such holder
from the sale of Registrable Securities or (ii) in the
case of an underwriter, the total price at which the
Registrable Securities purchased by it and distributed
to the public were offered to the public exceeds, in any
such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission.
No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
2.8 Adjustments Affecting Registrable
Securities. The Company will not effect or permit to
occur any combination or subdivision of shares which
would adversely affect the ability of the holders of
Registrable Securities to include such Registrable
Securities in any registration of its securities
contemplated by this section 2 or the marketability of
such Registrable Securities under any such registration.
3. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Commission: The Securities and Exchange
Commission or any other Federal agency at the
time administering the Securities Act.
Common Stock: The common stock, par value
$.01 per share, of the Company.
Company: As defined in the introductory
paragraph of this Agreement.
Exchange Act: The Securities Exchange Act of
1934, or any similar Federal statute, and the
rules and regulations of the Commission
thereunder, all as the same shall be in effect
at the time. Reference to a particular
section of the Securities Exchange Act of 1934
shall include a reference to the comparable
section, if any, of any such similar Federal
statute.
Initiating Holders: Any holder or holders of
Registrable Securities holding at least 20% of
the Registrable Securities (by number of
shares) and initiating a request pursuant to
section 2.1 for the registration of all or
part of such holder's or holders' Registrable
Securities.
Letter of Engagement: As defined in section
1.
Person: A corporation, an association, a
partnership, an organization, business, an
individual, a governmental or political
subdivision thereof or a governmental agency.
Promissory Notes: The four Promissory Notes
of the Company payable to Wand/Nestor
Investments L.P. and Wand/Nestor Investments
II L.P., each such Note due October 16, 1995,
in the aggregate principal amount of
$1,700,000, with the interest thereon payable
in shares of Common Stock.
Purchase and Exchange Agreement: As defined
in Section 1.
Registrable Securities: Any shares of Common
Stock issued or issuable pursuant to the
Revised Standby Agreement or the Promissory
Notes or issued or issuable upon conversion of
the Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred
Stock, and Series H Preferred Stock or upon
exercise of the Warrants or the Rights
Warrants, and any securities issued or
issuable with respect to any Common Stock
referred to above by way of stock dividend or
stock split or in connection with a
combination of shares, recapitalization,
merger, consolidation or other reorganization
or otherwise. As to any particular
Registrable Securities, once issued such
securities shall cease to be Registrable
Securities when (a) a registration statement
with respect to the sale of such securities
shall have become effective under the
Securities Act and such securities shall have
been disposed of in accordance with such
registration statement, (b) they shall have
been distributed to the public pursuant to
Rule 144 (or any successor provision) under
the Securities Act, (c) they shall have been
otherwise transferred, new certificates for
them not bearing a legend restricting further
transfer shall have been delivered by the
Company and subsequent disposition of them
shall not require registration or
qualification of them under the Securities Act
or any similar state law then in force, or (d)
they shall have ceased to be outstanding.
Registration Expenses: All expenses incident
to the Company's performance of or compliance
with section 2, including, without limitation,
all registration, filing and NASD fees, all
stock exchange listing fees, all fees and
expenses of complying with securities or blue
sky laws, all word processing, duplicating and
printing expenses, messenger and delivery
expenses, the fees and disbursements of
counsel for the Company and of its independent
public accountants, including the expenses of
any special audits or "cold comfort" letters
required by or incident to such performance
and compliance, the fees and disbursements of
any counsel and accountants retained by the
holder or holders of more than 50% of the
Registrable Securities being registered, and
costs of policies of insurance against
liabilities arising out of the public offering
of the Registrable Securities being registered
and any fees and disbursements of underwriters
customarily paid by issuers or sellers of
securities, but excluding underwriting
discounts and commissions and transfer taxes,
if any, provided that, in any case where
Registration Expenses are not to be borne by
the Company, such expenses shall not include
salaries of Company personnel or general
overhead expenses of the Company, auditing
fees, premiums or other expenses relating to
liability insurance required by underwriters
of the Company or other expenses for the
preparation of financial statements or other
data normally prepared by the Company in the
ordinary course of its business or which the
Company would have incurred in any event.
Requesting Holder: As defined in section 2.6.
Revised Standby Agreement: The First Amended
and Restated Standby Financing and Purchase
Agreement, dated as of June 30, 1995, by and
between the Company and the Wand/Nestor I
Partnership.
Rights Offering. The Company's offering of
rights to acquire units comprised of one share
of Series D Preferred Stock and a warrant to
acquire one-half share of Company Common Stock
at $2.00 per share made pursuant to a
Registration Statement declared effective
August 16, 1995.
Rights Warrants: As defined in Section 1.
Securities Act: The Securities Act of 1933,
or any similar Federal statute, and the rules
and regulations of the Commission thereunder,
all as of the same shall be in effect at the
time. References to a particular section of
the Securities Act of 1933 shall include a
reference to the comparable section, if any,
of any such similar Federal statute.
Securities Purchase Agreement: As defined in
section 1.
Wand/Nestor I Partnership: As defined in
Section 1.
Wand/Nestor II Partnership: As defined in
Section 1.
Wand/Nestor III Partnership: As defined in
Section 1.
Warrants: The Common Stock Purchase Warrants
of the Company issued (a) to the Wand/Nestor I
Partnership and the Wand/Nestor II Partnership
pursuant to the Securities Purchase Agreement
and the Revised Standby Agreement (and any
Warrants issued in substitution or transfer
thereof), (b) to Wand Partners L.P. and Hill &
Partners in connection with the Letter of
Engagement (and any Warrants issued in
substitution or transfer thereof), and (c) to
the Wand/Nestor I Partnership, the Wand/Nestor
II Partnership and the Wand/Nestor III
Partnership pursuant to the Purchase and
Exchange Agreement (and any Warrants issued in
substitution or transfer thereof).
4. Rule 144. The Company shall timely file
the reports required to be filed by it under the
Securities Act and the Exchange Act (including but not
limited to the reports under sections 13 and 15(d) of
the Exchange Act referred to in subparagraph (c) of Rule
144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file
such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other
information) and will take such further action as any
holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable
such holder to sell Registrable Securities without
registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to
whether it has complied with the requirements of this
Section 4.
5. Amendments and Waivers. This Agreement
may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company
shall have obtained the written consent to such
amendment, action or omission to act, of the holder or
holders of 66-2/3% or more of the shares of Registrable
Securities. Each holder of any Registrable Securities
at the time or thereafter outstanding shall be bound by
any consent authorized by this section 5, whether or not
such Registrable Securities shall have been marked to
indicate such consent.
6. Nominees for Beneficial Owners. In the
event that any Registrable Securities are held by a
nominee for the beneficial owner thereof, the beneficial
owner thereof may, at its election, be treated as the
holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of
Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of
Registrable Securities held by any holder or holders of
Registrable Securities contemplated by this Agreement.
If the beneficial owner of any Registrable Securities so
elects, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership
of such Registrable Securities.
7. Notices. Except as otherwise provided in
this Agreement, all notices, requests and other
communications to any Person provided for hereunder
shall be in writing and shall be given to such Person
(a) in the case of a party hereto other than the
Company, addressed to such party in the manner set forth
in the applicable Securities Purchase Agreement or the
Warrants or at such other address as such party shall
have furnished to the Company in writing, or (b) in the
case of any other holder of Registrable Securities, at
the address that such holder shall have furnished to the
Company in writing, or, until any such other holder so
furnishes to the Company an address, then to and at the
address of the last holder of such Registrable
Securities who has furnished an address to the Company,
or (c) in the case of the Company, at One Richmond
Square, Providence, Rhode Island 02906, to the attention
of its President, or at such other address, or to the
attention of such other officer, as the Company shall
have furnished to each holder of Registrable Securities
at the time outstanding. Each such notice, request or
other communication shall be effective (i) if given by
mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as
aforesaid or (ii) if given by any other means
(including, without limitation, by air courier), when
delivered at the address specified above, provided that
any such notice, request or communication to any holder
of Registrable Securities shall not be effective until
received.
8. Assignment. This Agreement shall be
binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not
any express assignment shall have been made, the
provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also
be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities, subject to the
provisions respecting the minimum numbers or percentages
of shares of Registrable Securities required in order to
be entitled to certain rights, or take certain actions,
contained herein.
9. Descriptive Headings. The descriptive
headings of the several sections and paragraphs of this
Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF DELAWARE WITHOUT REFERENCE TO THE
PRINCIPLES OF CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be
executed simultaneously in any number of counterparts,
each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same
instrument.
12. Entire Agreement. This Agreement
embodies the entire agreement and understanding between
the Company and each other party hereto relating to the
subject matter hereof and supersedes all prior
agreements and understandings relating to such subject
matter.
13. SUBMISSION TO JURISDICTION. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE OR OF
THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF
DELAWARE, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE
COURTS. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS FROM ANY OF THE AFOREMENTIONED
COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF TO SUCH PARTY BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO SUCH
PARTY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY,
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.
14. Severability. If any provision of this
Agreement, or the application of such provisions to any
Person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such
provision to Persons or circumstances other than those
to which it is held invalid, shall not be affected
thereby.
IN WITNESS WHEREOF, the parties have caused
this Agreement to be executed and delivered by their
respective officers thereunto duly authorized as of the
date first above written.
NESTOR, INC.
By_____________________________
Name:
Title:
WAND/NESTOR INVESTMENTS L.P
By: Wand (Nestor) Inc.
as general partner
By_____________________________
Name:
Title:
WAND/NESTOR INVESTMENTS II L.P.
By: Wand (Nestor) Inc.
as general partner
By_____________________________
Name:
Title:
WAND/NESTOR INVESTMENTS III L.P
By: Wand (Nestor) Inc.
as general partner
By_____________________________
Name:
Title:
WAND PARTNERS L.P.
By: Wand Partners Inc.
as general partner
By_____________________________
Name:
Title:
HILL & PARTNERS
By:_____________________________
Name: Thomas F. Hill
Title:
[105401/2a]
NESTOR, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
Dated as of January 31, 1996
NESTOR, INC.
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND SPECIAL RIGHTS
OF SERIES E CONVERTIBLE PREFERRED STOCK
RELATIVE RIGHTS AND PREFERENCES AND
OTHER TERMS AS FIXED AND DETERMINED BY THE
BOARD OF DIRECTORS
* * * * * *
Nestor, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State
of Delaware, does hereby certify that pursuant to the
provisions of Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the
Company, by action taken on January 13, 1996, adopted the
following resolution, which resolution remains in full
force and effect as of the date hereof;
WHEREAS, the Board of Directors of the Company is
authorized, within the limitations and restrictions
stated in the Certificate of Incorporation, to fix by
resolution or resolutions the designation of each series
of preferred stock and the powers, preferences and
relative, participating, optional or other special rights
and qualifications, limitations or restrictions thereof,
including, without limiting the generality of the
foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution
or resolutions of the Board of Directors under the
General Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors of
the Company pursuant to its authority as aforesaid, to
authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized such series of preferred stock on the terms
and with the provisions herein set forth:
Designation, Amount and Rank. One thousand four hundred
and forty-four (1,444) shares of a convertible preferred
stock, $1.00 par value per share, shall constitute a
series of such preferred stock designated as "Series E
Convertible Preferred Stock" (the "Series E Preferred
Stock"). With respect to dividend rights, redemption
rights and rights on liquidation, winding up and
dissolution, the Series E Preferred Stock (i) shall rank
junior to the Series F Preferred Stock and the Series G
Preferred Stock, (ii) shall rank pari passus with the
Series A Preferred Stock and Series H Preferred Stock,
and (iii) shall rank prior to the Series B Preferred
Stock, the Series D Preferred Stock, the Common Stock and
any other class of capital stock or series of preferred
stock hereafter created. The Series E Preferred Stock
shall be issued pursuant to the following additional
terms and conditions:
1. Series E Preferred Stock.
1.1. Definitions.
As used herein, unless the context otherwise
requires, the following terms have the following
meanings:
1.1.1. "Additional Director" means any
director whom holders of shares of Series E Preferred
Stock and Series H Preferred Stock shall be entitled to
elect by virtue of the provisions of Section 1.4.3
hereof.
1.1.2. "Additional Shares of Common Stock"
means all shares (including treasury shares) of Common
Stock issued or sold (or, pursuant to Sections 1.7.3 or
1.7.4, deemed to be issued) by the Company after the date
hereof, whether or not subsequently reacquired or retired
by the Company other than (a) the issuance of shares upon
conversion of the Preferred Stock; (b) shares issued upon
the exercise of the Currently Outstanding Warrants; (c)
shares issued upon the exercise of the Warrants; (d)
shares to be issued pursuant to Company sponsored
employee benefit and compensation arrangements, but not
to exceed 2,000,000 (subject to equitable adjustment in
the event of any combination, reclassification, stock
split, dividend or recapitalization of the Company); and
(e) such additional number of shares, if any, as may
become issuable upon the conversion or exercise of any of
the securities referred to in the foregoing clauses (a)
through (d) and by reason of adjustments required
pursuant to anti-dilution provisions applicable to such
Preferred Stock as in effect on the date hereof, but only
if and to the extent that such adjustments are required
as the result of the original issuance of such Series E
Preferred Stock.
1.1.3. "BHCA Holder" shall mean any original
holder of the Series E Preferred Stock that at the time
of its original acquisition of the Series E Stock from
the Company is subject to the Bank Holding Company Act of
1956, as amended.
1.1.4. "Book Value Event" means the end of any
fiscal quarter of the Company if the book value per share
of Common Stock of the Company determined in accordance
with generally accepted accounting principles (assuming
the conversion of all outstanding Convertible Securities
and the exercise of all outstanding Company stock options
but excluding the effect of the exercise of the Currently
Outstanding Warrants or the Warrants) exceeds $.70.
1.1.5. "Business Day" means any day other than
a Saturday or a Sunday or a day on which commercial
banking institutions in the City of New York are
authorized by law or other governmental action to be
closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
1.1.6. "Closing" means the date of closing of
any Triggering Event, as contemplated by Section 1.6.2
hereof.
1.1.7. "Common Stock" means the Company's
Common Stock, $.01 par value, such term to include any
stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification
of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders
of which have the right, without limitation as to amount,
either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to
preference.
1.1.8. "Conversion Price" means (a) prior to
August 1, 2004, $1.50, subject to adjustment pursuant to
Sections 1.7 and 1.9 hereof or (b) on or after August 1,
2004, the lower of $1.00 or the Conversion Price then
otherwise in effect pursuant to the preceding subsection
(a).
1.1.9. "Convertible Securities" means any
evidences of indebtedness, shares of stock (other than
Common Stock) or other securities directly or indirectly
convertible into or exchangeable for additional shares of
Common Stock.
1.1.10. "Current Market Price" means on any
date specified herein, the average daily Market Price
during the period of the most recent twenty (20) days,
ending on such date, on which the national securities
exchanges were open for trading, except that if no Common
Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-
counter market, the Current Market Price shall be the
Market Price on such date.
1.1.11. "Currently Outstanding Warrants" means
the common stock purchase warrants and non-qualified
options listed in Exhibit A hereto for the purchase of an
aggregate of 1,407,375 shares of the Common Stock (based
on the current capitalization of the Company).
1.1.12. "Dividend Payment Date" means March
31, June 30, September 30 and December 31 of each year,
commencing September 30, 1994.
1.1.13. "Dividend Period" means each of the
periods commencing January 1 and ending March 31 of any
year, commencing April 1 and ending June 30 of any year,
commencing July 1 and ending September 30 of any year and
commencing October 1 and ending December 31 of any year.
1.1.14. "Four-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series E Preferred Stock and the Series
H Preferred Stock for any four (4) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any four Dividend Periods within any
eight (8) consecutive Dividend Periods after such date.
1.1.15. "Lender Default" means any time when
(i) the Company shall violate the provisions of or be in
default under the terms of any loan or other agreement
relating to indebtedness of the Company or its
subsidiaries or (ii) a judgement shall be entered against
the Company or any of its subsidiaries, in an amount
exceeding $50,000 for failure to pay trade creditors or
indebtedness and such judgment shall remain unpaid for
more than sixty days.
1.1.16. "Mandatory Redemption Date" means the
Mandatory Redemption Date stated in Section 1.5.2 hereof.
1.1.17. "Market Price" means on any date
specified herein, the amount per share of the Common
Stock, equal to (a) the last sale price of such Common
Stock, regular way, on such date or, if no such sale
takes place on such date, the average of the closing bid
and asked prices thereof on such date, in each case as
officially reported on the principal national securities
exchange on which such Common Stock is then listed or
admitted to trading, or (b) if such Common Stock is not
then listed or admitted to trading on any national
securities exchange but is designated as a national
market system security by the NASD, the last trading
price of the Common Stock on such date, or (c) if there
shall have been no trading on such date or if the Common
Stock is not so designated, the average of the closing
bid and asked prices of the Common Stock on such date as
shown by the NASD automated quotation system, or (d) if
such Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in
the over-the-counter market, the value as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the
Company (and approved by the holders of a majority of the
outstanding shares of Series E Preferred Stock and Series
H Preferred Stock) as of the last day of any month ending
within thirty (30) days preceding the date as of which
the determination is to be made.
1.1.18. "Options" means rights, options or
warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or Convertible
Securities.
1.1.19. "Other Securities" means any stock
(other than Common Stock) and other securities of the
Company or any other Person (corporate or otherwise)
which the holders of Preferred Stock at any time shall be
entitled to receive, or shall have received, upon the
conversion of Preferred Stock, in lieu of or in addition
to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities.
1.1.20. "Person" means a corporation, an
association, a partnership, an organization, a business,
an individual, a government or political subdivision
thereof or a governmental agency.
1.1.21. "Preferred Stock" means, collectively,
the Series A Preferred Stock, the Series B Preferred
Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock, the Series
G Preferred Stock and the Series H Preferred Stock.
1.1.22. "Redemption Date" means any date fixed
for redemption of shares of Series E Preferred Stock and
Series H Preferred Stock pursuant to the provisions of
Section 1.5 hereof.
1.1.23. "Redemption Notice" means the written
notice of redemption contemplated by Section 1.5.5
hereof.
1.1.24. "Restricted Period" shall mean the
period beginning on the date of original issue of any
shares of the Series C Preferred Stock in exchange for
which (and upon the cancellation of) the shares of Series
E Preferred Stock or shares of Series H Preferred Stock
were issued and ending on the earlier of (i) the first
day of the calendar quarter in which the Company first
pays cash dividends on its Common Stock pursuant to
Section 1.2.5 hereof and (ii) June 30, 1998.
1.1.25. "Securities Act" means the Securities
Act of 1933, as amended.
1.1.26. "Series A Preferred Stock" means the
Series A Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 30, 1990 with the Secretary of
State of the State of Delaware.
1.1.27. "Series B Preferred Stock" means the
Series B Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed June 10, 1992 with the Secretary of
State of the State of Delaware.
1.1.28. "Series C Preferred Stock" means the
Series C Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 1, 1994 with the Secretary of
State of the State of Delaware, and cancelled, pursuant
to a Certificate of Cancellation filed with the Secretary
of State of the State of Delaware following the issuance
of the Series E Preferred Stock and the Series H
Preferred Stock.
1.1.29. "Series D Preferred Stock" means the
Series D Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 9, 1995 with the Secretary of
State of the State of Delaware.
1.1.30. "Series E Preferred Stock" means the
Series E Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.31. "Series F Preferred Stock" means the
Series F Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.32. "Series G Preferred Stock" means the
Series G Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.33. "Series H Preferred Stock" means the
Series H Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.34. "Special Redemption Event" has the
meaning set forth in Section 1.5.3.
1.1.35. "Special Series E Voting Rights" means
the special voting rights which holders of the Series H
Preferred Stock that are not BHCA Holders are entitled to
exercise by virtue of the provisions of Section 1.4.3
hereof.
1.1.36. "Stated Value" per share means (i)
with respect to the Series A Preferred Stock, two dollars
($2.00), (ii) with respect to the Series B Preferred
Stock, one dollar ($1.00), (iii) with respect to the
Series D Preferred Stock, one dollar and fifty cents
($1.50), and (iv) with respect to the Series E Preferred
Stock, One Thousand Dollars ($1,000) plus all accumulated
and unpaid dividends, if any, added thereto pursuant to
Section 1.2.2 and minus all amounts paid in cash in
respect of such previously accumulated and unpaid
dividends that were originally added to such Stated Value
pursuant to Section 1.2.2., and (v) with respect to the
Series H Preferred Stock, One Thousand Dollars ($1,000)
plus all accumulated and unpaid dividends, if any, added
thereto pursuant to Section 1.2.2 and minus all amounts
paid in cash in respect of such previously accumulated
and unpaid dividends that were originally added to such
Stated Value pursuant to Section 1.2.2.
1.1.37. "Two-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series E Preferred Stock and Series H
Preferred Stock for any two (2) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any two Dividend Periods within any
six (6) consecutive Dividend Periods occurring after such
date.
1.1.38. "Triggering Event" means the
consummation of an underwritten public offering prior to
August 1, 1997 pursuant to an effective registration
statement under the Securities Act covering the offering
and sale of shares of Common Stock (i) in which the
aggregate proceeds to the Company exceed $10,000,000 and
(ii) in which the price per share at which the Common
Stock is initially offered to the public equals or
exceeds $3.00 per share (which amount shall be equitably
adjusted to take into account any changes in
capitalization of the Company occurring after August 1,
1994).
1.1.39. "Unpaid Dividends" means all dividends
with respect to the Series E Preferred Stock and the
Series H Preferred Stock which have accrued but which
have not been either paid in cash or added to the Stated
Value thereof pursuant to Section 1.2.2.
1.1.40. "Warrants" means those certain Common
Stock Purchase Warrants, initially providing for the
acquisition of an aggregate of 1,400,000 shares of Common
Stock, originally issued pursuant to (a) the Securities
Purchase Agreement, dated August 1, 1994, by and between
the Company and Wand/Nestor Investments L.P. (and any
Warrants issued in substitution therefor), and (b) the
Letter of Engagement, dated April 26, 1994, among the
Company, Hill & Partners and Wand Partners Inc. (and any
Warrants issued in substitution therefor).
1.2. Dividends.
1.2.1. The holder of each issued and
outstanding share of Series E Preferred Stock and Series
H Preferred Stock shall be entitled to receive, out of
the funds of the Company legally available for such
purpose, when, as and if declared by the Board of
Directors of the Company, before any dividend shall be
declared, paid or set aside, or any other distribution
shall be declared or made, upon the Common Stock or any
other class or series of stock of the Company (other than
the Series F Preferred Stock and the Series G Preferred
Stock), dividends in cash at a dividend rate of seven
percent (7.0%) per annum of the Stated Value per share of
Series E Preferred Stock and Series H Preferred Stock,
calculated on a daily basis, for each Dividend Period or
portion thereof during which such Series E Preferred
Stock and Series H Preferred Stock are outstanding.
Notwithstanding the foregoing, the Company may declare
and pay dividends in the form of Common Stock (with
fractional shares to be paid in cash) pursuant to the
terms of the Series D Preferred Stock.
1.2.2. Notwithstanding anything to the
contrary herein provided, in the event that any portion
of the quarterly dividend for a Dividend Period on the
Series E Preferred Stock and the Series H Preferred Stock
is not declared and paid in cash on any Dividend Payment
Date, the amount of such accrued dividend which is not so
paid shall be accumulated and shall automatically be
added to the Stated Value of such share on such date.
Accumulated dividends on shares of Series E Preferred
Stock and the Series H Preferred Stock that have
previously been added to the Stated Value thereof
pursuant to the terms hereof may not thereafter be paid
in cash except upon redemption by the Company. Unpaid
dividends shall not bear interest but, to the extent
accumulated and added to the Stated Value, shall continue
to accrue dividends on a daily basis. Accumulated
dividends on any share of Series E Preferred Stock and
the Series H Preferred Stock which are added to the
Stated Value thereof pursuant to the terms hereof shall
not be deemed to be in arrears for any purpose
whatsoever. Any dividends that have accrued on the
Series E Preferred Stock and Series H Preferred Stock but
have not yet been added to the Stated Value thereof shall
constitute Unpaid Dividends. Notwithstanding anything to
the contrary herein provided, no cash dividends shall be
paid with respect to the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock or the
Series D Preferred Stock at any time when there are
Unpaid Dividends with respect to the Series E Preferred
Stock or the Series H Preferred Stock.
1.2.3. Dividends payable with respect to the
Series E Preferred Stock and the Series H Preferred Stock
shall be calculated on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each
and shall be payable on each Dividend Payment Date to the
holders of record of the Series E Preferred Stock and the
Series H Preferred Stock at the close of business on the
date specified by the Board of Directors of the Company;
provided, however, that no such record date shall be more
than thirty (30) days nor less than ten (10) days prior
to the respective Dividend Payment Date. Dividends on
shares of Series E Preferred Stock and the Series H
Preferred Stock shall accrue from the date of original
issue of the shares of Series C Preferred Stock in
exchange for which such shares of Series E Preferred
Stock and Series H Preferred Stock were issued. Such
dividends will accrue whether or not they have been
declared and whether or not there are profits, surplus or
other funds of the Company legally available for the
payment of dividends. The date on which the Company
originally issues any share of Series E Preferred Stock
or Series H Preferred Stock will be deemed to be its
"date of original issue" regardless of the number of
times transfer of such share is made on the stock records
maintained by or for the Company.
1.2.4. All dividends paid or added to Stated
Value, as the case may be, with respect to shares of the
Series E Preferred Stock or Series H Preferred Stock
shall be paid or added to Stated Value, as the case may
be, ratably (based on the respective Stated Values plus
Unpaid Dividends of the Series E Preferred Stock and the
Series H Preferred Stock) with respect to such shares to
the holders of Series E Preferred Stock and Series H
Preferred Stock entitled thereto.
1.2.5. So long as any shares of the Series E
Preferred Stock or Series H Preferred Stock are
outstanding, the Company shall not declare, pay or set
apart for payment any dividend or other distribution on
any of the Company's Common Stock, or Preferred Stock
(other than the Series F Preferred Stock, the Series G
Preferred Stock, the Series E Preferred Stock and the
Series H Preferred Stock) or make any payment on account
of, or set apart for payment money for a sinking fund or
other similar fund for the purchase, redemption or other
retirement of, any of the Common Stock, or Preferred
Stock (other than the Series F Preferred Stock, the
Series G Preferred Stock, the Series E Preferred Stock
and the Series H Preferred Stock) or any warrants,
rights, calls or options exercisable for any of the
Common Stock or make any distribution in respect thereof,
either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property
(other than distributions or dividends in stock to the
holders of such stock), and shall not permit any Person
directly or indirectly controlled by the Company to
purchase or redeem any of the Common Stock or Preferred
Stock (other than the Series F Preferred Stock, the
Series G Preferred Stock, the Series E Preferred Stock
and the Series H Preferred Stock) or any warrants,
rights, calls or options exercisable for any of the
Common Stock, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase
or distribution, as the case may be, all funds then
required for the mandatory redemption of shares of the
Series E Preferred Stock and the Series H Preferred Stock
pursuant to Section 1.5.2 hereof, shall have been paid or
be paid, and all Unpaid Dividends on shares of the Series
E Preferred Stock and the Series H Preferred Stock not
paid in cash, shall have been paid in cash or be paid in
cash. Notwithstanding the foregoing, the Company may
declare and pay cash dividends on the Common Stock
provided that (a) the Company is not then in default with
respect to any of its obligations to pay dividends on the
Series E Preferred Stock and the Series H Preferred
Stock, (b) cash dividends on Common Stock during any
fiscal year of the Company do not exceed twenty percent
(20%) of the after-tax earnings per share of Common Stock
for the immediately preceding fiscal year of the Company
and (c) all Unpaid Dividends on the Series E Preferred
Stock and the Series H Preferred Stock shall be paid in
cash concurrently with the payment of such cash dividend
on the Common Stock. Notwithstanding the foregoing, the
Company many declare and pay dividends in the form of
Common Stock (with fractional shares to be paid in cash)
pursuant to the terms of the Series D Preferred Stock.
1.3. Rights on Liquidation, Dissolution or
Winding-Up.
1.3.1. In the event of any liquidation,
dissolution or winding-up of the Company (including,
without limitation, a liquidation or reorganization under
Chapter 7 or 11 of Title 11 of the United States Code, as
amended), after payment in full of all amounts due to the
holders of Series F Preferred Stock and Series G
Preferred Stock, the holders of shares of the Series A
Preferred Stock, the Series E Preferred Stock and the
Series H Preferred Stock then issued and outstanding
shall be entitled to be paid out of the assets of the
Company available for distribution to its stockholders,
before any payment shall be made to the holders of Series
B Preferred Stock, Series D Preferred Stock, Common Stock
or of shares of any other class or series of stock of the
Company (other than the Series F Preferred Stock and
Series G Preferred Stock), an amount equal to the Stated
Value per share, plus an amount equal to any Unpaid
Dividends to and including the date of distribution with
respect to such shares. If, upon any liquidation,
dissolution or winding-up of the Company (including,
without limitation, a liquidation or reorganization under
Chapter 7 or 11 of Title 11 of the United States Code, as
amended), the assets of the Company available for
distribution to its stockholders shall, after payment in
full of all amounts due the holders of Series F Preferred
Stock and Series G Preferred Stock, be insufficient (a
"Liquidation Insufficiency") to pay the holders of shares
of the Series A Preferred Stock, the Series E Preferred
Stock and the Series H Preferred Stock the full amounts
to which they shall respectively be entitled, the holders
of shares of the Series A Preferred Stock, the Series E
Preferred Stock and the Series H Preferred Stock shall be
entitled to receive all the assets of the Company
available for distribution and each such holder of shares
of the Series A Preferred Stock, the Series E Preferred
Stock and the Series H Preferred Stock shall share in any
distribution in the proportion which the aggregate Stated
Values of the shares of the Series A Preferred Stock
(plus all Unpaid Dividends thereon), the Series E
Preferred Stock (plus all Unpaid Dividends thereon) and
the Series H Preferred Stock (plus all Unpaid Dividends
thereon) held by such holder of the Series A Preferred
Stock, Series E Preferred Stock or Series H Preferred
Stock bears to the aggregate Stated Values of all shares
of the Series A Preferred Stock (plus all Unpaid
Dividends thereon), Series E Preferred Stock (plus all
Unpaid Dividends thereon) and the Series H Preferred
Stock (plus all Unpaid Dividends thereon) then
outstanding. If there is no Liquidation Insufficiency
and payment shall have been made to the holders of shares
of the Series A Preferred Stock, Series E Preferred Stock
and Series H Preferred Stock of the full amount to which
they shall be entitled, then the holders of shares of the
Series A Preferred Stock, Series E Preferred Stock and
Series H Preferred Stock shall be entitled to receive no
further distributions thereon and the holders of shares
of the Series B Preferred Stock shall be entitled to
receive an amount equal to the Stated Value (plus all
Unpaid Dividends thereon) per share thereof. After
payment shall have been made to the holders of shares of
the Series B Preferred Stock of the full amounts to which
they shall be entitled, the holders of shares of the
Common Stock and of shares of any other class of stock of
the Company, if any, shall be entitled to share,
according to their respective rights and preferences, in
all remaining assets of the Company available for
distribution to its stockholders.
1.4. Voting Power.
1.4.1. Except as expressly provided herein in
Section 1.4.7 or as required by law, any holder of Series
E Preferred Stock that is a BHCA Holder shall have no
voting rights. Except as otherwise expressly provided
herein or as required by law, (i) each holder of Series E
Preferred Stock that is not a BHCA Holder shall be
entitled to vote on all matters as to which stockholders
of the Company are entitled to vote, and (ii) each holder
of Series E Preferred Stock (other than BCHA Holders)
shall be entitled to cast a number of votes equal to the
greatest number of whole shares of Common Stock into
which such holder's shares of Series E Preferred Stock
could be converted, pursuant to the provisions of Section
1.6 hereof, at the record date for the determination of
stockholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is
taken or any written consent of stockholders is
solicited. Except as otherwise expressly provided herein
or as required by law, the holders of shares of Series B
Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock (other than BHCA Holders), Series F
Preferred Stock, Series G Preferred Stock (other than
BHCA Holders), Series H Preferred Stock and Common Stock
shall be entitled to vote together as a class with
respect to all matters as to which such stockholders of
the Company are entitled to vote.
1.4.2. The holders of Series E Preferred Stock
(other than BHCA Holders) and Series H Preferred Stock
shall have the right, voting together separately as a
single class, to elect two (2) directors to the Board of
Directors of the Company, which, unless increased
pursuant to the Special Voting Rights, shall be composed
of no more than ten (10) directors.
1.4.3. In the event that at any time there
shall occur a Two-Dividend Default, then immediately upon
the happening of such Two-Dividend Default and until such
Two-Dividend Default and all defaults in the payment of
quarterly dividends on the Series E Preferred Stock and
Series H Preferred Stock subsequent to and occurring
while such Two-Dividend Default exists shall be cured,
the number of directors constituting the Board of
Directors of the Company shall, without further action,
be increased by two and the holders of Series E Preferred
Stock (other than BHCA Holders) and Series H Preferred
Stock shall have, in addition to the other voting rights
set forth herein, the exclusive right, voting separately
as a class, to elect two directors of the Company to fill
such newly created directorship, the remaining directors
to be elected by the class or classes of stock (including
the Series E Preferred Stock (other than BHCA Holders)
and the Series H Preferred Stock) entitled to vote
therefor, at each meeting of stockholders held for the
purpose of electing directors. In the event that at any
time there shall occur a Four-Dividend Default or a
Lender Default, then immediately on the happening of such
Four-Dividend Default or Lender Default and until such
Lender Default or Four-Dividend Default and all defaults
in the payment of quarterly dividends on the Series E
Preferred Stock subsequent to and occurring while such
Four-Dividend Default exists shall be cured, then the
number of directors constituting the Board of Directors
of the Company shall, without further action, be further
increased by six (in the case of a Four-Dividend Default)
or by eight (in the case of a Lender Default) and the
holders of Series E Preferred Stock (other than BHCA
Holders) and the Series H Preferred Stock shall have, in
addition to the other voting rights set forth herein, the
exclusive right, voting separately as a class, to elect
directors of the Company to fill such newly created
directorships, the remaining directors to be elected by
the class or classes of stock (including the Series E
Preferred Stock and the Series H Preferred Stock)
entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors.
During the existence of a Four Dividend Default, a
majority of the Directors not elected by the holders of
the Series E Preferred Stock and the Series H Preferred
Stock (or their affiliates) shall have the right to
declare and pay dividends on the Series E Preferred Stock
and the Series H Preferred Stock out of funds legally
available for the payment of such dividends.
Notwithstanding the foregoing provisions of this Section
1.4.3, upon payment in full of all quarterly dividends on
the Series E Preferred Stock and the Series H Preferred
Stock coming due subsequent to a Four-Dividend Default
and the dividend which resulted in the Four-Dividend
Default, so that no more than three consecutive quarterly
dividends on the Series E Preferred Stock and the Series
H Preferred Stock remain in default, the Special Series E
Voting Rights of the holders of Series E Preferred Stock
and the Series H Preferred Stock shall be reduced so that
they have the right, voting separately as a class, to
elect two Additional Directors of the Company.
Notwithstanding the foregoing provisions of this Section
1.4.3, upon payment in full of (i) all quarterly
dividends on the Series E Preferred Stock and the Series
H Preferred Stock coming due subsequent to a Two-Dividend
Default and the dividend which resulted in the Two-
Dividend Default, or (ii) upon payment in full of all
quarterly dividends on the Series E Preferred Stock and
the Series H Preferred Stock coming due subsequent to a
Four-Dividend Default and three of the dividends which
resulted in a Four-Dividend Default, so that, in each
case, no more than one quarterly dividend remains in
default, or (iii) upon payment in full or cure of all
Lender Defaults, the Special Series E Voting Rights shall
terminate. Upon any termination of the aforesaid Special
Series E Voting Rights, the term of office of each
director elected by the holders of the Series E Preferred
Stock and the Series H Preferred Stock pursuant to this
Section 1.4.3 then in office shall thereupon terminate
and upon such termination the number of directors
constituting the Board of Directors shall, by resolution
of the Board of Directors, be reduced accordingly,
subject always to the subsequent increase of the number
of directors from time to time pursuant to this Section
1.4.3 in the event of the periodic future vesting of the
right of the holders of the Series E Preferred Stock
(other than BHCA Holders) and Series H Preferred Stock to
elect Additional Directors. The term of office of any
director elected by the holders of the Series E Preferred
Stock and Series H Preferred Stock pursuant to this
Section 1.4.3 shall terminate upon the earlier of the
termination of the Special Series E Voting Rights and the
election of a successor to such director at any meeting
of holders of the Series E Preferred Stock and the Series
H Preferred Stock for the purpose of electing directors.
1.4.4. Special Series E Voting Rights may be
exercised either at a special meeting of holders of the
Series E Preferred Stock and the Series H Preferred
Stock, or at any annual or special meeting of
stockholders of the Company, or may be exercised by the
written consent of holders of the Series E Preferred
Stock and the Series H Preferred Stock pursuant to the
Delaware General Corporation Law.
1.4.5. At any time when Special Series E
Voting Rights pursuant to Section 1.4.3 above shall have
vested in holders of the Series E Preferred Stock (other
than BHCA Holders) and the Series H Preferred Stock, and
if such rights shall have not already been initially
exercised, a proper officer of the Company shall, upon
the written request of any holder of record of the Series
E Preferred Stock (other than BHCA Holders) or Series H
Preferred Stock then outstanding, addressed to the
secretary of the Company, call a special meeting of
holders of the Series E Preferred Stock and Series H
Preferred Stock for the purpose of electing directors.
Such meeting shall be held at the earliest practicable
date upon the notice required for annual meetings of the
stockholders at the place for holding annual meetings of
the stockholders of the Company or, if none, at a place
designated by the secretary of the Company. If such a
meeting shall not be called by the proper officer of the
Company within ten (10) days after the personal service
of such written request upon the secretary of the
Company, or within ten (10) days after mailing the same
within the United States, by first-class registered mail,
addressed to the secretary of the Company at the
Company's principal office (such mailing to be evidenced
by registry receipt issued by the postal authorities),
then the holders of record of ten percent (10%) of the
shares of the Series E Preferred Stock or the Series H
Preferred Stock then outstanding may designate in writing
a holder of Series E Preferred Stock or Series H
Preferred Stock to call such meeting at the expense of
the Company, and such meeting may be called by such
person so designated upon the notice required for annual
meetings of stockholders and shall be held at the same
place as is elsewhere provided in this Section 1.4.5.
Any holder of Series E Preferred Stock (other than BHCA
Holders) or Series H Preferred Stock shall have access to
the stock books of the Company for the purpose of causing
a meeting of holders of Series E Preferred Stock (other
than BHCA Holders) and Series H Preferred Stock to be
called pursuant to the provisions hereof.
1.4.6. At any meeting held for the purpose of
electing directors at which the holders of Series E
Preferred Stock and Series H Preferred Stock shall have
the right to elect directors as provided herein, the
presence in person or by proxy of the holders of twenty-
five percent (25%) of the then outstanding shares of
Series E Preferred Stock and Series H Preferred Stock
shall be required and shall be sufficient to constitute a
quorum of such class for the election of directors by
such class. In the absence of a quorum of the holders of
Series E Preferred Stock and Series H Preferred Stock
entitled to vote for the election of directors, a
majority of the holders present in person or by proxy of
such class shall have the power to adjourn the meeting
for the election of directors which the holders of such
class are entitled to elect, from time to time, without
notice other than announcement at the meeting, until a
quorum shall be present.
1.4.7. Unless the vote of the holders of a
greater number of shares of this Series E Preferred Stock
shall then be required by law, the consent of the holders
of at least 66-2/3% of all of the shares of this Series E
Preferred Stock at the time outstanding, voting together
as a separate class, shall be necessary for authorizing,
effecting or validating any of the following:
(a) the creation, authorization or issue of
any shares of any class or series of stock of the Company
ranking prior to, or pari passu with, the shares of this
Series E Preferred Stock as to dividends or upon
liquidation or otherwise, or the reclassification of any
authorized stock of the Company into any such prior
shares, or the creation, authorization or issue of any
obligation or security convertible into or evidencing the
right to purchase any such prior shares; and
(b) the amendment, alteration or repeal of any
of the provisions of the Certificate of Incorporation or
of any certificate amendatory thereof or supplemental
thereto so as to affect adversely the preferences,
rights, powers or privileges of this Series E Preferred
Stock;
1.5. Redemption.
1.5.1. Optional Redemption. On or after
August 1, 1995, the Company shall have the right to
redeem all or part of the Series E Preferred Stock upon
not less than ten (10) days prior written notice to the
holders of the Series E Preferred Stock.
No shares of Series E Preferred Stock shall be
redeemed pursuant to this Section 1.5.1 unless
concurrently therewith shares of Series H Preferred Stock
are redeemed on a pro rata basis (based on the respective
Stated Values plus Unpaid Dividends of the Series H
Preferred Stock and the Series E Preferred Stock) and no
shares of Series H Preferred Stock shall be redeemed
unless concurrently therewith shares of Series E
Preferred Stock are redeemed on a pro rata basis (based
on the respective Stated Values plus Unpaid Dividends of
the Series H Preferred Stock and the Series E Preferred
Stock).
In the event of optional redemption by the
Company within sixty days following any occurrence of a
Book Value Event or in the event of optional redemption
by the Company after December 31, 2004, shares of Series
E Preferred Stock and Series H Preferred Stock shall be
redeemed at a redemption price equal to the Stated Value
per share, plus all Unpaid Dividends payable with respect
to such shares as of the date fixed for redemption,
without interest. In the event of optional redemption by
the Company prior to January 1, 2005 in the absence of
the existence of a Book Value Event, shares of Series E
Preferred Stock and Series H Preferred Stock shall be
redeemed at a redemption price equal to 107% of the
Stated Value per share, plus all Unpaid Dividends payable
with respect to such shares as of the date fixed for
redemption without interest. In either circumstance,
such redemption price shall be paid in cash.
1.5.2. Mandatory Redemption. The Company
shall redeem all (but not less than all) shares of Series
E Preferred Stock and Series H Preferred Stock on August
1, 2004 (the "Mandatory Redemption Date") at a cash
redemption price equal to the Stated Value per share of
such Series E Preferred Stock and Series H Preferred
Stock, plus all Unpaid Dividends on each such share up to
and including the date of redemption.
Payment shall be applied to the redemption of the shares of
Series E Preferred Stock and Series H Preferred Stock, pro rata
(based on the respective Stated Values plus Unpaid Dividends)
among the holders of all outstanding shares of the Series E
Preferred Stock and Series H Preferred Stock on the Mandatory
Redemption Date and shall be paid to each such holder upon
surrender of the certificate or certificates evidencing such
shares to be redeemed to the secretary of the Company. If the
Company fails to redeem all outstanding shares of Series E
Preferred Stock and Series H Preferred Stock on the Mandatory
Redemption Date, then the other terms of the Series E Preferred
Stock and Series H Preferred Stock shall remain in full force
and effect and the holder shall have no further recourse
against the Company.
1.5.3. Special Redemption. (a) Upon the
occurrence of any Special Redemption Event (as hereinafter
defined), each holder of Series E Preferred Stock and Series H
Preferred Stock shall have the right to require that the
Company redeem, to the extent the Company lawfully may do so,
all or a portion of the shares of Series E Preferred Stock and
Series H Preferred Stock held by such holder, at a redemption
price in cash equal to the Stated Value per share (plus all
Unpaid Dividends thereon to the redemption date). No shares of
Series H Preferred Stock shall be redeemed pursuant to this
Section 1.5.3 unless concurrently therewith shares of Series E
Preferred Stock are redeemed on a pro rata basis (based on the
respective Stated Values plus Unpaid Dividends of the Series E
Preferred Stock and the Series H Preferred Stock) and no shares
of Series H Preferred Stock shall be redeemed pursuant to this
Section 1.5.3 unless concurrently therewith shares of Series E
Preferred Stock are redeemed on a pro rata basis (based on the
respective Stated Values plus Unpaid Dividends of the Series E
Preferred Stock and the Series H Preferred Stock).
(b) Within five Business Days following any Special
Redemption Event (as hereinafter defined), the Company will
mail to each holder of Series E Preferred Stock and Series H
Preferred Stock a notice (the "Special Redemption Event
Notice") (i) stating that a Special Redemption Event has
occurred; (ii) setting forth a purchase date (the "Special
Redemption Date"), which shall be no earlier than 20 Business
Days nor later than 30 Business Days from the date the Special
Redemption Event Notice is mailed; (iii) setting forth the
Conversion Price then in effect with respect to such shares of
Series E Preferred Stock and Series H Preferred Stock, pursuant
to the provisions of Section 1.6 hereof; and (iv) setting forth
the instructions reasonably determined by the Company,
consistent with this Section 1.5.3 and applicable law, that a
holder must follow in order to require the redemption of his
Series E Preferred Stock and Series H Preferred Stock. Holders
of Series E Preferred Stock and Series H Preferred Stock
seeking to require that the Company redeem their shares will be
required to surrender their shares to the Company prior to the
close of business on the third Business Day prior to the
Special Redemption Date.
(c) Immediately prior to the redemption of any
shares of Series E Preferred Stock and Series H Preferred Stock
pursuant to this Section 1.5.3., the Company shall declare and
pay a cash dividend on all outstanding shares of Series E
Preferred Stock and Series H Preferred Stock in an amount equal
to the aggregate amount of all accumulated and unpaid dividends
that have been added to the Stated Value thereof and all
accrued Unpaid Dividends thereon to the Special Redemption
Date. Upon the Special Redemption Date, the redemption price
of such shares shall be payable to the order of the person
whose name appears on the certificate or certificates
representing such shares as the owner thereof and each
surrendered certificate shall be cancelled. From and after the
date the Company shall irrevocably deposit an amount equal to
the redemption price of the shares of Series E Preferred Stock
and Series H Preferred Stock to be redeemed in trust for the
holders of such shares with a bank having capital and surplus
in excess of $100 million, which bank shall be named in the
Special Redemption Event Notice, all rights of the holders of
such Series E Preferred Stock and Series H Preferred Stock,
except the right to receive such redemption price without
interest upon surrender of their certificate or certificates,
shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Company or be
deemed to be outstanding for any purpose whatsoever.
(d) "Special Redemption Event" shall mean:
(i) consummation of any merger,
reorganization or consolidation transaction
involving the Company;
(ii) the acquisition by purchase or otherwise
of a controlling interest in the business or
assets of, or the stock or other evidence of
beneficial ownership of, any other Person if
consummation of such transaction results in a
transfer of ownership of a majority of the
voting securities of the Company to such other
Person or its stockholders;
(iii) the sale, lease, conveyance, transfer,
exchange, encumbrance or other disposition, in
one transaction or a series of related
transactions, of more than 25% of the assets of
the Company; provided, however, that a
definitive agreement between the Company and a
party with which it is currently negotiating
that contemplates an ongoing revenue stream to
the Company based on commercial exploitation of
the Company's technology and requiring a payment
to the Company upon execution of at least $1.25
million, such payment to be not primarily in
consideration of any requirement that the
Company render services, shall not be deemed to
breach this provision if such agreement is
executed on or before July 31, 1996; or
(iv) the sale or other disposition of voting
securities of the Company, in a transaction or a
series of related transactions, if consummation
of such transaction or transactions results in a
transfer of ownership of a majority of the
voting securities of the Company.
(e) Anything in this Section 1.5.3 to the contrary
notwithstanding, no BHCA Holder shall be entitled to require
that the Company redeem any of its Series G Preferred Stock
pursuant to this Section 1.5.3 unless the Federal Reserve
System has confirmed in advance that such redemption does not
violate the Bank Holding Company Act of 1956, as amended.
1.5.4. With respect to any optional redemption of
Series E Preferred Stock, each redemption of Series E Preferred
Stock shall be made so that the number of shares of Series H
Preferred Stock held by each registered holder thereof shall be
reduced in an amount which shall bear the same ratio to the
total number of shares of Series E Preferred Stock being so
redeemed as the number of shares of Series E Preferred Stock
then held by such holder bears to the aggregate number of
shares of Series E Preferred Stock then outstanding.
1.5.5. Except as otherwise provided herein, at least
twenty (20) days before any Redemption Date (ten (10) days if
such redemption is in connection with a Book Value Event), a
Redemption Notice shall be mailed, postage prepaid, to each
holder of record of the Series E Preferred Stock and Series H
Preferred Stock which is to be redeemed, at its address shown
on the records of the Company; provided, however, that the
Company's failure to give such Redemption Notice shall in no
way affect its obligation to redeem the shares of Series E
Preferred Stock and Series H Preferred Stock as provided
herein. The Redemption Notice shall set forth:
(i) the number of shares of Series H Preferred
Stock held by the holder which shall be redeemed by
the Company, and the total number of shares of Series
E Preferred Stock and Series H Preferred Stock held
by all holders of such series to be so redeemed;
(ii) the Redemption Date and the redemption
price;
(iii) that the holder is to surrender to the
Company, at the place designated therein, its
certificate or certificates representing the shares
of Series E Preferred Stock and Series H Preferred
Stock to be redeemed;
(iv) the Conversion Price then in effect with
respect to such shares of Preferred Stock, pursuant
to the provisions of Section 1.6 hereof; and
(v) that the conversion rights of shares of
Series E Preferred Stock and Series H Preferred Stock
to be redeemed shall terminate at the close of
business on the date prior to the Redemption Date.
1.5.6. Each holder of shares of Series E Preferred
Stock and Series H Preferred Stock to be redeemed shall
surrender the certificate or certificates representing such
shares to the Company at the place designated in the Redemption
Notice and thereupon the applicable redemption price for such
shares shall be paid to the order of the Person whose name
appears on such certificate or certificates and each
surrendered certificate shall be cancelled and retired.
1.5.7. From and after the Redemption Date, no shares
of Series E Preferred Stock and Series H Preferred Stock
thereupon subject to redemption shall be entitled to any
further accrual of any dividends pursuant to Section 1.2 hereof
or to the conversion provisions set forth in Section 1.6
hereof; provided, however, that sufficient funds for payment of
the redemption price for the shares of Series E Preferred Stock
and Series H Preferred Stock to be redeemed are deposited or
held and set apart for that purpose at the place of payment on
or prior to the Redemption Date.
1.5.8. If the Redemption Notice shall have been
mailed as provided herein, and if on or before the Redemption
Date specified in such notice the consideration necessary for
such redemption shall have been set apart so as to be available
therefor, then on and after the close of business on the
Redemption Date the shares of Series E Preferred Stock and
Series H Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith cease
and terminate, except only the right of the holders thereof to
receive upon surrender of their certificates the consideration
payable upon redemption thereof. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
1.6. Conversion Rights.
1.6.1. Each holder of the shares of Series E
Preferred Stock shall have the right, at the election of such
holder, exercised at any time and from time to time, to
convert, subject to the terms and provisions hereof (including,
in the case of BHCA Holders, the restrictions stated in Section
1.14.2 hereof), all or any portion of such shares of Series E
Preferred Stock into fully paid and non-assessable shares of
Common Stock of the Company or any capital stock or other
securities into which such Common Stock shall have been changed
or any capital stock or other securities resulting from a
reclassification thereof. Such conversion of Series E
Preferred Stock to shares of Common Stock shall be made at the
Conversion Price, subject to adjustment from time to time as
set forth herein. Series E Preferred Stock may be converted by
the holder thereof during normal business hours on any Business
Day by surrender of the required number of shares of Series E
Preferred Stock, accompanied by written evidence of the
holder's election to convert such holder's Series E Preferred
Stock or portion thereof, to the Company at its principal
executive offices. Payment of the Conversion Price for the
shares of Common Stock specified in such election shall be made
by applying shares of Series E Preferred Stock, valued at the
Stated Value per share. Payment of Unpaid Dividends, if any,
applicable to such converted shares of Series E Preferred Stock
shall be made in accordance with Section 1.6.5.
1.6.2. All or part of the outstanding shares of
Series E Preferred Stock (other than shares held by BHCA
Holders) shall, at the option of the Company and upon written
notice to the holders thereof given not less than ten (10) days
prior to the Closing of a Triggering Event be converted, by
applying shares of Series E Preferred Stock valued at the
Stated Value per share, as of the date and time of the Closing
into shares of Common Stock at the Conversion Price
automatically and without any further action by the holders of
such shares and whether or not the certificates representing
such shares are surrendered to the Company or its transfer
agent. Payment of Unpaid Dividends, if any, applicable to such
converted shares of Series E Preferred Stock shall be made in
accordance with Section 1.6.5.
1.6.3. Upon the conversion of Series E Preferred
Stock, the holders of such Series E Preferred Stock shall
surrender the certificates representing such shares at the
office of the Company. The Company shall not be obligated to
issue certificates evidencing the shares of Common Stock
issuable upon such conversion (or to pay any Unpaid Dividends
in connection with such conversion) unless certificates
evidencing such shares of Series E Preferred Stock being
converted are either delivered to the Company or the holder
notifies the Company that such certificates have been lost,
stolen, or destroyed and delivers to the Company an agreement
satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection therewith.
1.6.4. Each conversion of Series E Preferred Stock
shall be deemed to have been effected immediately prior to the
close of business on the Business Day on which such Series E
Preferred Stock shall have been surrendered to the Company as
provided herein (except that if such conversion is in
connection with a Triggering Event, then such conversion shall
be deemed to have been effected concurrently with the Closing
of such Triggering Event), and such conversion shall be at the
Conversion Price in effect at such time. On each such day that
the conversion of shares of Series E Preferred Stock is deemed
effected, the person or persons in whose name or names any
certificate or certificates for shares of Common Stock are
issuable upon such conversion shall be deemed to have become
the holder or holders of record thereof.
1.6.5. As promptly as practical after the
conversion of shares of Series E Preferred Stock, in whole or
in part, and in any event within five (5) Business Days
thereafter (unless such conversion is in connection with a
Triggering Event, in which event concurrently with such
conversion), the Company at its expense (including the payment
by it of any applicable issue, stamp or other taxes, other than
any income taxes and other than any taxes arising by reason of
issuance of shares of Common Stock to any person other than
such holder) will cause to be issued in the name of and
delivered to the holder thereof or as such holder may direct,
(i) a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled upon such
conversion plus, in lieu of any fractional shares to which such
holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Current Market Price per share of
Common Stock and (ii) Unpaid Dividends, if any, applicable as
of the time of conversion to those shares of Preferred Stock
which are converted. Such Unpaid Dividends shall be paid in
cash, without interest. In case fewer than all the shares of
Series H Preferred Stock represented by any surrendered
certificate are converted into Common Stock, a new certificate
representing the shares of Series H Preferred Stock not
converted shall be issued without cost to the holder thereof.
1.7. Anti-Dilution Adjustments. The number of
shares of Common Stock issuable upon any conversion provided
for in Section 1.6 shall be subject to adjustment, from time to
time, in accordance with the following provisions:
1.7.1. Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to time
after the date hereof shall issue or sell Additional Shares of
Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 1.7.3 or 1.7.4) without
consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to such issue or
sale, then, in each such case, subject to Section 1.7.8, such
Conversion Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Conversion Price by a fraction
(a) the numerator of which shall be (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate
consideration received by the Company for the total
number of such Additional Shares of Common Stock so
issued or sold would purchase at such Conversion
Price, and
(b) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after such issue or sale,
provided that, for the purposes of this Section 1.7.1, (x)
immediately after any Additional Shares of Common Stock are
deemed to have been issued pursuant to Section 1.7.3 or 1.7.4,
such Additional Shares shall be deemed to be outstanding and
(y) treasury shares shall not be deemed to be outstanding.
1.7.2. Adjustment of Conversion Price Upon
Extraordinary Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of other or
additional stock or other securities or property or Options by
way of dividend or spin-off, reclassification, recapitalization
or similar corporate rearrangement) on the Common Stock, other
than (a) a dividend payable in Additional Shares of Common
Stock or (b) a cash dividend permitted pursuant to Section
1.2.5 hereof, then, and in each such case, subject to Section
1.7.8, the Conversion Price in effect immediately prior to the
close of business on the record date fixed for the
determination of holders of any class of securities entitled to
receive such dividend or distribution shall be reduced,
effective as of the close of business on such record date, to a
price (calculated to the nearest .001 of a cent) determined by
multiplying such Conversion Price by a fraction
(a) the numerator of which shall be the Current
Market Price in effect on such record date or, if the
Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend
trading, less the amount of such dividend or
distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one
share of Common Stock,
(b) the denominator of which shall be such
Current Market Price,
provided that, in the event that the amount of such dividend as
so determined is equal to or greater than 25% of such Current
Market Price or in the event that such fraction is less than
three fourths (3/4), in lieu of the foregoing adjustment,
adequate provision shall be made so that the holders of the
Series H Preferred Stock shall receive, in the same form and at
the same time such dividend is payable to holders of Common
Stock, a pro rata share of such dividend based upon the maximum
number of shares of Common Stock at the time issuable to such
holders upon conversion of such Series H Preferred Stock.
1.7.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time to
time after the date hereof shall issue, sell, grant or assume,
or shall fix a record date for the determination of holders of
any class of securities entitled to receive, any Options or
Convertible Securities, then and in each such case, the maximum
number of Additional Shares of Common Stock (as set forth in
the instrument relating thereto, without regard to any
provisions contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the
time of such issue, sale, grant or assumption or, in case such
a record date shall have been fixed, as of the close of
business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional Shares of
Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 1.7.5)
of such shares would be less than the Conversion Price in
effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be, and provided,
further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued
(a) no further adjustment of the Conversion
Price shall be made upon the subsequent issue or sale
of Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Conversion Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which shall not
have been exercised (or purchase by the Company and
cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under
which shall not have been exercised), the Conversion
Price computed upon the original issue, sale, grant
or assumption (or upon the occurrence of the record
date, or date prior to the commencement of ex-
dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based
thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be
recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional
Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the
conversion or exchange of such Convertible Securities
and the consideration received therefor was the
consideration actually received by the Company for
the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the
consideration actually received by the Company upon
such exercise, or for the issue or sale of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received
by the Company for the issue, sale, grant or
assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 1.7.5)
upon the issue or sale of such Convertible Securities
with respect to which such Options were actually
exercised;
(d) no readjustment pursuant to subdivision (b)
or (c) above shall have the effect of increasing the
Conversion Price by an amount in excess of the amount
of the adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such
Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than thirty (30) days
after the date of issue, sale, grant or assumption
thereof, no adjustment of the Conversion Price shall
be made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
1.7.4. Treatment of Stock Dividends, Stock Splits,
etc. In case the Company at any time or from time to time
after the date hereof shall declare or pay any dividend on the
Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock),
then, and in each such case, Additional Shares of Common Stock
shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in the
case of any such subdivision, at the close of business on the
date immediately prior to the day upon which such corporate
action becomes effective.
1.7.5. Computation of Consideration. For the
purposes of this Section 1.7,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company,
without deducting any expenses paid or incurred by
the Company or any commissions or compensation paid
or concessions or discounts allowed to underwriters,
dealers or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be computed
at the fair value thereof at the time of such issue
or sale, as determined in good faith by the Board of
Directors of the Company (subject to confirmation by
a firm of independent certified public accountants of
recognized standing approved by the holders of a
majority of the Series E Preferred Stock and Series H
Preferred Stock), and
(iii) in case Additional Shares of Common Stock
are issued or sold together with other stock or
securities or other assets of the Company for a
consideration which covers both, be the portion of
such consideration so received, computed as provided
in clauses (i) and (ii) above, allocable to such
Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by the holders of a
majority of the Series E Preferred Stock and Series H
Preferred Stock);
(b) Additional Shares of Common Stock deemed to
have been issued pursuant to Section 1.7.3, relating
to Options and Convertible Securities, shall be
deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the
issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible Securities
or, in the case of Options for Convertible
Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange
of such Convertible Securities, in each case
computing such consideration as provided in the
foregoing subdivision (a),
by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed to
have been issued pursuant to Section 1.7.4, relating
to stock dividends, stock splits, etc., shall be
deemed to have been issued for no consideration.
1.7.6. Adjustments for Combinations, etc. In case
the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in
effect immediately prior to such combination or consolidation
shall, concurrently with the effectiveness of such combination
or consolidation, be proportionately increased.
1.7.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or shall
become subject to issue or sale upon the conversion or exchange
of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in
Section 1.8) or to subscription, purchase or other acquisition
pursuant to any Options issued or granted by the Company (or
any such other issuer or Person) for a consideration such as to
dilute, on a basis consistent with the standards established in
the other provisions of this Section 1.7, the conversion rights
granted to holders of Series C Preferred Stock, then, and in
each such case, the computations, adjustments and readjustments
provided for in this Section 1.7 with respect to the Conversion
Price shall be made as nearly as possible in the manner so
provided and applied to determine the amount of Other
Securities from time to time receivable upon the conversion of
the shares of Series H Preferred Stock, so as to protect the
holders of the Series H Preferred Stock against the effect of
such dilution.
1.7.8. Minimum Adjustment of Conversion Price. If
the amount of any adjustment of the Conversion Price required
pursuant to this Section 1.7 would be less than one-half of one
percent (1%) of the Conversion Price in effect at the time such
adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one-half
of one percent (1%) of such Conversion Price.
1.8. Consolidation, Merger, etc.
1.8.1. Adjustments for Consolidation, Merger, Sale
of Assets, Reorganization, etc. In case the Company after the
date hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into the Company and the
Company shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Common Stock
or Other Securities shall be changed into or exchanged for
stock or other securities of any Other Person or cash or any
other property, or (c) shall transfer all or substantially all
of its properties or assets to any other Person, or (d) shall
effect a capital reorganization or reclassification of the
Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of
Additional Shares of Common Stock for which adjustment in the
Conversion Price is provided in subsection 1.7.1 or 1.7.2),
then, and in the case of each such transaction (excluding any
such transaction which constitutes a Triggering Event and in
connection with which the Company requires conversion of the
Series E Preferred Stock), proper provision shall be made so
that, upon the basis and the terms and in the manner provided
herein, the holders of shares of Series E Preferred Stock, upon
the conversion thereof at any time after the consummation of
such transaction, shall be entitled to receive (at the
aggregate Conversion Price in effect at the time of such
consummation for all Common Stock or Other Securities issuable
upon such exercise immediately prior to such consummation), in
lieu of the Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount of
securities, cash or other property to which such holder would
actually have been entitled as a stockholder upon such
consummation if such holder had exercised the conversion rights
pertaining to the Series E Preferred Stock immediately prior
thereto.
1.8.2. Assumption of Obligations. Notwithstanding
anything to the contrary herein provided, the Company will not
effect any of the transactions described in subsections (a)
through (d) of Section 1.8.1 (excluding any such transaction
which constitutes a Triggering Event and in connection with
which the Company requires conversion of the Series E Preferred
Stock) unless, prior to the consummation thereof, each Person
(other than the Company) which may be required to deliver any
stock, securities, cash or property upon the conversion of
shares of Series E Preferred Stock as provided herein shall
assume, by written instrument delivered to, and reasonably
satisfactory to, the holders of the Series E Preferred Stock
(a) the obligations of the Company with respect to the Series E
Preferred Stock (and if the Company shall survive the
consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any
continuing obligations of the Company with respect to the
Series H Preferred Stock), and (b) the obligation to deliver to
such holder such shares of stock, securities, cash or property
as, in accordance with the foregoing provisions of this Section
1.8, such holder may be entitled to receive, and such Person
shall have similarly delivered to such holders of Series E
Preferred Stock an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such holders,
stating that the rights and privileges of the Series E
Preferred Stock shall thereafter continue in full force and
effect and the terms thereof (including, without limitation,
all of the provisions of this Section 1.8) shall be applicable
to the stock, securities, cash or property which such Person
may be required to deliver upon any conversion of shares of
Series E Preferred Stock or the exercise of any rights pursuant
hereto.
1.9. Other Dilutive Events. In case any event shall
occur as to which the provisions of Section 1.7 or Section 1.8
are not strictly applicable but the failure to make any
adjustment would not fairly protect the conversion rights
pertaining to shares of Series E Preferred Stock in accordance
with the essential intent and principles of such sections,
then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national
standing (such firm to be subject to the approval of the
holders of a majority of the Series E Preferred Stock and the
Series H Preferred Stock"), which shall give their opinion
regarding the adjustment, if any, on a basis consistent with
the essential intent and principles established in Sections 1.7
and 1.8, necessary to preserve, without dilution, the
conversion rights of the Series E Preferred Stock and the
Series H Preferred Stock. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to each holder of
Series E Preferred Stock and Series H Preferred Stock and shall
make the adjustments described therein.
1.10. No Dilution or Impairment. The Company will
not, by amendment of its certificate of incorporation or by-
laws or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Series E
Preferred Stock, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to
protect the rights of the holders of shares of Series E
Preferred Stock against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will
not permit the par value of any shares of stock receivable upon
the conversion of Series E Preferred Stock to exceed the amount
payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-
assessable shares of stock on the conversion of the shares of
Series E Preferred Stock from time to time outstanding, and (c)
will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the
conversion of all of the outstanding shares of Series E
Preferred Stock would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the
Company's certificate of incorporation and available for the
purpose of issue upon such exercise.
1.11. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares of
Common Stock (or Other Securities) issuable upon the conversion
of shares of Series E Preferred Stock, the Company at its
expense will promptly compute such adjustment or readjustment
in accordance with the terms hereof and cause independent
certified public accountants of recognized standing (such firm
to be subject to the approval of the holders of a majority of
the outstanding Series E Preferred Stock and Series H Preferred
Stock) selected by the Company to verify such computation and
prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation
thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to
have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Conversion
Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 1.7) on account
thereof. The Company will forthwith mail a copy of each such
report to each holder of shares of Series E Preferred Stock and
Series H Preferred Stock and will, upon the written request at
any time of any holder of shares of Series E Preferred Stock
and Series H Preferred Stock, furnish to such holder a like
report setting forth the Conversion Price at the time in effect
and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its
principal office and will cause the same to be available for
inspection at such office during normal business hours by any
holder of Series E Preferred Stock or Series H Preferred Stock
or any prospective purchaser of Series E Preferred Stock or
Series H Preferred Stock designated by the holder thereof.
1.12. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than
dividends payable with respect to the Series E
Preferred Stock and the Series H Preferred Stock and
other than a regular periodic dividend payable in
cash out of earned surplus in an amount not exceeding
the amount of the immediately preceding cash dividend
for such period) or other distribution, or any right
to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all of the
assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of shares of Series E
Preferred Stock and the Series H Preferred Stock a notice
specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected
date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for
the securities or other property deliverable upon such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or
winding-up. Except for notices relating to mandatory
conversion or optional redemption in connection with a
Triggering Event, such notices shall be mailed at least forty-
five (45) days prior to the date of the action therein
specified.
1.13. Retirement of Converted or Redeemed Shares.
No share or shares of Series E Preferred Stock acquired by the
Company by reason of optional or mandatory redemption,
purchase, conversion or otherwise shall be re-issued and all
such shares shall be cancelled, retired and eliminated from the
shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of
shares of Series E Preferred Stock accordingly.
1.14. Restrictions on Transfer and Conversion of the
Series E Preferred Stock By BHCA Holders.
1.14.1. A BHCA Holder may transfer Series E
Preferred Stock only to an unaffiliated third party (a) in a
widely dispersed public offering, (b) to one or more investors,
in one or more transactions, none of whom, after such purchase
would hold more than 2% of the voting securities of the Company
then outstanding assuming that the Series E Preferred Stock
being transferred to such investor has been fully converted by
such investor, (c) to any Person that already controls the
Company prior to such transfer, (d) in a transaction that
complies with Rule 144 (or any successor thereto) of the
Securities Act of 1933, as amended, or (e) in any other
transaction approved in advance by the Federal Reserve System.
1.14.2. A BHCA Holder may only convert Series E
Preferred Stock into Common Stock in connection with the sale
of the Common Stock to an unaffiliated party (a) in a widely
dispersed public offering, (b) to one or more investors, in one
or more transactions, none of whom, after such purchase would
hold more than 2% of the voting securities of the Company then
outstanding, (c) to any Person that already controls the
Company prior to such transfer, (d) in a transaction that
complies with Rule 144 (or any successor thereto) of the
Securities Act of 1933, as amended, or (e) in any other
transaction approved in advance by the Federal Reserve System.
FURTHER RESOLVED, that, before the Company shall issue any
shares of Series E Preferred Stock, a certificate pursuant to
Section 151 of the DGCL shall be made, executed, acknowledged,
filed, and recorded in accordance with the provisions of
Section 103 and 151 of the DGCL, and the proper officers of the
Company be, and they hereby are, authorized and directed to do
all acts and things which may be necessary or proper in their
opinion to carry into effect the purposes and intent of this
and the foregoing resolutions.
IN WITNESS WHEREOF, the Company has caused this
Certificate to be signed in its name and on its behalf and
attested on this 30th day of January, 1996 by duly authorized
officers of this Corporation.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Name: Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
Currently Outstanding Warrants
(A) outstanding Warrants to Purchase 1,114,375 shares of the
Common Stock of the Company at $3.00 per share expiring at
various times in 1995 and 1996, and (B) other outstanding
warrants and non-qualified options to purchase 293,000 shares
of the Common Stock of the Company at prices between $1.20 per
share and $2.56 per share expiring in 1995 and 1997.
NESTOR, INC.
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND SPECIAL RIGHTS
OF SERIES F CONVERTIBLE PREFERRED STOCK
RELATIVE RIGHTS AND PREFERENCES AND
OTHER TERMS AS FIXED AND DETERMINED BY THE
BOARD OF DIRECTORS
* * * * * *
Nestor, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State
of Delaware, does hereby certify that pursuant to the
provisions of Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the
Company, by action taken on January 13, 1996, adopted the
following resolution, which resolution remains in full
force and effect as of the date hereof;
WHEREAS, the Board of Directors of the Company is
authorized, within the limitations and restrictions
stated in the Certificate of Incorporation, to fix by
resolution or resolutions the designation of each series
of preferred stock and the powers, preferences and
relative, participating, optional or other special rights
and qualifications, limitations or restrictions thereof,
including, without limiting the generality of the
foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution
or resolutions of the Board of Directors under the
General Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors of
the Company pursuant to its authority as aforesaid, to
authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized such series of preferred stock on the terms
and with the provisions herein set forth:
Designation, Amount and Rank. Five hundred ninety-nine
(599) shares of a convertible preferred stock, $1.00 par
value per share, shall constitute a series of such
preferred stock designated as "Series F Convertible
Preferred Stock" (the "Series F Preferred Stock"). With
respect to dividend rights, redemption rights and rights
on liquidation, winding up and dissolution, the Series F
Preferred Stock shall rank pari passus with the Series G
Preferred Stock and shall rank prior to the Series A
Preferred Stock, the Series B Preferred Stock, the Series
D Preferred Stock, the Series E Preferred Stock, the
Series H Preferred Stock, the Common Stock and any other
class of capital stock or series of preferred stock
hereafter created. The Series F Preferred Stock shall be
issued pursuant to the following additional terms and
conditions:
1. Series F Preferred Stock.
1.1. Definitions.
As used herein, unless the context otherwise
requires, the following terms have the following
meanings:
1.1.1. "Additional Director" means any
director whom holders of shares of Series F Preferred
Stock and Series G Preferred Stock shall be entitled to
elect by virtue of the provisions of Section 1.4.2
hereof.
1.1.2. "Additional Shares of Common Stock"
means all shares (including treasury shares) of Common
Stock issued or sold (or, pursuant to Sections 1.7.3 or
1.7.4, deemed to be issued) by the Company after the date
hereof, whether or not subsequently reacquired or retired
by the Company other than (a) the issuance of shares upon
conversion of the Preferred Stock; (b) shares issued upon
the exercise of the Currently Outstanding Warrants; (c)
shares issued upon the exercise of the Warrants; (d)
shares to be issued pursuant to Company sponsored
employee benefit and compensation arrangements, but not
to exceed 2,000,000 (subject to equitable adjustment in
the event of any combination, reclassification, stock
split, dividend or recapitalization of the Company); and
(e) such additional number of shares, if any, as may
become issuable upon the conversion or exercise of any of
the securities referred to in the foregoing clauses (a)
through (d) and by reason of adjustments required
pursuant to anti-dilution provisions applicable to such
Preferred Stock as in effect on the date hereof, but only
if and to the extent that such adjustments are required
as the result of the original issuance of such Series F
Preferred Stock.
1.1.3. "Book Value Event" means the end of any
fiscal quarter of the Company if the fully diluted book
value per share of Common Stock of the Company determined
in accordance with generally accepted accounting
principles exceeds $.70.
1.1.4. "Business Day" means any day other than
a Saturday or a Sunday or a day on which commercial
banking institutions in the City of New York are
authorized by law or other governmental action to be
closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
1.1.5. "Common Stock" means the Company's
Common Stock, $.01 par value, such term to include any
stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification
of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders
of which have the right, without limitation as to amount,
either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to
preference.
1.1.6. "Conversion Price" means (a) $1.25,
subject to adjustment pursuant to Sections 1.7 and 1.9
hereof or (b) if the Company has not on or before July
31, 1996 entered into a definitive agreement with a party
with which it is currently negotiating, such agreement to
contemplate an ongoing revenue stream to the Company,
based on commercial exploitation of the Company's
technology, and to require a payment to the Company upon
execution of at least $1.25 million, such payment to be
not primarily in consideration of any requirement that
the Company render services, then the Conversion Price
shall automatically be reduced to $.75, subject to
adjustment pursuant to Sections 1.7 and 1.9 hereof.
1.1.7. "Convertible Securities" means any
evidences of indebtedness, shares of stock (other than
Common Stock) or other securities directly or indirectly
convertible into or exchangeable for additional shares of
Common Stock.
1.1.8. "Current Market Price" means on any
date specified herein, the average daily Market Price
during the period of the most recent twenty (20) days,
ending on such date, on which the national securities
exchanges were open for trading, except that if no Common
Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-
counter market, the Current Market Price shall be the
Market Price on such date.
1.1.9. "Currently Outstanding Warrants" means
the common stock purchase warrants and non-qualified
options listed below for the purchase of an aggregate of
3,315,650 shares (subject to adjustment as provided in
such Warrants) of the Common Stock (based on the current
capitalization of the Company):
(A) Outstanding warrants to Purchase 689,375
shares of the Common Stock of the Company at
$3.00 per share expiring at various times in
1996;
(B) Other outstanding warrants and non-
qualified options to purchase 206,000 shares of
the Common Stock of the Company at prices
between $1.00 per share and $4.625 per share
expiring in 1996, 1997 and 1999;
(C) Warrant No. W-D, dated August 11, 1994,
respecting 210,000 shares of Common Stock;
(D) Warrant No. W-F, dated August 11, 1994,
respecting 15,000 shares of Common Stock;
(E) Warrant No. W-G, dated August 11, 1994,
respecting 15,000 shares of Common Stock;
(F) Warrant No. W-H, dated August 11, 1994,
respecting 5,000 shares of Common Stock;
(G) Warrant No. W-I, dated August 11, 1994,
respecting 5,000 shares of Common Stock;
(H) Warrant No. W-E, dated August 11, 1994,
respecting 130,000 shares of Common Stock;
(I) Warrant No. W-J, dated August 11, 1994,
respecting 15,000 shares of Common Stock;
(J) Warrant No. W-K, dated August 11, 1994,
respecting 5,000 shares of Common Stock;
(K) Warrant No. W-N, dated October 5, 1995,
respecting 928,000 shares of Common Stock;
(L) Warrant No. W-O, dated October 5, 1995,
respecting 72,000 shares of Company Common
Stock;
(M) Warrant No. W-P, dated August 11, 1994,
respecting 215,000 shares;
(N) Warrant No. W-Q, dated October 5, 1995,
respecting 649,600 shares of Company Common
Stock;
(O) Warrant No. W-R, dated October 5, 1995,
respecting 50,400 shares of Company Common
Stock; and
(P) Warrants to purchase 105,275 shares of Common
Stock at an exercise price of $2.00 per share,
expiring September 1998.
1.1.10. "Dividend Payment Date" means March
31, June 30, September 30 and December 31 of each year,
commencing March 31, 1996.
1.1.11. "Dividend Period" means each of the
periods commencing January 1 and ending March 31 of any
year, commencing April 1 and ending June 30 of any year,
commencing July 1 and ending September 30 of any year and
commencing October 1 and ending December 31 of any year.
1.1.12. "Four-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series F Preferred Stock and Series G
Preferred Stock for any four (4) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any four Dividend Periods within any
eight (8) consecutive Dividend Periods after such date.
1.1.13. "Lender Default" means any time when
(i) the Company shall violate the provisions of or be in
default under the terms of any loan or other agreement
relating to indebtedness of the Company or its
subsidiaries or (ii) a judgement shall be entered against
the Company or any of its subsidiaries, in an amount
exceeding $50,000 for failure to pay trade creditors or
indebtedness and such judgment shall remain unpaid for
more than sixty days.
1.1.14. "Mandatory Redemption Date" means the
Mandatory Redemption Date stated in Section 1.5.2 hereof.
1.1.15. "Market Price" means on any date
specified herein, the amount per share of the Common
Stock, equal to (a) the last sale price of such Common
Stock, regular way, on such date or, if no such sale
takes place on such date, the average of the closing bid
and asked prices thereof on such date, in each case as
officially reported on the principal national securities
exchange on which such Common Stock is then listed or
admitted to trading, or (b) if such Common Stock is not
then listed or admitted to trading on any national
securities exchange but is designated as a national
market system security by the NASD, the last trading
price of the Common Stock on such date, or (c) if there
shall have been no trading on such date or if the Common
Stock is not so designated, the average of the closing
bid and asked prices of the Common Stock on such date as
shown by the NASD automated quotation system, or (d) if
such Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in
the over-the-counter market, the value as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the
Company (and approved by the holders of a majority of the
outstanding shares of Series F Preferred Stock and Series
G Preferred Stock) as of the last day of any month ending
within thirty (30) days preceding the date as of which
the determination is to be made.
1.1.16. "Options" means rights, options or
warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or Convertible
Securities.
1.1.17. "Other Securities" means any stock
(other than Common Stock) and other securities of the
Company or any other Person (corporate or otherwise)
which the holders of Preferred Stock at any time shall be
entitled to receive, or shall have received, upon the
conversion of Preferred Stock, in lieu of or in addition
to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities.
1.1.18. "Person" means a corporation, an
association, a partnership, an organization, a business,
an individual, a government or political subdivision
thereof or a governmental agency.
1.1.19. "Preferred Stock" means, collectively,
the Series A Preferred Stock, the Series B Preferred
Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock, the Series
G Preferred Stock and the Series H Preferred Stock.
1.1.20. "Redemption Date" means any date fixed
for redemption of shares of Series F Preferred Stock and
Series G Preferred Stock pursuant to the provisions of
Section 1.5 hereof.
1.1.21. "Redemption Notice" means the written
notice of redemption contemplated by Section 1.5.5
hereof.
1.1.22. "Restricted Period" shall mean the
period beginning on the date of original issue of any
shares of Series F Preferred Stock and ending on
September 30, 1997.
1.1.23. "Securities Act" means the Securities
Act of 1933, as amended.
1.1.24. "Series A Preferred Stock" means the
Series A Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 30, 1990 with the Secretary of
State of the State of Delaware.
1.1.25. "Series B Preferred Stock" means the
Series B Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed June 10, 1992 with the Secretary of
State of the State of Delaware.
1.1.26. "Series D Preferred Stock" means the
Series D Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 9, 1995 with the Secretary of
State of the State of Delaware.
1.1.27. "Series E Preferred Stock" means the
Series E Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.28. "Series F Preferred Stock" means the
Series F Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.29. "Series G Preferred Stock" means the
Series G Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.30. "Series H Preferred Stock" means the
Series H Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.31. "Special Redemption Event" has the
meaning set forth in Section 1.5.3.
1.1.32. "Special Series F Voting Rights" means
the special voting rights which holders of the Series F
Preferred Stock are entitled to exercise by virtue of the
provisions of Section 1.4.2 hereof.
1.1.33. "Stated Value" per share means (i)
with respect to the Series A Preferred Stock, two dollars
($2.00), (ii) with respect to the Series B Preferred
Stock, one dollar ($1.00), (iii) with respect to the
Series D Preferred Stock, one dollar and fifty cents
($1.50), (iv) with respect to the Series E Preferred
Stock, One Thousand Dollars ($1,000) plus all accumulated
and unpaid dividends, if any, added thereto and minus all
amounts paid in cash in respect of such previously
accumulated and unpaid dividends that were originally
added to Stated Value, (v) with respect to the Series F
Preferred Stock, One Thousand Dollars ($1,000) plus all
accumulated and unpaid dividends, if any, added thereto
pursuant to Section 1.2.2 and minus all amounts paid in
cash in respect of such previously accumulated and unpaid
dividends that were originally added to such Stated Value
pursuant to Section 1.2.2., (vi) with respect to the
Series G Preferred Stock, One Thousand Dollars ($1,000)
plus all accumulated and unpaid dividends, if any, added
thereto pursuant to Section 1.2.2 and minus all amounts
paid in cash in respect of such previously accumulated
and unpaid dividends that were originally added to such
Stated Value pursuant to Section 1.2.2, and (vii) with
respect to the Series H Preferred Stock, One Thousand
Dollars ($1,000) plus all accumulated and unpaid
dividends, if any, added thereto and minus all amounts
paid in cash in respect of such previously accumulated
and unpaid dividends that were originally added to Stated
Value.
1.1.34. "Two-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series F Preferred Stock and the Series
G Preferred Stock for any two (2) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any two Dividend Periods within any
six (6) consecutive Dividend Periods occurring after such
date.
1.1.35. "Unpaid Dividends" means all dividends
with respect to the Series F Preferred Stock and Series G
Preferred Stock which have accrued but which have not
been either paid in cash or added to the Stated Value
thereof pursuant to Section 1.2.2.
1.1.36. "Warrants" means common stock purchase
warrants to acquire an aggregate of 290,000 shares
(subject to adjustment as provided in such warrants)
issued in connection with the purchase of the Series G
Preferred Stock and Series F Preferred Stock.
1.2. Dividends.
1.2.1. The holder of each issued and
outstanding share of Series F Preferred Stock and the
Series G Preferred Stock shall be entitled to receive,
out of the funds of the Company legally available for
such purpose, when, as and if declared by the Board of
Directors of the Company, before any dividend shall be
declared, paid or set aside, or any other distribution
shall be declared or made, upon the Common Stock or any
other class or series of stock of the Company, dividends
in cash at a dividend rate of nine percent (9.0%) per
annum of the Stated Value per share of Series F Preferred
Stock and Series G Preferred Stock, calculated on a daily
basis, for each Dividend Period or portion thereof during
which such Series F Preferred Stock and Series G
Preferred Stock are outstanding. Notwithstanding the
foregoing, the Company may pay dividends in the form of
Common Stock (with fractional shares to be paid in cash)
pursuant to the terms of the Series D Preferred Stock.
1.2.2. Notwithstanding anything to the
contrary herein provided, in the event that any portion
of the quarterly dividend for a Dividend Period on the
Series F Preferred Stock and Series G Preferred Stock is
not declared and paid in cash on any Dividend Payment
Date, the amount of such accrued dividend which is not so
paid shall be accumulated and shall automatically be
added to the Stated Value of such share on such date.
Accumulated dividends on shares of Series F Preferred
Stock and Series G Preferred Stock that have previously
been added to the Stated Value thereof pursuant to the
terms hereof may not thereafter be paid in cash except
upon redemption by the Company. Unpaid dividends shall
not bear interest but, to the extent accumulated and
added to the Stated Value, shall continue to accrue
dividends on a daily basis. Accumulated dividends on any
share of Series F Preferred Stock and Series G Preferred
Stock which are added to the Stated Value thereof
pursuant to the terms hereof shall not be deemed to be in
arrears for any purpose whatsoever. Any dividends that
have accrued on the Series F Preferred Stock and Series G
Preferred Stock but have not yet been added to the Stated
Value thereof shall constitute Unpaid Dividends.
Notwithstanding anything to the contrary herein provided,
no cash dividends shall be paid with respect to the
Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock, the Series D Preferred Stock, the Series
E Preferred Stock or the Series H Preferred Stock at any
time when there are Unpaid Dividends with respect to the
Series F Preferred Stock and the Series G Preferred
Stock.
1.2.3. Dividends payable with respect to the
Series F Preferred Stock and the Series G Preferred Stock
shall be calculated on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each
and shall be payable on each Dividend Payment Date to the
holders of record of the Series F Preferred Stock and the
Series G Preferred Stock at the close of business on the
date specified by the Board of Directors of the Company;
provided, however, that no such record date shall be more
than thirty (30) days nor less than ten (10) days prior
to the respective Dividend Payment Date. Dividends on
shares of Series F Preferred Stock and the Series G
Preferred Stock shall accrue from the date of original
issue of such shares of Series F Preferred Stock or
Series G Preferred Stock. Such dividends will accrue
whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Company
legally available for the payment of dividends. The date
on which the Company originally issues any share of
Series F Preferred Stock or Series G Preferred Stock will
be deemed to be its "date of original issue" regardless
of the number of times transfer of such share is made on
the stock records maintained by or for the Company.
1.2.4. All dividends paid or added to Stated
Value, as the case may be, with respect to shares of the
Series F Preferred Stock or Series G Preferred Stock
shall be paid or added to Stated Value, as the case may
be, ratably (based on the respective Stated Values plus
Unpaid Dividends of the Series F Preferred Stock and
Series G Preferred Stock) with respect to such shares to
the holders entitled thereto.
1.2.5. So long as any shares of the Series F
Preferred Stock or Series G Preferred Stock are
outstanding, the Company shall not declare, pay or set
apart for payment any dividend or other distribution on
any of the Company's Common Stock, or Preferred Stock
(other than the Series F Preferred Stock, Series G
Preferred Stock, Series E Preferred Stock and Series H
Preferred Stock) or make any payment on account of, or
set apart for payment money for a sinking fund or other
similar fund for the purchase, redemption or other
retirement of, any of the Common Stock, or Preferred
Stock (other than the Series F Preferred Stock or Series
G Preferred Stock) or any warrants, rights, calls or
options exercisable for any of the Common Stock or make
any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of
the Company or other property (other than distributions
or dividends in stock to the holders of such stock), and
shall not permit any Person directly or indirectly
controlled by the Company to purchase or redeem any of
the Common Stock or Preferred Stock (other than the
Series F Preferred Stock and Series G Preferred Stock) or
any warrants, rights, calls or options exercisable for
any of the Common Stock, unless prior to or concurrently
with such declaration, payment, setting apart for
payment, purchase or distribution, as the case may be,
all funds then required for the mandatory redemption of
shares of the Series F Preferred Stock and Series G
Preferred Stock pursuant to Section 1.5.2 hereof, shall
have been paid or be paid, and all Unpaid Dividends on
shares of the Series F Preferred Stock and Series G
Preferred Stock not paid in cash, shall have been paid in
cash or be paid in cash. Notwithstanding the foregoing,
the Company may declare and pay dividends in the form of
Common Stock (with fractional shares to be paid in cash)
pursuant to the terms of the Series D Preferred Stock.
1.3. Rights on Liquidation, Dissolution or
Winding-Up.
1.3.1. In the event of any liquidation,
dissolution or winding-up of the Company (including,
without limitation, a liquidation or reorganization under
Chapter 7 or 11 of Title 11 of the United States Code, as
amended), the holders of shares of the Series F Preferred
Stock and Series G Preferred Stock then issued and
outstanding shall be entitled to be paid out of the
assets of the Company available for distribution to its
stockholders, before any payment shall be made to the
holders of Common Stock or of shares of any other class
or series of stock of the Company, an amount equal to the
Stated Value per share, plus an amount equal to any
Unpaid Dividends to and including the date of
distribution with respect to such shares. If, upon any
liquidation, dissolution or winding-up of the Company
(including, without limitation, a liquidation or
reorganization under Chapter 7 or 11 of Title 11 of the
United States Code, as amended), the assets of the
Company available for distribution to its stockholders
shall be insufficient (a "Liquidation Insufficiency") to
pay the holders of shares of the Series F Preferred Stock
and the Series G Preferred Stock the full amounts to
which they shall respectively be entitled, the holders of
shares of the Series F Preferred Stock and the Series G
Preferred Stock shall be entitled to receive all the
assets of the Company available for distribution and each
such holder of shares of the Series F Preferred Stock and
the Series G Preferred Stock shall share in any
distribution in the proportion which the aggregate Stated
Values of the shares of the Series F Preferred Stock
(plus all Unpaid Dividends thereon) and the Series G
Preferred Stock (plus all Unpaid Dividends thereon) held
by such holder of the Series F Preferred Stock or Series
G Preferred Stock bears to the aggregate Stated Values of
all shares of the Series F Preferred Stock (plus all
Unpaid Dividends thereon) and Series G Preferred Stock
(plus all Unpaid Dividends thereon) then outstanding. If
there is no Liquidation Insufficiency and payment shall
have been made to the holders of shares of the Series F
Preferred Stock and Series G Preferred Stock of the full
amount to which they shall be entitled, then the holders
of shares of the Series F Preferred Stock and Series G
Preferred Stock shall be entitled to receive no further
distributions thereon and the holders of shares of the
Series A Preferred Stock, the Series E Preferred Stock
and the Series H Preferred Stock shall be entitled to
receive an amount equal to the Stated Value (plus all
Unpaid Dividends thereon) per share thereof. After
payment shall have been made to the holders of shares of
the Series A Preferred Stock, the Series E Preferred
Stock and the Series H Preferred Stock of the full
amounts to which they shall be entitled, the holders of
shares of the Common Stock and of shares of any other
class of stock of the Company, if any, shall be entitled
to share, according to their respective rights and
preferences, in all remaining assets of the Company
available for distribution to its stockholders.
1.4. Voting Power.
1.4.1. Except as otherwise expressly provided
herein or as required by law, (i) each holder of
Series F Preferred Stock shall be entitled to vote on all
matters as to which stockholders of the Company are
entitled to vote, and (ii) each holder of Series F
Preferred Stock shall be entitled to cast a number of
votes equal to the greatest number of whole shares of
Common Stock into which such holder's shares of Series F
Preferred Stock could be converted, pursuant to the
provisions of Section 1.6 hereof, at the record date for
the determination of stockholders entitled to vote on
such matter or, if no such record date is established, at
the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly
provided herein or as required by law, the holders of
shares of Series B Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock
and Common Stock shall be entitled to vote together as a
class with respect to all matters as to which such
stockholders of the Company are entitled to vote.
1.4.2. In the event that at any time there
shall occur a Two-Dividend Default, then immediately upon
the happening of such Two-Dividend Default and until such
Two-Dividend Default and all defaults in the payment of
quarterly dividends on the Series F Preferred Stock and
Series G Preferred Stock subsequent to and occurring
while such Two-Dividend Default exists shall be cured,
the number of directors constituting the Board of
Directors of the Company shall, without further action,
be increased by two and the holders of Series F Preferred
Stock and Series G Preferred Stock shall have, in
addition to the other voting rights set forth herein, the
exclusive right, voting together separately as a single
class, to elect two directors of the Company to fill such
newly created directorship, the remaining directors to be
elected by the class or classes of stock (including the
Series F Preferred Stock and Series G Preferred Stock)
entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors.
In the event that at any time there shall occur a Four-
Dividend Default or a Lender Default, then immediately on
the happening of such Four-Dividend Default or Lender
Default and until such Lender Default or Four-Dividend
Default and all defaults in the payment of quarterly
dividends on the Series F Preferred Stock and Series G
Preferred Stock subsequent to and occurring while such
Four-Dividend Default exists shall be cured, then the
number of directors constituting the Board of Directors
of the Company shall, without further action, be further
increased by four in the case of a Four Dividend Default
or in the case of a Lender Default, and the holders of
Series F Preferred Stock and Series G Preferred Stock
shall have, in addition to the other voting rights set
forth herein, the exclusive right, voting together
separately as a single class, to elect directors of the
Company to fill such newly created directorships, the
remaining directors to be elected by the class or classes
of stock (including the Series F Preferred Stock)
entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors.
During the existence of a Four Dividend Default, a
majority of the Directors not elected by the holders of
the Series F Preferred Stock and Series G Preferred Stock
(or their affiliates) shall have the right to declare and
pay dividends on the Series F Preferred Stock and Series
G Preferred Stock out of funds legally available for the
payment of such dividends. Notwithstanding the foregoing
provisions of this Section 1.4.2, upon payment in full of
all quarterly dividends on the Series F Preferred Stock
and Series G Preferred Stock coming due subsequent to a
Four-Dividend Default and the dividend which resulted in
the Four-Dividend Default, so that no more than three
consecutive quarterly dividends on the Series F Preferred
Stock and Series G Preferred Stock remain in default, the
Special Series F Voting Rights of the holders of Series F
Preferred Stock and Series G Preferred Stock shall be
reduced so that they have the right, voting separately as
a class, to elect two Additional Directors of the
Company. Notwithstanding the foregoing provisions of
this Section 1.4.2, upon payment in full of (i) all
quarterly dividends on the Series F Preferred Stock and
Series G Preferred Stock coming due subsequent to a Two-
Dividend Default and the dividend which resulted in the
Two-Dividend Default, (ii) upon payment in full of all
quarterly dividends on the Series F Preferred Stock and
Series G Preferred Stock coming due subsequent to a Four-
Dividend Default and three of the dividends which
resulted in a Four-Dividend Default, so that, in each
case, no more than one quarterly dividend remains in
default, and (iii) upon payment in full or cure of any
Lender Defaults, the Special Series F Voting Rights shall
terminate. Upon any termination of the aforesaid Special
Series F Voting Rights, the term of office of each
director elected by the holders of the Series F Preferred
Stock and Series G Preferred Stock pursuant to this
Section 1.4.2 then in office shall thereupon terminate
and upon such termination the number of directors
constituting the Board of Directors shall, by resolution
of the Board of Directors, be reduced accordingly,
subject always to the subsequent increase of the number
of directors from time to time pursuant to this Section
1.4.2 in the event of the periodic future vesting of the
right of the holders of the Series F Preferred Stock and
Series G Preferred Stock to elect Additional Directors.
The term of office of any director elected by the holders
of the Series F Preferred Stock and Series G Preferred
Stock pursuant to this Section 1.4.2 shall terminate upon
the earlier of the termination of the Special Series F
Voting Rights and the election of a successor to such
director at any meeting of holders of the Series F
Preferred Stock and Series G Preferred Stock for the
purpose of electing directors.
1.4.3. Special Series F Voting Rights may be
exercised either at a special meeting of holders of the
Series F Preferred Stock and Series G Preferred Stock, or
at any annual or special meeting of stockholders of the
Company, or may be exercised by the written consent of
holders of the Series F Preferred Stock and Series G
Preferred Stock pursuant to the Delaware General
Corporation Law.
1.4.4. At any time when Special Series F
Voting Rights pursuant to Section 1.4.2 above shall have
vested in holders of the Series F Preferred Stock and
Series G Preferred Stock, and if such rights shall have
not already been initially exercised, a proper officer of
the Company shall, upon the written request of any holder
of record of the Series F Preferred Stock and Series G
Preferred Stock then outstanding, addressed to the
secretary of the Company, call a special meeting of
holders of the Series F Preferred Stock and Series G
Preferred Stock for the purpose of electing directors.
Such meeting shall be held at the earliest practicable
date upon the notice required for annual meetings of the
stockholders at the place for holding annual meetings of
the stockholders of the Company or, if none, at a place
designated by the secretary of the Company. If such a
meeting shall not be called by the proper officer of the
Company within ten (10) days after the personal service
of such written request upon the secretary of the
Company, or within ten (10) days after mailing the same
within the United States, by first-class registered mail,
addressed to the secretary of the Company at the
Company's principal office (such mailing to be evidenced
by registry receipt issued by the postal authorities),
then the holders of record of ten percent (10%) of the
shares of the Series F Preferred Stock or Series G
Preferred Stock then outstanding may designate in writing
a holder of Series F Preferred Stock or Series G
Preferred Stock to call such meeting at the expense of
the Company, and such meeting may be called by such
person so designated upon the notice required for annual
meetings of stockholders and shall be held at the same
place as is elsewhere provided in this Section 1.4.4.
Any holder of Series F Preferred Stock and Series G
Preferred Stock shall have access to the stock books of
the Company for the purpose of causing a meeting of
holders of Series F Preferred Stock and Series G
Preferred Stock to be called pursuant to the provisions
hereof.
1.4.5. At any meeting held for the purpose of
electing directors at which the holders of Series F
Preferred Stock and Series G Preferred Stock shall have
the right to elect directors as provided herein, the
presence in person or by proxy of the holders of twenty-
five percent (25%) of the then outstanding shares of
Series F Preferred Stock and Series G Preferred Stock
shall be required and shall be sufficient to constitute a
quorum of such class for the election of directors by
such series. In the absence of a quorum of the holders
of Series F Preferred Stock and Series G Preferred Stock
entitled to vote for the election of directors, a
majority of the holders present in person or by proxy of
such Series shall have the power to adjourn the meeting
for the election of directors which the holders of such
Series are entitled to elect, from time to time, without
notice other than announcement at the meeting, until a
quorum shall be present.
1.4.6. Unless the vote of the holders of a
greater number of shares of this Series F Preferred Stock
shall then be required by law, the consent of the holders
of at least 66-2/3% of all of the shares of this Series F
Preferred Stock at the time outstanding, voting together
as a separate class, shall be necessary for authorizing,
effecting or validating any of the following:
(a) the creation, authorization or issue of
any shares of any class or series of stock of the Company
ranking prior to, or pari passu with, the shares of this
Series F Preferred Stock as to dividends or upon
liquidation or otherwise, or the reclassification of any
authorized stock of the Company into any such prior
shares, or the creation, authorization or issue of any
obligation or security convertible into or evidencing the
right to purchase any such prior shares;
(b) the amendment, alteration or repeal of any
of the provisions of the Certificate of Incorporation or
of any certificate amendatory thereof or supplemental
thereto so as to affect adversely the preferences,
rights, powers or privileges of this Series F Preferred
Stock; and
(c) the issuance or assumption of any debt
greater than $250,000 (provided, however, if the Company
has previously redeemed a portion of the Series F
Preferred Stock and the Series G Preferred Stock, then
this amount may be increased up to a maximum amount
obtained by multiplying $250,000 by a fraction that is
the inverse of the percentage of the Series F Preferred
Stock and Series G Preferred Stock that remains
outstanding after such redemption).
1.5. Redemption.
1.5.1. Optional Redemption. The Company shall
have the right to redeem all or part of the Series F
Preferred Stock upon not less than ten (10) days prior
written notice to the holders of the Series F Preferred
Stock.
No shares of Series F Preferred Stock shall be
redeemed pursuant to this Section 1.5.1 unless
concurrently therewith shares of Series G Preferred Stock
are redeemed on a pro rata basis (based on the respective
Stated Values plus Unpaid Dividends of the Series F
Preferred Stock and the Series G Preferred Stock) and no
shares of Series G Preferred Stock shall be redeemed
unless concurrently therewith shares of Series F
Preferred Stock are redeemed on a pro rata basis (based
on the respective Stated Values plus Unpaid Dividends of
the Series F Preferred Stock and the Series G Preferred
Stock).
In the event of optional redemption by the
Company within sixty days following any occurrence of a
Book Value Event shares of Series F Preferred Stock and
Series G Preferred Stock shall be redeemed at a
redemption price equal to the Stated Value per share,
plus all Unpaid Dividends payable with respect to such
shares as of the date fixed for redemption, without
interest. In the event of optional redemption by the
Company prior to August 1, 2004 in the absence of the
existence of a Book Value Event, shares of Series F
Preferred Stock and Series G Preferred Stock shall be
redeemed at a redemption price equal to 109% of the
Stated Value per share, plus all Unpaid Dividends payable
with respect to such shares as of the date fixed for
redemption without interest. In either circumstance,
such redemption price shall be paid in cash.
1.5.2. Mandatory Redemption. The Company
shall redeem all (but not less than all) shares of Series
F Preferred Stock and the Series G Preferred Stock on
August 1, 2004 (the "Mandatory Redemption Date") at a
cash redemption price equal to the Stated Value per share
of such Series F Preferred Stock and Series G Preferred
Stock, plus all Unpaid Dividends on each such share up to
and including the date of redemption.
Payment shall be applied to the redemption of the
shares of Series F Preferred Stock and the Series G Preferred
Stock, pro rata (based on the respective Stated Values plus
Unpaid Dividends) among the holders of all outstanding shares
of the Series F Preferred Stock and the Series G Preferred
Stock on the Mandatory Redemption Date and shall be paid to
each such holder upon surrender of the certificate or
certificates evidencing such shares to be redeemed to the
secretary of the Company.
1.5.3. Special Redemption. (a) Upon the
occurrence of any Special Redemption Event (as hereinafter
defined, each holder of Series F Preferred Stock and Series G
Preferred Stock shall have the right to require that the
Company redeem, to the extent the Company lawfully may do so,
all or a portion of the shares of Series F Preferred Stock and
Series G Preferred Stock held by such holder, at a redemption
price in cash equal to the Stated Value per share (plus all
Unpaid Dividends thereon to the redemption date). No shares of
Series F Preferred Stock shall be redeemed pursuant to this
Section 1.5.3 unless concurrently therewith shares of Series G
Preferred Stock are redeemed on a pro rata basis (based on the
respective Stated Values plus Unpaid Dividends of the Series F
Preferred Stock and the Series G Preferred Stock) and no shares
of Series G Preferred Stock shall be redeemed pursuant to this
Section 1.5.3 unless concurrently therewith shares of Series F
Preferred Stock are redeemed on a pro rata basis (based on the
respective Stated Values plus Unpaid Dividends of the Series F
Preferred Stock and the Series G Preferred Stock).
(b) Within five Business Days following any Special
Redemption Event (as hereinafter defined), the Company will
mail to each holder of Series F Preferred Stock and Series G
Preferred Stock a notice (the "Special Redemption Event
Notice") (i) stating that a Special Redemption Event has
occurred; (ii) setting forth a purchase date (the "Special
Redemption Date"), which shall be no earlier than 20 Business
Days nor later than 30 Business Days from the date the Special
Redemption Event Notice is mailed; (iii) setting forth the
Conversion Price then in effect with respect to such shares of
Series F Preferred Stock and Series G Preferred Stock, pursuant
to the provisions of Section 1.6 hereof; and (iv) setting forth
the instructions reasonably determined by the Company,
consistent with this Section 1.5.3 and applicable law, that a
holder must follow in order to require the redemption of his
Series F Preferred Stock and Series G Preferred Stock. Holders
of Series F Preferred Stock and Series G Preferred Stock
seeking to require that the Company redeem their shares will be
required to surrender their shares to the Company prior to the
close of business on the third Business Day prior to the
Special Redemption Date.
(c) Immediately prior to the redemption of any
shares of Series F Preferred Stock and Series G Preferred Stock
pursuant to this Section 1.5.3., the Company shall declare and
pay a cash dividend on all outstanding shares of Series F
Preferred Stock and Series G Preferred Stock in an amount equal
to the aggregate amount of all accumulated and unpaid dividends
that have been added to the Stated Value thereof and all
accrued Unpaid Dividends thereon to the Special Redemption
Date. Upon the Special Redemption Date, the redemption price
of such shares shall be payable to the order of the person
whose name appears on the certificate or certificates
representing such shares as the owner thereof and each
surrendered certificate shall be cancelled. From and after the
date the Company shall irrevocably deposit an amount equal to
the redemption price of the shares of Series F Preferred Stock
and Series G Preferred Stock to be redeemed in trust for the
holders of such shares with a bank having capital and surplus
in excess of $100 million, which bank shall be named in the
Special Redemption Event Notice, all rights of the holders of
such Series F Preferred Stock, except the right to receive such
redemption price without interest upon surrender of their
certificate or certificates, shall cease with respect to such
shares, and such shares shall not thereafter be transferred on
the books of the Company or be deemed to be outstanding for any
purpose whatsoever.
(d) "Special Redemption Event" shall mean:
(i) consummation of any merger,
reorganization or consolidation transaction
involving the Company;
(ii) the acquisition by purchase or otherwise
of a controlling interest in the business or
assets of, or the stock or other evidence of
beneficial ownership of, any other Person if
consummation of such transaction results in a
transfer of ownership of a majority of the
voting securities of the Company to such other
Person or its stockholders;
(iii) except in connection with the execution
of the agreement contemplated by Section
1.1.6(b) hereof, the sale, lease, conveyance,
transfer, exchange, encumbrance or other
disposition, in one transaction or a series of
related transactions, of more than 25% of the
assets of the Company; or
(iv) the sale or other disposition of voting
securities of the Company, in a transaction or a
series of related transactions, if consummation
of such transaction or transactions results in a
transfer of ownership of a majority of the
voting securities of the Company.
1.5.4. With respect to any optional redemption of
Series F Preferred Stock, each redemption of Series F Preferred
Stock shall be made so that the number of shares of Series F
Preferred Stock held by each registered holder thereof shall be
reduced in an amount which shall bear the same ratio to the
total number of shares of Series F Preferred Stock being so
redeemed as the number of shares of Series F Preferred Stock
then held by such holder bears to the aggregate number of
shares of Series F Preferred Stock then outstanding.
1.5.5. Except as otherwise provided herein, at least
twenty (20) days before any Redemption Date (ten (10) days if
such redemption is in connection with a Book Value Event), a
Redemption Notice shall be mailed, postage prepaid, to each
holder of record of the Series F Preferred Stock and Series G
Preferred Stock which is to be redeemed, at its address shown
on the records of the Company; provided, however, that the
Company's failure to give such Redemption Notice shall in no
way affect its obligation to redeem the shares of Series F
Preferred Stock and Series G Preferred Stock as provided
herein. The Redemption Notice shall set forth:
(i) the number of shares of Series F Preferred
Stock held by the holder which shall be redeemed by
the Company, and the total number of shares of Series
F Preferred Stock and Series G Preferred Stock held
by all holders of such series to be so redeemed;
(ii) the Redemption Date and the redemption
price;
(iii) that the holder is to surrender to the
Company, at the place designated therein, its
certificate or certificates representing the shares
of Series F Preferred Stock and Series G Preferred
Stock to be redeemed;
(iv) the Conversion Price then in effect with
respect to such shares of Preferred Stock, pursuant
to the provisions of Section 1.6 hereof; and
(v) that the conversion rights of shares of
Series F Preferred Stock and Series G Preferred Stock
to be redeemed shall terminate at the close of
business on the date prior to the Redemption Date.
1.5.6. Each holder of shares of Series F Preferred
Stock and Series G Preferred Stock to be redeemed shall
surrender the certificate or certificates representing such
shares to the Company at the place designated in the Redemption
Notice and thereupon the applicable redemption price for such
shares shall be paid to the order of the Person whose name
appears on such certificate or certificates and each
surrendered certificate shall be cancelled and retired.
1.5.7. From and after the Redemption Date, no shares
of Series F Preferred Stock and Series G Preferred Stock
thereupon subject to redemption shall be entitled to any
further accrual of any dividends pursuant to Section 1.2 hereof
or to the conversion provisions set forth in Section 1.6
hereof; provided, however, that sufficient funds for payment of
the redemption price for the shares of Series F Preferred Stock
and Series G Preferred Stock to be redeemed are deposited or
held and set apart for that purpose at the place of payment on
or prior to the Redemption Date.
1.5.8. If the Redemption Notice shall have been
mailed as provided herein, and if on or before the Redemption
Date specified in such notice the consideration necessary for
such redemption shall have been set apart so as to be available
therefor, then on and after the close of business on the
Redemption Date the shares of Series F Preferred Stock and
Series G Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith cease
and terminate, except only the right of the holders thereof to
receive upon surrender of their certificates the consideration
payable upon redemption thereof. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
1.6. Conversion Rights.
1.6.1. After June 30, 1996, each holder of the
shares of Series F Preferred Stock shall have the right, at the
election of such holder, exercised at any time and from time to
time, to convert, subject to the terms and provisions hereof,
all or any portion of such shares of Series F Preferred Stock
into fully paid and non-assessable shares of Common Stock of
the Company or any capital stock or other securities into which
such Common Stock shall have been changed or any capital stock
or other securities resulting from a reclassification thereof.
Such conversion of Series F Preferred Stock to shares of Common
Stock shall be made at the Conversion Price, subject to
adjustment from time to time as set forth herein. Series F
Preferred Stock may be converted by the holder thereof during
normal business hours on any Business Day by surrender of the
required number of shares of Series F Preferred Stock,
accompanied by written evidence of the holder's election to
convert such holder's Series F Preferred Stock or portion
thereof, to the Company at its principal executive offices.
Payment of the Conversion Price for the shares of Common Stock
specified in such election shall be made by applying shares of
Series F Preferred Stock, valued at the Stated Value per share.
Payment of Unpaid Dividends, if any, applicable to such
converted shares of Series F Preferred Stock shall be made in
accordance with Section 1.6.4.
1.6.2. Upon the conversion of Series F Preferred
Stock, the holders of such Series F Preferred Stock shall
surrender the certificates representing such shares at the
office of the Company. The Company shall not be obligated to
issue certificates evidencing the shares of Common Stock
issuable upon such conversion (or to pay any Unpaid Dividends
in connection with such conversion) unless certificates
evidencing such shares of Series F Preferred Stock being
converted are either delivered to the Company or the holder
notifies the Company that such certificates have been lost,
stolen, or destroyed and delivers to the Company an agreement
satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection therewith.
1.6.3. Each conversion of Series F Preferred Stock
shall be deemed to have been effected immediately prior to the
close of business on the Business Day on which such Series F
Preferred Stock shall have been surrendered to the Company as
provided herein, and such conversion shall be at the Conversion
Price in effect at such time. On each such day that the
conversion of shares of Series F Preferred Stock is deemed
effected, the person or persons in whose name or names any
certificate or certificates for shares of Common Stock are
issuable upon such conversion shall be deemed to have become
the holder or holders of record thereof.
1.6.4. As promptly as practical after the
conversion of shares of Series F Preferred Stock, in whole or
in part, and in any event within five (5) Business Days
thereafter, the Company at its expense (including the payment
by it of any applicable issue, stamp or other taxes, other than
any income taxes and other than any taxes arising by reason of
issuance of shares of Common Stock to any person other than
such holder) will cause to be issued in the name of and
delivered to the holder thereof or as such holder may direct,
(i) a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled upon such
conversion plus, in lieu of any fractional shares to which such
holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Current Market Price per share of
Common Stock and (ii) Unpaid Dividends, if any, applicable as
of the time of conversion to those shares of Preferred Stock
which are converted. Such Unpaid Dividends shall be paid in
cash, without interest. In case fewer than all the shares of
Series F Preferred Stock represented by any surrendered
certificate are converted into Common Stock, a new certificate
representing the shares of Series F Preferred Stock not
converted shall be issued without cost to the holder thereof.
1.7. Anti-Dilution Adjustments. The number of
shares of Common Stock issuable upon any conversion provided
for in Section 1.6 shall be subject to adjustment, from time to
time, in accordance with the following provisions:
1.7.1. Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to time
after the date hereof shall issue or sell Additional Shares of
Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 1.7.3 or 1.7.4) without
consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to such issue or
sale, then, in each such case, subject to Section 1.7.8, such
Conversion Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent)
equal to the consideration per share paid for such additional
shares of Common Stock.
1.7.2. Adjustment of Conversion Price Upon Extraor-
dinary Dividends and Distributions. In case the Company at any
time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including,
without limitation, any distribution of other or additional
stock or other securities or property or Options by way of
dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other
than a dividend payable in Additional Shares of Common Stock,
then, and in each such case, subject to Section 1.7.8, the
Conversion Price in effect immediately prior to the close of
business on the record date fixed for the determination of
holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the
close of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying such
Conversion Price by a fraction
(a) the numerator of which shall be the Current
Market Price in effect on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading, less the amount of such
dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of
Common Stock,
(b) the denominator of which shall be such Current
Market Price,
provided that, in the event that the amount of such dividend as
so determined is equal to or greater than 25% of such Current
Market Price or in the event that such fraction is less than
three fourths (3/4), in lieu of the foregoing adjustment,
adequate provision shall be made so that the holders of the
Series F Preferred Stock shall receive, in the same form and at
the same time such dividend is payable to holders of Common
Stock, a pro rata share of such dividend based upon the maximum
number of shares of Common Stock at the time issuable to such
holders upon conversion of such Series F Preferred Stock.
1.7.3. Treatment of Options and Convertible Securi-
ties. In case the Company at any time or from time to time
after the date hereof shall issue, sell, grant or assume, or
shall fix a record date for the determination of holders of any
class of securities entitled to receive, any Options or
Convertible Securities, then and in each such case, the maximum
number of Additional Shares of Common Stock (as set forth in
the instrument relating thereto, without regard to any
provisions contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the
time of such issue, sale, grant or assumption or, in case such
a record date shall have been fixed, as of the close of
business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional Shares of
Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 1.7.5)
of such shares would be less than the Conversion Price in
effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be, and provided,
further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued
(a) no further adjustment of the Conversion Price
shall be made upon the subsequent issue or sale of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or
decrease in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof (by
change of rate or otherwise), the Conversion Price computed
upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective,
be recomputed to reflect such increase or decrease insofar as
it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are
outstanding at such time;
(c) upon the expiration (or purchase by the Company
and cancellation or retirement) of any such Options which shall
not have been exercised or the expiration of any rights of
conversion or exchange under any such Convertible Securities
which shall not have been exercised (or purchase by the Company
and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which
shall not have been exercised), the Conversion Price computed
upon the original issue, sale, grant or assumption (or upon the
occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional
Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the
conversion or exchange of such Convertible Securities
and the consideration received therefor was the
consideration actually received by the Company for
the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the
consideration actually received by the Company upon
such exercise, or for the issue or sale of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received
by the Company for the issue, sale, grant or
assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 1.7.5)
upon the issue or sale of such Convertible Securities
with respect to which such Options were actually
exercised;
(d) no readjustment pursuant to subdivision (b) or
(c) above shall have the effect of increasing the Conversion
Price by an amount in excess of the amount of the adjustment
thereof originally made in respect of the issue, sale, grant or
assumption of such Options or Convertible Securities; and
(e) in the case of any such Options which expire by
their terms not more than thirty (30) days after the date of
issue, sale, grant or assumption thereof, no adjustment of the
Conversion Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
1.7.4. Treatment of Stock Dividends, Stock Splits,
etc. In case the Company at any time or from time to time
after the date hereof shall declare or pay any dividend on the
Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock),
then, and in each such case, Additional Shares of Common Stock
shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in the
case of any such subdivision, at the close of business on the
date immediately prior to the day upon which such corporate
action becomes effective.
1.7.5. Computation of Consideration. For the
purposes of this Section 1.7,
(a) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the
accounting treatment of such consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company,
without deducting any expenses paid or incurred by
the Company or any commissions or compensation paid
or concessions or discounts allowed to underwriters,
dealers or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be computed
at the fair value thereof at the time of such issue
or sale, as determined in good faith by the Board of
Directors of the Company (subject to confirmation by
a firm of independent certified public accountants of
recognized standing approved by the holders of a
majority of the Series F Preferred Stock and Series G
Preferred Stock), and
(iii) in case Additional Shares of Common Stock
are issued or sold together with other stock or
securities or other assets of the Company for a
consideration which covers both, be the portion of
such consideration so received, computed as provided
in clauses (i) and (ii) above, allocable to such
Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by the holders of a
majority of the Series F Preferred Stock and Series G
Preferred Stock);
(b) Additional Shares of Common Stock deemed to have
been issued pursuant to Section 1.7.3, relating to Options and
Convertible Securities, shall be deemed to have been issued for
a consideration per share determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the
issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible Securities
or, in the case of Options for Convertible
Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange
of such Convertible Securities, in each case
computing such consideration as provided in the
foregoing subdivision (a),
by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have
been issued pursuant to Section 1.7.4, relating to stock
dividends, stock splits, etc., shall be deemed to have been
issued for no consideration.
1.7.6. Adjustments for Combinations, etc. In case
the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in
effect immediately prior to such combination or consolidation
shall, concurrently with the effectiveness of such combination
or consolidation, be proportionately increased.
1.7.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or shall
become subject to issue or sale upon the conversion or exchange
of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in
Section 1.8) or to subscription, purchase or other acquisition
pursuant to any Options issued or granted by the Company (or
any such other issuer or Person) for a consideration such as to
dilute, on a basis consistent with the standards established in
the other provisions of this Section 1.7, the conversion rights
granted to holders of Series F Preferred Stock, then, and in
each such case, the computations, adjustments and readjustments
provided for in this Section 1.7 with respect to the Conversion
Price shall be made as nearly as possible in the manner so
provided and applied to determine the amount of Other
Securities from time to time receivable upon the conversion of
the shares of Series F Preferred Stock, so as to protect the
holders of the Series F Preferred Stock against the effect of
such dilution.
1.7.8. Minimum Adjustment of Conversion Price. If
the amount of any adjustment of the Conversion Price required
pursuant to this Section 1.7 would be less than one-half of one
percent (1%) of the Conversion Price in effect at the time such
adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one-half
of one percent (1%) of such Conversion Price.
1.8. Consolidation, Merger, etc.
1.8.1. Adjustments for Consolidation, Merger, Sale
of Assets, Reorganization, etc. In case the Company after the
date hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into the Company and the
Company shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Common Stock
or Other Securities shall be changed into or exchanged for
stock or other securities of any Other Person or cash or any
other property, or (c) shall transfer all or substantially all
of its properties or assets to any other Person, or (d) shall
effect a capital reorganization or reclassification of the
Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of
Additional Shares of Common Stock for which adjustment in the
Conversion Price is provided in subsection 1.7.1 or 1.7.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the terms
and in the manner provided herein, the holders of shares of
Series F Preferred Stock, upon the conversion thereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Conversion Price in
effect at the time of such consummation for all Common Stock or
Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other
Securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or other
property to which such holder would actually have been entitled
as a stockholder upon such consummation if such holder had
exercised the conversion rights pertaining to the Series F
Preferred Stock immediately prior thereto.
1.8.2. Assumption of Obligations. Notwithstanding
anything to the contrary herein provided, the Company will not
effect any of the transactions described in subsections (a)
through (d) of Section 1.8.1 unless, prior to the consummation
thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property
upon the conversion of shares of Series F Preferred Stock as
provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the holders of the Series F
Preferred Stock (a) the obligations of the Company with respect
to the Series F Preferred Stock (and if the Company shall
survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company
from, any continuing obligations of the Company with respect to
the Series F Preferred Stock), and (b) the obligation to
deliver to such holder such shares of stock, securities, cash
or property as, in accordance with the foregoing provisions of
this Section 1.8, such holder may be entitled to receive, and
such Person shall have similarly delivered to such holders of
Series F Preferred Stock an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to such holders,
stating that the rights and privileges of the Series F
Preferred Stock shall thereafter continue in full force and
effect and the terms thereof (including, without limitation,
all of the provisions of this Section 1.8) shall be applicable
to the stock, securities, cash or property which such Person
may be required to deliver upon any conversion of shares of
Series F Preferred Stock or the exercise of any rights pursuant
hereto.
1.9. Other Dilutive Events. In case any event shall
occur as to which the provisions of Section 1.7 or Section 1.8
are not strictly applicable but the failure to make any
adjustment would not fairly protect the conversion rights
pertaining to shares of Series F Preferred Stock in accordance
with the essential intent and principles of such sections,
then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national
standing (such firm to be subject to the approval of the
holders of a majority of the Series F Preferred Stock and the
Series G Preferred Stock), which shall give their opinion
regarding the adjustment, if any, on a basis consistent with
the essential intent and principles established in Sections 1.7
and 1.8, necessary to preserve, without dilution, the
conversion rights of the Series F Preferred Stock and the
Series G Preferred Stock. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to each holder of
Series F Preferred Stock and the Series G Preferred Stock and
shall make the adjustments described therein.
1.10. No Dilution or Impairment. The Company will
not, by amendment of its certificate of incorporation or by-
laws or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Series F
Preferred Stock, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to
protect the rights of the holders of shares of Series F
Preferred Stock against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will
not permit the par value of any shares of stock receivable upon
the conversion of Series F Preferred Stock to exceed the amount
payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-
assessable shares of stock on the conversion of the shares of
Series F Preferred Stock from time to time outstanding, and (c)
will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the
conversion of all of the outstanding shares of Series F
Preferred Stock would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the
Company's certificate of incorporation and available for the
purpose of issue upon such exercise.
1.11. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares of
Common Stock (or Other Securities) issuable upon the conversion
of shares of Series F Preferred Stock, the Company at its
expense will promptly compute such adjustment or readjustment
in accordance with the terms hereof and cause independent
certified public accountants of recognized standing (such firm
to be subject to the approval of the holders of a majority of
the outstanding Series F Preferred Stock and Series G Preferred
Stock) selected by the Company to verify such computation and
prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation
thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to
have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Conversion
Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 1.7) on account
thereof. The Company will forthwith mail a copy of each such
report to each holder of shares of Series F Preferred Stock and
Series G Preferred Stock and will, upon the written request at
any time of any holder of shares of Series F Preferred Stock
and Series G Preferred Stock, furnish to such holder a like
report setting forth the Conversion Price at the time in effect
and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its
principal office and will cause the same to be available for
inspection at such office during normal business hours by any
holder of Series F Preferred Stock and Series G Preferred Stock
or any prospective purchaser of Series F Preferred Stock or
Series G Preferred Stock designated by the holder thereof.
1.12. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any
dividend (other than dividends payable with respect to the
Series F Preferred Stock and Series G Preferred Stock) or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other Person or any transfer of all or
substantially all of the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of shares of Series F
Preferred Stock and Series G Preferred Stock a notice
specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected
date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for
the securities or other property deliverable upon such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or
winding-up.
1.13. Retirement of Converted or Redeemed Shares.
No share or shares of Series F Preferred Stock acquired by the
Company by reason of optional or mandatory redemption,
purchase, conversion or otherwise shall be re-issued and all
such shares shall be cancelled, retired and eliminated from the
shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of
shares of Series F Preferred Stock accordingly.
FURTHER RESOLVED, that, before the Company shall issue any
shares of Series F Preferred Stock, a certificate pursuant to
Section 151 of the DGCL shall be made, executed, acknowledged,
filed, and recorded in accordance with the provisions of
Section 103 and 151 of the DGCL, and the proper officers of the
Company be, and they hereby are, authorized and directed to do
all acts and things which may be necessary or proper in their
opinion to carry into effect the purposes and intent of this
and the foregoing resolutions.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be signed in its name and on its behalf and attested on this
30th day of January, 1996 by duly authorized officers of this
Corporation.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Name: Simon N. Heifetz
Title: Vice Chairman
NESTOR, INC.
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND SPECIAL RIGHTS
OF SERIES G CONVERTIBLE PREFERRED STOCK
RELATIVE RIGHTS AND PREFERENCES AND
OTHER TERMS AS FIXED AND DETERMINED BY THE
BOARD OF DIRECTORS
* * * * * *
Nestor, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State
of Delaware, does hereby certify that pursuant to the
provisions of Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the
Company, by action taken on January 13, 1996, adopted the
following resolution, which resolution remains in full
force and effect as of the date hereof;
WHEREAS, the Board of Directors of the Company is
authorized, within the limitations and restrictions
stated in the Certificate of Incorporation, to fix by
resolution or resolutions the designation of each series
of preferred stock and the powers, preferences and
relative, participating, optional or other special rights
and qualifications, limitations or restrictions thereof,
including, without limiting the generality of the
foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution
or resolutions of the Board of Directors under the
General Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors of
the Company pursuant to its authority as aforesaid, to
authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized such series of preferred stock on the terms
and with the provisions herein set forth:
Designation, Amount and Rank. Four hundred one (401)
shares of a convertible preferred stock, $1.00 par value
per share, shall constitute a series of such preferred
stock designated as "Series G Convertible Preferred
Stock" (the "Series G Preferred Stock"). With respect to
dividend rights, redemption rights and rights on
liquidation, winding up and dissolution, the Series G
Preferred Stock shall rank pari passus with the Series F
Preferred Stock and shall rank prior to the Series A
Preferred Stock, the Series B Preferred Stock, the Series
D Preferred Stock, the Series E Preferred Stock, the
Series H Preferred Stock, the Common Stock and any other
class of capital stock or series of preferred stock
hereafter created. The Series G Preferred Stock shall be
issued pursuant to the following additional terms and
conditions:
1. Series G Preferred Stock.
1.1. Definitions.
As used herein, unless the context otherwise
requires, the following terms have the following
meanings:
1.1.1. "Additional Director" means any
director whom holders of shares of Series F Preferred
Stock and Series G Preferred Stock shall be entitled to
elect by virtue of the provisions of Section 1.4.2
hereof.
1.1.2. "Additional Shares of Common Stock"
means all shares (including treasury shares) of Common
Stock issued or sold (or, pursuant to Sections 1.7.3 or
1.7.4, deemed to be issued) by the Company after the date
hereof, whether or not subsequently reacquired or retired
by the Company other than (a) the issuance of shares upon
conversion of the Preferred Stock; (b) shares issued upon
the exercise of the Currently Outstanding Warrants; (c)
shares issued upon the exercise of the Warrants; (d)
shares to be issued pursuant to Company sponsored
employee benefit and compensation arrangements, but not
to exceed 2,000,000 (subject to equitable adjustment in
the event of any combination, reclassification, stock
split, dividend or recapitalization of the Company); and
(e) such additional number of shares, if any, as may
become issuable upon the conversion or exercise of any of
the securities referred to in the foregoing clauses (a)
through (d) and by reason of adjustments required
pursuant to anti-dilution provisions applicable to such
Preferred Stock as in effect on the date hereof, but only
if and to the extent that such adjustments are required
as the result of the original issuance of such Series G
Preferred Stock.
1.1.3. "BHCA Holder" shall mean any original
holder of the Series G Preferred Stock that at the time
of its original acquisition of the Series G Preferred
Stock from the Company is subject to the Bank Holding
Company Act of 1956, as amended.
1.1.4. "Book Value Event" means the end of any
fiscal quarter of the Company if the fully diluted book
value per share of Common Stock of the Company determined
in accordance with generally accepted accounting
principles exceeds $.70.
1.1.5. "Business Day" means any day other than
a Saturday or a Sunday or a day on which commercial
banking institutions in the City of New York are
authorized by law or other governmental action to be
closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
1.1.6. "Common Stock" means the Company's
Common Stock, $.01 par value, such term to include any
stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification
of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders
of which have the right, without limitation as to amount,
either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to
preference.
1.1.7. "Conversion Price" means (a) $1.25,
subject to adjustment pursuant to Sections 1.7 and 1.9
hereof or (b) if the Company has not on or before July
31, 1996 entered into a definitive agreement with a party
with which it is currently negotiating, such agreement to
contemplate an ongoing revenue stream to the Company,
based on commercial exploitation of the Company's
technology, and to require a payment to the Company upon
execution of at least $1.25 million, such payment to be
not primarily in consideration of any requirement that
the Company render services, then the Conversion Price
shall automatically be reduced to $.75, subject to
adjustment pursuant to Sections 1.7 and 1.9 hereof.
1.1.8. "Convertible Securities" means any
evidences of indebtedness, shares of stock (other than
Common Stock) or other securities directly or indirectly
convertible into or exchangeable for additional shares of
Common Stock.
1.1.9. "Current Market Price" means on any
date specified herein, the average daily Market Price
during the period of the most recent twenty (20) days,
ending on such date, on which the national securities
exchanges were open for trading, except that if no Common
Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-
counter market, the Current Market Price shall be the
Market Price on such date.
1.1.10. "Currently Outstanding Warrants" means
the common stock purchase warrants and non-qualified
options listed below for the purchase of an aggregate of
3,315,650 shares (subject to adjustment as provided in
such Warrants) of the Common Stock (based on the current
capitalization of the Company):
(A) Outstanding warrants to Purchase 689,375
shares of the Common Stock of the Company at
$3.00 per share expiring at various times in
1996;
(B) Other outstanding warrants and non-
qualified options to purchase 206,000 shares of
the Common Stock of the Company at prices
between $1.00 per share and $4.625 per share
expiring in 1996, 1997 and 1999;
(C) Warrant No. W-D, dated August 11, 1994,
respecting 210,000 shares of Common Stock;
(D) Warrant No. W-F, dated August 11, 1994,
respecting 15,000 shares of Common Stock;
(E) Warrant No. W-G, dated August 11, 1994,
respecting 15,000 shares of Common Stock;
(F) Warrant No. W-H, dated August 11, 1994,
respecting 5,000 shares of Common Stock;
(G) Warrant No. W-I, dated August 11, 1994,
respecting 5,000 shares of Common Stock;
(H) Warrant No. W-E, dated August 11, 1994,
respecting 130,000 shares of Common Stock;
(I) Warrant No. W-J, dated August 11, 1994,
respecting 15,000 shares of Common Stock;
(J) Warrant No. W-K, dated August 11, 1994,
respecting 5,000 shares of Common Stock;
(K) Warrant No. W-N, dated October 5, 1995,
respecting 928,000 shares of Common Stock;
(L) Warrant No. W-O, dated October 5, 1995,
respecting 72,000 shares of Company Common
Stock;
(M) Warrant No. W-P, dated August 11, 1994,
respecting 215,000 shares;
(N) Warrant No. W-Q, dated October 5, 1995,
respecting 649,600 shares of Company Common
Stock;
(O) Warrant No. W-R, dated October 5, 1995,
respecting 50,400 shares of Company Common
Stock; and
(P) Warrants to purchase 105,275 shares of Common
Stock at an exercise price of $2.00 per share,
expiring September 1998.
1.1.11. "Dividend Payment Date" means March
31, June 30, September 30 and December 31 of each year,
commencing March 31, 1996.
1.1.12. "Dividend Period" means each of the
periods commencing January 1 and ending March 31 of any
year, commencing April 1 and ending June 30 of any year,
commencing July 1 and ending September 30 of any year and
commencing October 1 and ending December 31 of any year.
1.1.13. "Four-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series F Preferred Stock and Series G
Preferred Stock for any four (4) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any four Dividend Periods within any
eight (8) consecutive Dividend Periods after such date.
1.1.14. "Lender Default" means any time when
(i) the Company shall violate the provisions of or be in
default under the terms of any loan or other agreement
relating to indebtedness of the Company or its
subsidiaries or (ii) a judgement shall be entered against
the Company or any of its subsidiaries, in an amount
exceeding $50,000 for failure to pay trade creditors or
indebtedness and such judgment shall remain unpaid for
more than sixty days.
1.1.15. "Mandatory Redemption Date" means the
Mandatory Redemption Date stated in Section 1.5.2 hereof.
1.1.16. "Market Price" means on any date
specified herein, the amount per share of the Common
Stock, equal to (a) the last sale price of such Common
Stock, regular way, on such date or, if no such sale
takes place on such date, the average of the closing bid
and asked prices thereof on such date, in each case as
officially reported on the principal national securities
exchange on which such Common Stock is then listed or
admitted to trading, or (b) if such Common Stock is not
then listed or admitted to trading on any national
securities exchange but is designated as a national
market system security by the NASD, the last trading
price of the Common Stock on such date, or (c) if there
shall have been no trading on such date or if the Common
Stock is not so designated, the average of the closing
bid and asked prices of the Common Stock on such date as
shown by the NASD automated quotation system, or (d) if
such Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in
the over-the-counter market, the value as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the
Company (and approved by the holders of a majority of the
outstanding shares of Series F Preferred Stock and Series
G Preferred Stock) as of the last day of any month ending
within thirty (30) days preceding the date as of which
the determination is to be made.
1.1.17. "Options" means rights, options or
warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or Convertible
Securities.
1.1.18. "Other Securities" means any stock
(other than Common Stock) and other securities of the
Company or any other Person (corporate or otherwise)
which the holders of Preferred Stock at any time shall be
entitled to receive, or shall have received, upon the
conversion of Preferred Stock, in lieu of or in addition
to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities.
1.1.19. "Person" means a corporation, an
association, a partnership, an organization, a business,
an individual, a government or political subdivision
thereof or a governmental agency.
1.1.20. "Preferred Stock" means, collectively,
the Series A Preferred Stock, the Series B Preferred
Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock, the Series
G Preferred Stock and the Series H Preferred Stock.
1.1.21. "Redemption Date" means any date fixed
for redemption of shares of Series F Preferred Stock and
Series G Preferred Stock pursuant to the provisions of
Section 1.5 hereof.
1.1.22. "Redemption Notice" means the written
notice of redemption contemplated by Section 1.5.5
hereof.
1.1.23. "Restricted Period" shall mean the
period beginning on the date of original issue of any
shares of Series G Preferred Stock and ending on
September 30, 1997.
1.1.24. "Securities Act" means the Securities
Act of 1933, as amended.
1.1.25. "Series A Preferred Stock" means the
Series A Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 30, 1990 with the Secretary of
State of the State of Delaware.
1.1.26. "Series B Preferred Stock" means the
Series B Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed June 10, 1992 with the Secretary of
State of the State of Delaware.
1.1.27. "Series D Preferred Stock" means the
Series D Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 9, 1995 with the Secretary of
State of the State of Delaware.
1.1.28. "Series E Preferred Stock" means the
Series E Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.29. "Series F Preferred Stock" means the
Series F Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.30. "Series G Preferred Stock" means the
Series G Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.31. "Series H Preferred Stock" means the
Series H Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.32. "Special Redemption Event" has the
meaning set forth in Section 1.5.3.
1.1.33. "Special Series G Voting Rights" means
the special voting rights which holders of the Series G
Preferred Stock that are not BHCA Holders are entitled to
exercise by virtue of the provisions of Section 1.4.2
hereof.
1.1.34. "Stated Value" per share means (i)
with respect to the Series A Preferred Stock, two dollars
($2.00), (ii) with respect to the Series B Preferred
Stock, one dollar ($1.00), (iii) with respect to the
Series D Preferred Stock, one dollar and fifty cents
($1.50), (iv) with respect to the Series E Preferred
Stock, One Thousand Dollars ($1,000) plus all accumulated
and unpaid dividends, if any, added thereto and minus all
amounts paid in cash in respect of such previously
accumulated and unpaid dividends that were originally
added to Stated Value, (v) with respect to the Series F
Preferred Stock, One Thousand Dollars ($1,000) plus all
accumulated and unpaid dividends, if any, added thereto
pursuant to Section 1.2.2 and minus all amounts paid in
cash in respect of such previously accumulated and unpaid
dividends that were originally added to such Stated Value
pursuant to Section 1.2.2., (vi) with respect to the
Series G Preferred Stock, One Thousand Dollars ($1,000)
plus all accumulated and unpaid dividends, if any, added
thereto pursuant to Section 1.2.2 and minus all amounts
paid in cash in respect of such previously accumulated
and unpaid dividends that were originally added to such
Stated Value pursuant to Section 1.2.2, and (vii) with
respect to the Series H Preferred Stock, One Thousand
Dollars ($1,000) plus all accumulated and unpaid
dividends, if any, added thereto and minus all amounts
paid in cash in respect of such previously accumulated
and unpaid dividends that were originally added to Stated
Value.
1.1.35. "Two-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series F Preferred Stock and the Series
G Preferred Stock for any two (2) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any two Dividend Periods within any
six (6) consecutive Dividend Periods occurring after such
date.
1.1.36. "Unpaid Dividends" means all dividends
with respect to the Series F Preferred Stock and Series G
Preferred Stock which have accrued but which have not
been either paid in cash or added to the Stated Value
thereof pursuant to Section 1.2.2.
1.1.37. "Warrants" means common stock purchase
warrants to acquire an aggregate of 290,000 shares
(subject to adjustment as provided in such warrants)
issued in connection with the purchase of the Series G
Preferred Stock and Series F Preferred Stock.
1.2. Dividends.
1.2.1. The holder of each issued and
outstanding share of Series F Preferred Stock and the
Series G Preferred Stock shall be entitled to receive,
out of the funds of the Company legally available for
such purpose, when, as and if declared by the Board of
Directors of the Company, before any dividend shall be
declared, paid or set aside, or any other distribution
shall be declared or made, upon the Common Stock or any
other class or series of stock of the Company, dividends
in cash at a dividend rate of nine percent (9.0%) per
annum of the Stated Value per share of Series F Preferred
Stock and Series G Preferred Stock, calculated on a daily
basis, for each Dividend Period or portion thereof during
which such Series F Preferred Stock and Series G
Preferred Stock are outstanding. Notwithstanding the
foregoing, the Company may pay dividends in the form of
Common Stock (with fractional shares to be paid in cash)
pursuant to the terms of the Series D Preferred Stock.
1.2.2. Notwithstanding anything to the
contrary herein provided, in the event that any portion
of the quarterly dividend for a Dividend Period on the
Series F Preferred Stock and Series G Preferred Stock is
not declared and paid in cash on any Dividend Payment
Date, the amount of such accrued dividend which is not so
paid shall be accumulated and shall automatically be
added to the Stated Value of such share on such date.
Accumulated dividends on shares of Series F Preferred
Stock and Series G Preferred Stock that have previously
been added to the Stated Value thereof pursuant to the
terms hereof may not thereafter be paid in cash except
upon redemption by the Company. Unpaid dividends shall
not bear interest but, to the extent accumulated and
added to the Stated Value, shall continue to accrue
dividends on a daily basis. Accumulated dividends on any
share of Series F Preferred Stock and Series G Preferred
Stock which are added to the Stated Value thereof
pursuant to the terms hereof shall not be deemed to be in
arrears for any purpose whatsoever. Any dividends that
have accrued on the Series F Preferred Stock and Series G
Preferred Stock but have not yet been added to the Stated
Value thereof shall constitute Unpaid Dividends.
Notwithstanding anything to the contrary herein provided,
no cash dividends shall be paid with respect to the
Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock, the Series D Preferred Stock, the Series
E Preferred Stock or the Series H Preferred Stock at any
time when there are Unpaid Dividends with respect to the
Series F Preferred Stock and the Series G Preferred
Stock.
1.2.3. Dividends payable with respect to the
Series F Preferred Stock and the Series G Preferred Stock
shall be calculated on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each
and shall be payable on each Dividend Payment Date to the
holders of record of the Series F Preferred Stock and the
Series G Preferred Stock at the close of business on the
date specified by the Board of Directors of the Company;
provided, however, that no such record date shall be more
than thirty (30) days nor less than ten (10) days prior
to the respective Dividend Payment Date. Dividends on
shares of Series F Preferred Stock and the Series G
Preferred Stock shall accrue from the date of original
issue of such shares of Series F Preferred Stock or
Series G Preferred Stock. Such dividends will accrue
whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Company
legally available for the payment of dividends. The date
on which the Company originally issues any share of
Series F Preferred Stock or Series G Preferred Stock will
be deemed to be its "date of original issue" regardless
of the number of times transfer of such share is made on
the stock records maintained by or for the Company.
1.2.4. All dividends paid or added to Stated
Value, as the case may be, with respect to shares of the
Series F Preferred Stock or Series G Preferred Stock
shall be paid or added to Stated Value, as the case may
be, ratably (based on the respective Stated Values plus
Unpaid Dividends of the Series F Preferred Stock and
Series G Preferred Stock) with respect to such shares to
the holders entitled thereto.
1.2.5. So long as any shares of the Series F
Preferred Stock or Series G Preferred Stock are
outstanding, the Company shall not declare, pay or set
apart for payment any dividend or other distribution on
any of the Company's Common Stock, or Preferred Stock
(other than the Series F Preferred Stock, Series G
Preferred Stock, Series E Preferred Stock and Series H
Preferred Stock) or make any payment on account of, or
set apart for payment money for a sinking fund or other
similar fund for the purchase, redemption or other
retirement of, any of the Common Stock, or Preferred
Stock (other than the Series F Preferred Stock or Series
G Preferred Stock) or any warrants, rights, calls or
options exercisable for any of the Common Stock or make
any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of
the Company or other property (other than distributions
or dividends in stock to the holders of such stock), and
shall not permit any Person directly or indirectly
controlled by the Company to purchase or redeem any of
the Common Stock or Preferred Stock (other than the
Series F Preferred Stock and Series G Preferred Stock) or
any warrants, rights, calls or options exercisable for
any of the Common Stock, unless prior to or concurrently
with such declaration, payment, setting apart for
payment, purchase or distribution, as the case may be,
all funds then required for the mandatory redemption of
shares of the Series F Preferred Stock and Series G
Preferred Stock pursuant to Section 1.5.2 hereof, shall
have been paid or be paid, and all Unpaid Dividends on
shares of the Series F Preferred Stock and Series G
Preferred Stock not paid in cash, shall have been paid in
cash or be paid in cash. Notwithstanding the foregoing,
the Company may declare and pay dividends in the form of
Common Stock (with fractional shares to be paid in cash)
pursuant to the terms of the Series D Preferred Stock.
1.3. Rights on Liquidation, Dissolution or
Winding-Up.
1.3.1. In the event of any liquidation,
dissolution or winding-up of the Company (including,
without limitation, a liquidation or reorganization under
Chapter 7 or 11 of Title 11 of the United States Code, as
amended), the holders of shares of the Series F Preferred
Stock and Series G Preferred Stock then issued and
outstanding shall be entitled to be paid out of the
assets of the Company available for distribution to its
stockholders, before any payment shall be made to the
holders of Common Stock or of shares of any other class
or series of stock of the Company, an amount equal to the
Stated Value per share, plus an amount equal to any
Unpaid Dividends to and including the date of
distribution with respect to such shares. If, upon any
liquidation, dissolution or winding-up of the Company
(including, without limitation, a liquidation or
reorganization under Chapter 7 or 11 of Title 11 of the
United States Code, as amended), the assets of the
Company available for distribution to its stockholders
shall be insufficient (a "Liquidation Insufficiency") to
pay the holders of shares of the Series F Preferred Stock
and the Series G Preferred Stock the full amounts to
which they shall respectively be entitled, the holders of
shares of the Series F Preferred Stock and the Series G
Preferred Stock shall be entitled to receive all the
assets of the Company available for distribution and each
such holder of shares of the Series F Preferred Stock and
the Series G Preferred Stock shall share in any
distribution in the proportion which the aggregate Stated
Values of the shares of the Series F Preferred Stock
(plus all Unpaid Dividends thereon) and the Series G
Preferred Stock (plus all Unpaid Dividends thereon) held
by such holder of the Series F Preferred Stock or Series
G Preferred Stock bears to the aggregate Stated Values of
all shares of the Series F Preferred Stock (plus all
Unpaid Dividends thereon) and Series G Preferred Stock
(plus all Unpaid Dividends thereon) then outstanding. If
there is no Liquidation Insufficiency and payment shall
have been made to the holders of shares of the Series F
Preferred Stock and Series G Preferred Stock of the full
amount to which they shall be entitled, then the holders
of shares of the Series F Preferred Stock and Series G
Preferred Stock shall be entitled to receive no further
distributions thereon and the holders of shares of the
Series A Preferred Stock, the Series E Preferred Stock
and the Series H Preferred Stock shall be entitled to
receive an amount equal to the Stated Value (plus all
Unpaid Dividends thereon) per share thereof. After
payment shall have been made to the holders of shares of
the Series A Preferred Stock, the Series E Preferred
Stock and the Series H Preferred Stock of the full
amounts to which they shall be entitled, the holders of
shares of the Common Stock and of shares of any other
class of stock of the Company, if any, shall be entitled
to share, according to their respective rights and
preferences, in all remaining assets of the Company
available for distribution to its stockholders.
1.4. Voting Power.
1.4.1. Except as expressly provided herein in
Section 1.4.6 (a) and (b) or as required by law, any
holder of Series G Preferred Stock that is a BHCA Holder
shall have no voting rights. Except as otherwise
expressly provided herein or as required by law, (i) each
holder of Series G Preferred Stock that is not a BHCA
Holder shall be entitled to vote on all matters as to
which stockholders of the Company are entitled to vote,
and (ii) each holder of Series G Preferred Stock (other
than BHCA Holders) shall be entitled to cast a number of
votes equal to the greatest number of whole shares of
Common Stock into which such holder's shares of Series G
Preferred Stock could be converted, pursuant to the
provisions of Section 1.6 hereof, at the record date for
the determination of stockholders entitled to vote on
such matter or, if no such record date is established, at
the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly
provided herein or as required by law, the holders of
shares of Series B Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock (other than BHCA
Holders), Series F Preferred Stock, Series G Preferred
Stock (other than BHCA Holders), Series H Preferred Stock
and Common Stock shall be entitled to vote together as a
class with respect to all matters as to which such
stockholders of the Company are entitled to vote.
1.4.2. In the event that at any time there
shall occur a Two-Dividend Default, then immediately upon
the happening of such Two-Dividend Default and until such
Two-Dividend Default and all defaults in the payment of
quarterly dividends on the Series F Preferred Stock and
Series G Preferred Stock subsequent to and occurring
while such Two-Dividend Default exists shall be cured,
the number of directors constituting the Board of
Directors of the Company shall, without further action,
be increased by two and the holders of Series F Preferred
Stock and Series G Preferred Stock (other than BHCA
Holders) shall have, in addition to the other voting
rights set forth herein, the exclusive right, voting
together separately as a single class, to elect two
directors of the Company to fill such newly created
directorship, the remaining directors to be elected by
the class or classes of stock (including the Series F
Preferred Stock and Series G Preferred Stock (other than
BHCA Holders)) entitled to vote therefor, at each meeting
of stockholders held for the purpose of electing
directors. In the event that at any time there shall
occur a Four-Dividend Default or a Lender Default, then
immediately on the happening of such Four-Dividend
Default or Lender Default and until such Lender Default
or Four-Dividend Default and all defaults in the payment
of quarterly dividends on the Series F Preferred Stock
and Series G Preferred Stock subsequent to and occurring
while such Four-Dividend Default exists shall be cured,
then the number of directors constituting the Board of
Directors of the Company shall, without further action,
be further increased by four in the case of a Four
Dividend Default or in the case of a Lender Default, and
the holders of Series F Preferred Stock and Series G
Preferred Stock (other than BHCA Holders) shall have, in
addition to the other voting rights set forth herein, the
exclusive right, voting together separately as a single
class, to elect directors of the Company to fill such
newly created directorships, the remaining directors to
be elected by the class or classes of stock (including
the Series G Preferred Stock) entitled to vote therefor,
at each meeting of stockholders held for the purpose of
electing directors. During the existence of a Four
Dividend Default, a majority of the Directors not elected
by the holders of the Series F Preferred Stock and Series
G Preferred Stock (or their affiliates) shall have the
right to declare and pay dividends on the Series F
Preferred Stock and Series G Preferred Stock out of funds
legally available for the payment of such dividends.
Notwithstanding the foregoing provisions of this Section
1.4.2, upon payment in full of all quarterly dividends on
the Series F Preferred Stock and Series G Preferred Stock
coming due subsequent to a Four-Dividend Default and the
dividend which resulted in the Four-Dividend Default, so
that no more than three consecutive quarterly dividends
on the Series F Preferred Stock and Series G Preferred
Stock remain in default, the Special Series G Voting
Rights of the holders of Series F Preferred Stock and
Series G Preferred Stock shall be reduced so that they
have the right, voting separately as a class, to elect
two Additional Directors of the Company. Notwithstanding
the foregoing provisions of this Section 1.4.2, (i) upon
payment in full of all quarterly dividends on the Series
F Preferred Stock and Series G Preferred Stock coming due
subsequent to a Two-Dividend Default and the dividend
which resulted in the Two-Dividend Default, (ii) upon
payment in full of all quarterly dividends on the Series
F Preferred Stock and Series G Preferred Stock coming due
subsequent to a Four-Dividend Default and three of the
dividends which resulted in a Four-Dividend Default, so
that, in each case, no more than one quarterly dividend
remains in default, and (iii) upon payment in full or
cure of any Lender Defaults, the Special Series G Voting
Rights shall terminate. Upon any termination of the
aforesaid Special Series G Voting Rights, the term of
office of each director elected by the holders of the
Series F Preferred Stock and Series G Preferred Stock
pursuant to this Section 1.4.2 then in office shall
thereupon terminate and upon such termination the number
of directors constituting the Board of Directors shall,
by resolution of the Board of Directors, be reduced
accordingly, subject always to the subsequent increase of
the number of directors from time to time pursuant to
this Section 1.4.2 in the event of the periodic future
vesting of the right of the holders of the Series F
Preferred Stock and Series G Preferred Stock (other than
BHCA Holders) to elect Additional Directors. The term of
office of any director elected by the holders of the
Series F Preferred Stock and Series G Preferred Stock
pursuant to this Section 1.4.2 shall terminate upon the
earlier of the termination of the Special Series G Voting
Rights and the election of a successor to such director
at any meeting of holders of the Series F Preferred Stock
and Series G Preferred Stock for the purpose of electing
directors.
1.4.3. Special Series G Voting Rights may be
exercised either at a special meeting of holders of the
Series F Preferred Stock and Series G Preferred Stock, or
at any annual or special meeting of stockholders of the
Company, or may be exercised by the written consent of
holders of the Series F Preferred Stock and Series G
Preferred Stock pursuant to the Delaware General
Corporation Law.
1.4.4. At any time when Special Series G
Voting Rights pursuant to Section 1.4.2 above shall have
vested in holders of the Series F Preferred Stock and
Series G Preferred Stock (other than BHCA Holders), and
if such rights shall have not already been initially
exercised, a proper officer of the Company shall, upon
the written request of any holder of record of the Series
F Preferred Stock and Series G Preferred Stock (other
than BHCA Holders) then outstanding, addressed to the
secretary of the Company, call a special meeting of
holders of the Series F Preferred Stock and Series G
Preferred Stock for the purpose of electing directors.
Such meeting shall be held at the earliest practicable
date upon the notice required for annual meetings of the
stockholders at the place for holding annual meetings of
the stockholders of the Company or, if none, at a place
designated by the secretary of the Company. If such a
meeting shall not be called by the proper officer of the
Company within ten (10) days after the personal service
of such written request upon the secretary of the
Company, or within ten (10) days after mailing the same
within the United States, by first-class registered mail,
addressed to the secretary of the Company at the
Company's principal office (such mailing to be evidenced
by registry receipt issued by the postal authorities),
then the holders of record of ten percent (10%) of the
shares of the Series F Preferred Stock or Series G
Preferred Stock then outstanding may designate in writing
a holder of Series F Preferred Stock or Series G
Preferred Stock to call such meeting at the expense of
the Company, and such meeting may be called by such
person so designated upon the notice required for annual
meetings of stockholders and shall be held at the same
place as is elsewhere provided in this Section 1.4.4.
Any holder of Series F Preferred Stock and Series G
Preferred Stock (other than BHCA Holders) shall have
access to the stock books of the Company for the purpose
of causing a meeting of holders of Series F Preferred
Stock and Series G Preferred Stock (other than BHCA
Holders) to be called pursuant to the provisions hereof.
1.4.5. At any meeting held for the purpose of
electing directors at which the holders of Series F
Preferred Stock and Series G Preferred Stock shall have
the right to elect directors as provided herein, the
presence in person or by proxy of the holders of twenty-
five percent (25%) of the then outstanding shares of
Series F Preferred Stock and Series G Preferred Stock
shall be required and shall be sufficient to constitute a
quorum of such class for the election of directors by
such series. In the absence of a quorum of the holders
of Series F Preferred Stock and Series G Preferred Stock
entitled to vote for the election of directors, a
majority of the holders present in person or by proxy of
such Series shall have the power to adjourn the meeting
for the election of directors which the holders of such
Series are entitled to elect, from time to time, without
notice other than announcement at the meeting, until a
quorum shall be present.
1.4.6. Unless the vote of the holders of a
greater number of shares of this Series G Preferred Stock
shall then be required by law, the consent of the holders
of at least 66-2/3% of all of the shares of this Series G
Preferred Stock at the time outstanding, voting together
as a separate class, shall be necessary for authorizing,
effecting or validating any of the following:
(a) the creation, authorization or issue of
any shares of any class or series of stock of the Company
ranking prior to, or pari passu with, the shares of this
Series G Preferred Stock as to dividends or upon
liquidation or otherwise, or the reclassification of any
authorized stock of the Company into any such prior
shares, or the creation, authorization or issue of any
obligation or security convertible into or evidencing the
right to purchase any such prior shares;
(b) the amendment, alteration or repeal of any
of the provisions of the Certificate of Incorporation or
of any certificate amendatory thereof or supplemental
thereto so as to affect adversely the preferences,
rights, powers or privileges of this Series G Preferred
Stock; and
(c) the issuance or assumption of any debt
greater than $250,000 (provided, however, if the Company
has previously redeemed a portion of the Series F
Preferred Stock and the Series G Preferred Stock, then
this amount may be increased up to a maximum amount
obtained by multiplying $250,000 by a fraction that is
the inverse of the percentage of the Series F Preferred
Stock and Series G Preferred Stock that remains
outstanding after such redemption).
1.5. Redemption.
1.5.1. Optional Redemption. The Company shall
have the right to redeem all or part of the Series G
Preferred Stock upon not less than ten (10) days prior
written notice to the holders of the Series G Preferred
Stock.
No shares of Series G Preferred Stock shall be
redeemed pursuant to this Section 1.5.1 unless
concurrently therewith shares of Series F Preferred Stock
are redeemed on a pro rata basis (based on the respective
Stated Values plus Unpaid Dividends of the Series F
Preferred Stock and the Series G Preferred Stock) and no
shares of Series F Preferred Stock shall be redeemed
unless concurrently therewith shares of Series G
Preferred Stock are redeemed on a pro rata basis (based
on the respective Stated Values plus Unpaid Dividends of
the Series F Preferred Stock and the Series G Preferred
Stock).
In the event of optional redemption by the
Company within sixty days following any occurrence of a
Book Value Event shares of Series F Preferred Stock and
Series G Preferred Stock shall be redeemed at a
redemption price equal to the Stated Value per share,
plus all Unpaid Dividends payable with respect to such
shares as of the date fixed for redemption, without
interest. In the event of optional redemption by the
Company prior to August 1, 2004 in the absence of the
existence of a Book Value Event, shares of Series F
Preferred Stock and Series G Preferred Stock shall be
redeemed at a redemption price equal to 109% of the
Stated Value per share, plus all Unpaid Dividends payable
with respect to such shares as of the date fixed for
redemption without interest. In either circumstance,
such redemption price shall be paid in cash.
1.5.2. Mandatory Redemption. The Company
shall redeem all (but not less than all) shares of Series
F Preferred Stock and the Series G Preferred Stock on
August 1, 2004 (the "Mandatory Redemption Date") at a
cash redemption price equal to the Stated Value per share
of such Series F Preferred Stock and Series G Preferred
Stock, plus all Unpaid Dividends on each such share up to
and including the date of redemption.
Payment shall be applied to the redemption of the
shares of Series F Preferred Stock and the Series G Preferred
Stock, pro rata (based on the respective Stated Values plus
Unpaid Dividends) among the holders of all outstanding shares
of the Series F Preferred Stock and the Series G Preferred
Stock on the Mandatory Redemption Date and shall be paid to
each such holder upon surrender of the certificate or
certificates evidencing such shares to be redeemed to the
secretary of the Company.
1.5.3. Special Redemption. (a) Upon the
occurrence of any Special Redemption Event (as hereinafter
defined, each holder of Series F Preferred Stock and Series G
Preferred Stock shall have the right to require that the
Company redeem, to the extent the Company lawfully may do so,
all or a portion of the shares of Series F Preferred Stock and
Series G Preferred Stock held by such holder, at a redemption
price in cash equal to the Stated Value per share (plus all
Unpaid Dividends thereon to the redemption date). No shares of
Series F Preferred Stock shall be redeemed pursuant to this
Section 1.5.3 unless concurrently therewith shares of Series G
Preferred Stock are redeemed on a pro rata basis (based on the
respective Stated Values plus Unpaid Dividends of the Series F
Preferred Stock and the Series G Preferred Stock) and no shares
of Series G Preferred Stock shall be redeemed pursuant to this
Section 1.5.3 unless concurrently therewith shares of Series F
Preferred Stock are redeemed on a pro rata basis (based on the
respective Stated Values plus Unpaid Dividends of the Series F
Preferred Stock and the Series G Preferred Stock).
(b) Within five Business Days following any Special
Redemption Event (as hereinafter defined), the Company will
mail to each holder of Series F Preferred Stock and Series G
Preferred Stock a notice (the "Special Redemption Event
Notice") (i) stating that a Special Redemption Event has
occurred; (ii) setting forth a purchase date (the "Special
Redemption Date"), which shall be no earlier than 20 Business
Days nor later than 30 Business Days from the date the Special
Redemption Event Notice is mailed; (iii) setting forth the
Conversion Price then in effect with respect to such shares of
Series F Preferred Stock and Series G Preferred Stock, pursuant
to the provisions of Section 1.6 hereof; and (iv) setting forth
the instructions reasonably determined by the Company,
consistent with this Section 1.5.3 and applicable law, that a
holder must follow in order to require the redemption of his
Series F Preferred Stock and Series G Preferred Stock. Holders
of Series F Preferred Stock and Series G Preferred Stock
seeking to require that the Company redeem their shares will be
required to surrender their shares to the Company prior to the
close of business on the third Business Day prior to the
Special Redemption Date.
(c) Immediately prior to the redemption of any
shares of Series F Preferred Stock and Series G Preferred Stock
pursuant to this Section 1.5.3., the Company shall declare and
pay a cash dividend on all outstanding shares of Series F
Preferred Stock and Series G Preferred Stock in an amount equal
to the aggregate amount of all accumulated and unpaid dividends
that have been added to the Stated Value thereof and all
accrued Unpaid Dividends thereon to the Special Redemption
Date. Upon the Special Redemption Date, the redemption price
of such shares shall be payable to the order of the person
whose name appears on the certificate or certificates
representing such shares as the owner thereof and each
surrendered certificate shall be cancelled. From and after the
date the Company shall irrevocably deposit an amount equal to
the redemption price of the shares of Series F Preferred Stock
and Series G Preferred Stock to be redeemed in trust for the
holders of such shares with a bank having capital and surplus
in excess of $100 million, which bank shall be named in the
Special Redemption Event Notice, all rights of the holders of
such Series F Preferred Stock, except the right to receive such
redemption price without interest upon surrender of their
certificate or certificates, shall cease with respect to such
shares, and such shares shall not thereafter be transferred on
the books of the Company or be deemed to be outstanding for any
purpose whatsoever.
(d) "Special Redemption Event" shall mean:
(i) consummation of any merger,
reorganization or consolidation transaction
involving the Company;
(ii) the acquisition by purchase or otherwise
of a controlling interest in the business or
assets of, or the stock or other evidence of
beneficial ownership of, any other Person if
consummation of such transaction results in a
transfer of ownership of a majority of the
voting securities of the Company to such other
Person or its stockholders;
(iii) except in connection with the execution
of the agreement contemplated by Section
1.1.7(b) hereof, the sale, lease, conveyance,
transfer, exchange, encumbrance or other
disposition, in one transaction or a series of
related transactions, of more than 25% of the
assets of the Company; or
(iv) the sale or other disposition of voting
securities of the Company, in a transaction or a
series of related transactions, if consummation
of such transaction or transactions results in a
transfer of ownership of a majority of the
voting securities of the Company.
(e) Anything in this Section 1.5.3 to the contrary
notwithstanding, no BHCA Holder shall be entitled to require
that the Company redeem any of its Series G Preferred Stock
pursuant to this Section 1.5.3 unless the Federal Reserve
System has confirmed in advance that such redemption does not
violate the Bank Holding Company Act of 1956, as amended.
1.5.4. With respect to any optional redemption of
Series G Preferred Stock, each redemption of Series G Preferred
Stock shall be made so that the number of shares of Series G
Preferred Stock held by each registered holder thereof shall be
reduced in an amount which shall bear the same ratio to the
total number of shares of Series G Preferred Stock being so
redeemed as the number of shares of Series G Preferred Stock
then held by such holder bears to the aggregate number of
shares of Series G Preferred Stock then outstanding.
1.5.5. Except as otherwise provided herein, at least
twenty (20) days before any Redemption Date (ten (10) days if
such redemption is in connection with a Book Value Event), a
Redemption Notice shall be mailed, postage prepaid, to each
holder of record of the Series F Preferred Stock and Series G
Preferred Stock which is to be redeemed, at its address shown
on the records of the Company; provided, however, that the
Company's failure to give such Redemption Notice shall in no
way affect its obligation to redeem the shares of Series F
Preferred Stock and Series G Preferred Stock as provided
herein. The Redemption Notice shall set forth:
(i) the number of shares of Series F Preferred
Stock held by the holder which shall be redeemed by
the Company, and the total number of shares of Series
F Preferred Stock and Series G Preferred Stock held
by all holders of such series to be so redeemed;
(ii) the Redemption Date and the redemption
price;
(iii) that the holder is to surrender to the
Company, at the place designated therein, its
certificate or certificates representing the shares
of Series F Preferred Stock and Series G Preferred
Stock to be redeemed;
(iv) the Conversion Price then in effect with
respect to such shares of Preferred Stock, pursuant
to the provisions of Section 1.6 hereof; and
(v) that the conversion rights of shares of
Series F Preferred Stock and Series G Preferred Stock
to be redeemed shall terminate at the close of
business on the date prior to the Redemption Date.
1.5.6. Each holder of shares of Series F Preferred
Stock and Series G Preferred Stock to be redeemed shall
surrender the certificate or certificates representing such
shares to the Company at the place designated in the Redemption
Notice and thereupon the applicable redemption price for such
shares shall be paid to the order of the Person whose name
appears on such certificate or certificates and each
surrendered certificate shall be cancelled and retired.
1.5.7. From and after the Redemption Date, no shares
of Series F Preferred Stock and Series G Preferred Stock
thereupon subject to redemption shall be entitled to any
further accrual of any dividends pursuant to Section 1.2 hereof
or to the conversion provisions set forth in Section 1.6
hereof; provided, however, that sufficient funds for payment of
the redemption price for the shares of Series F Preferred Stock
and Series G Preferred Stock to be redeemed are deposited or
held and set apart for that purpose at the place of payment on
or prior to the Redemption Date.
1.5.8. If the Redemption Notice shall have been
mailed as provided herein, and if on or before the Redemption
Date specified in such notice the consideration necessary for
such redemption shall have been set apart so as to be available
therefor, then on and after the close of business on the
Redemption Date the shares of Series F Preferred Stock and
Series G Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and
all rights with respect to such shares shall forthwith cease
and terminate, except only the right of the holders thereof to
receive upon surrender of their certificates the consideration
payable upon redemption thereof. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
1.6. Conversion Rights.
1.6.1. After June 30, 1996, each holder of the
shares of Series G Preferred Stock shall have the right, at the
election of such holder, exercised at any time and from time to
time, to convert, subject to the terms and provisions hereof
(including, in the case of BHCA Holders, the restrictions
stated in Section 1.14.2 hereof), all or any portion of such
shares of Series G Preferred Stock into fully paid and non-
assessable shares of Common Stock of the Company or any capital
stock or other securities into which such Common Stock shall
have been changed or any capital stock or other securities
resulting from a reclassification thereof. Such conversion of
Series G Preferred Stock to shares of Common Stock shall be
made at the Conversion Price, subject to adjustment from time
to time as set forth herein. Series G Preferred Stock may be
converted by the holder thereof during normal business hours on
any Business Day by surrender of the required number of shares
of Series G Preferred Stock, accompanied by written evidence of
the holder's election to convert such holder's Series G
Preferred Stock or portion thereof, to the Company at its
principal executive offices. Payment of the Conversion Price
for the shares of Common Stock specified in such election shall
be made by applying shares of Series G Preferred Stock, valued
at the Stated Value per share. Payment of Unpaid Dividends, if
any, applicable to such converted shares of Series G Preferred
Stock shall be made in accordance with Section 1.6.4.
1.6.2. Upon the conversion of Series G Preferred
Stock, the holders of such Series G Preferred Stock shall
surrender the certificates representing such shares at the
office of the Company. The Company shall not be obligated to
issue certificates evidencing the shares of Common Stock
issuable upon such conversion (or to pay any Unpaid Dividends
in connection with such conversion) unless certificates
evidencing such shares of Series G Preferred Stock being
converted are either delivered to the Company or the holder
notifies the Company that such certificates have been lost,
stolen, or destroyed and delivers to the Company an agreement
satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection therewith.
1.6.3. Each conversion of Series G Preferred Stock
shall be deemed to have been effected immediately prior to the
close of business on the Business Day on which such Series F
Preferred Stock shall have been surrendered to the Company as
provided herein, and such conversion shall be at the Conversion
Price in effect at such time. On each such day that the
conversion of shares of Series G Preferred Stock is deemed
effected, the person or persons in whose name or names any
certificate or certificates for shares of Common Stock are
issuable upon such conversion shall be deemed to have become
the holder or holders of record thereof.
1.6.4. As promptly as practical after the
conversion of shares of Series G Preferred Stock, in whole or
in part, and in any event within five (5) Business Days
thereafter, the Company at its expense (including the payment
by it of any applicable issue, stamp or other taxes, other than
any income taxes and other than any taxes arising by reason of
issuance of shares of Common Stock to any person other than
such holder) will cause to be issued in the name of and
delivered to the holder thereof or as such holder may direct,
(i) a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled upon such
conversion plus, in lieu of any fractional shares to which such
holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Current Market Price per share of
Common Stock and (ii) Unpaid Dividends, if any, applicable as
of the time of conversion to those shares of Preferred Stock
which are converted. Such Unpaid Dividends shall be paid in
cash, without interest. In case fewer than all the shares of
Series G Preferred Stock represented by any surrendered
certificate are converted into Common Stock, a new certificate
representing the shares of Series G Preferred Stock not
converted shall be issued without cost to the holder thereof.
1.7. Anti-Dilution Adjustments. The number of
shares of Common Stock issuable upon any conversion provided
for in Section 1.6 shall be subject to adjustment, from time to
time, in accordance with the following provisions:
1.7.1. Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to time
after the date hereof shall issue or sell Additional Shares of
Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 1.7.3 or 1.7.4) without
consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to such issue or
sale, then, in each such case, subject to Section 1.7.8, such
Conversion Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent)
equal to the consideration per share paid for such additional
shares of Common Stock.
1.7.2. Adjustment of Conversion Price Upon
Extraordinary Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution
(including, without limitation, any distribution of other or
additional stock or other securities or property or Options by
way of dividend or spin-off, reclassification, recapitalization
or similar corporate rearrangement) on the Common Stock, other
than a dividend payable in Additional Shares of Common Stock,
then, and in each such case, subject to Section 1.7.8, the
Conversion Price in effect immediately prior to the close of
business on the record date fixed for the determination of
holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the
close of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying such
Conversion Price by a fraction
(a) the numerator of which shall be the Current
Market Price in effect on such record date or, if the Common
Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading, less the amount of such
dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of
Common Stock,
(b) the denominator of which shall be such Current
Market Price,
provided that, in the event that the amount of such dividend as
so determined is equal to or greater than 25% of such Current
Market Price or in the event that such fraction is less than
three fourths (3/4), in lieu of the foregoing adjustment,
adequate provision shall be made so that the holders of the
Series F Preferred Stock shall receive, in the same form and at
the same time such dividend is payable to holders of Common
Stock, a pro rata share of such dividend based upon the maximum
number of shares of Common Stock at the time issuable to such
holders upon conversion of such Series F Preferred Stock.
1.7.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time to
time after the date hereof shall issue, sell, grant or assume,
or shall fix a record date for the determination of holders of
any class of securities entitled to receive, any Options or
Convertible Securities, then and in each such case, the maximum
number of Additional Shares of Common Stock (as set forth in
the instrument relating thereto, without regard to any
provisions contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the
time of such issue, sale, grant or assumption or, in case such
a record date shall have been fixed, as of the close of
business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional Shares of
Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 1.7.5)
of such shares would be less than the Conversion Price in
effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of
business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be, and provided,
further, that in any such case in which Additional Shares of
Common Stock are deemed to be issued
(a) no further adjustment of the Conversion Price
shall be made upon the subsequent issue or sale of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or
decrease in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof (by
change of rate or otherwise), the Conversion Price computed
upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective,
be recomputed to reflect such increase or decrease insofar as
it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are
outstanding at such time;
(c) upon the expiration (or purchase by the Company
and cancellation or retirement) of any such Options which shall
not have been exercised or the expiration of any rights of
conversion or exchange under any such Convertible Securities
which shall not have been exercised (or purchase by the Company
and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which
shall not have been exercised), the Conversion Price computed
upon the original issue, sale, grant or assumption (or upon the
occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of
Common Stock issued or sold were the Additional
Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the
conversion or exchange of such Convertible Securities
and the consideration received therefor was the
consideration actually received by the Company for
the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the
consideration actually received by the Company upon
such exercise, or for the issue or sale of all such
Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if
any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise of such
Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received
by the Company for the issue, sale, grant or
assumption of all such Options, whether or not
exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 1.7.5)
upon the issue or sale of such Convertible Securities
with respect to which such Options were actually
exercised;
(d) no readjustment pursuant to subdivision (b) or
(c) above shall have the effect of increasing the Conversion
Price by an amount in excess of the amount of the adjustment
thereof originally made in respect of the issue, sale, grant or
assumption of such Options or Convertible Securities; and
(e) in the case of any such Options which expire by
their terms not more than thirty (30) days after the date of
issue, sale, grant or assumption thereof, no adjustment of the
Conversion Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
1.7.4. Treatment of Stock Dividends, Stock Splits,
etc. In case the Company at any time or from time to time
after the date hereof shall declare or pay any dividend on the
Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in Common Stock),
then, and in each such case, Additional Shares of Common Stock
shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in the
case of any such subdivision, at the close of business on the
date immediately prior to the day upon which such corporate
action becomes effective.
1.7.5. Computation of Consideration. For the
purposes of this Section 1.7,
(a) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the
accounting treatment of such consideration,
(i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company,
without deducting any expenses paid or incurred by
the Company or any commissions or compensation paid
or concessions or discounts allowed to underwriters,
dealers or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be computed
at the fair value thereof at the time of such issue
or sale, as determined in good faith by the Board of
Directors of the Company (subject to confirmation by
a firm of independent certified public accountants of
recognized standing approved by the holders of a
majority of the Series F Preferred Stock and Series G
Preferred Stock), and
(iii) in case Additional Shares of Common Stock
are issued or sold together with other stock or
securities or other assets of the Company for a
consideration which covers both, be the portion of
such consideration so received, computed as provided
in clauses (i) and (ii) above, allocable to such
Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by the holders of a
majority of the Series F Preferred Stock and Series G
Preferred Stock);
(b) Additional Shares of Common Stock deemed to have
been issued pursuant to Section 1.7.3, relating to Options and
Convertible Securities, shall be deemed to have been issued for
a consideration per share determined by dividing
(i) the total amount, if any, received and
receivable by the Company as consideration for the
issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible Securities
or, in the case of Options for Convertible
Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange
of such Convertible Securities, in each case
computing such consideration as provided in the
foregoing subdivision (a),
by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have
been issued pursuant to Section 1.7.4, relating to stock
dividends, stock splits, etc., shall be deemed to have been
issued for no consideration.
1.7.6. Adjustments for Combinations, etc. In case
the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price in
effect immediately prior to such combination or consolidation
shall, concurrently with the effectiveness of such combination
or consolidation, be proportionately increased.
1.7.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or shall
become subject to issue or sale upon the conversion or exchange
of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in
Section 1.8) or to subscription, purchase or other acquisition
pursuant to any Options issued or granted by the Company (or
any such other issuer or Person) for a consideration such as to
dilute, on a basis consistent with the standards established in
the other provisions of this Section 1.7, the conversion rights
granted to holders of Series F Preferred Stock, then, and in
each such case, the computations, adjustments and readjustments
provided for in this Section 1.7 with respect to the Conversion
Price shall be made as nearly as possible in the manner so
provided and applied to determine the amount of Other
Securities from time to time receivable upon the conversion of
the shares of Series F Preferred Stock, so as to protect the
holders of the Series F Preferred Stock against the effect of
such dilution.
1.7.8. Minimum Adjustment of Conversion Price. If
the amount of any adjustment of the Conversion Price required
pursuant to this Section 1.7 would be less than one-half of one
percent (1%) of the Conversion Price in effect at the time such
adjustment is otherwise so required to be made, such amount
shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one-half
of one percent (1%) of such Conversion Price.
1.8. Consolidation, Merger, etc.
1.8.1. Adjustments for Consolidation, Merger, Sale
of Assets, Reorganization, etc. In case the Company after the
date hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into the Company and the
Company shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Common Stock
or Other Securities shall be changed into or exchanged for
stock or other securities of any Other Person or cash or any
other property, or (c) shall transfer all or substantially all
of its properties or assets to any other Person, or (d) shall
effect a capital reorganization or reclassification of the
Common Stock or Other Securities (other than a capital
reorganization or reclassification resulting in the issue of
Additional Shares of Common Stock for which adjustment in the
Conversion Price is provided in subsection 1.7.1 or 1.7.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the terms
and in the manner provided herein, the holders of shares of
Series F Preferred Stock, upon the conversion thereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Conversion Price in
effect at the time of such consummation for all Common Stock or
Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other
Securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or other
property to which such holder would actually have been entitled
as a stockholder upon such consummation if such holder had
exercised the conversion rights pertaining to the Series F
Preferred Stock immediately prior thereto.
1.8.2. Assumption of Obligations. Notwithstanding
anything to the contrary herein provided, the Company will not
effect any of the transactions described in subsections (a)
through (d) of Section 1.8.1 unless, prior to the consummation
thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property
upon the conversion of shares of Series G Preferred Stock as
provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the holders of the Series F
Preferred Stock (a) the obligations of the Company with respect
to the Series G Preferred Stock (and if the Company shall
survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company
from, any continuing obligations of the Company with respect to
the Series F Preferred Stock), and (b) the obligation to
deliver to such holder such shares of stock, securities, cash
or property as, in accordance with the foregoing provisions of
this Section 1.8, such holder may be entitled to receive, and
such Person shall have similarly delivered to such holders of
Series G Preferred Stock an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to such holders,
stating that the rights and privileges of the Series G
Preferred Stock shall thereafter continue in full force and
effect and the terms thereof (including, without limitation,
all of the provisions of this Section 1.8) shall be applicable
to the stock, securities, cash or property which such Person
may be required to deliver upon any conversion of shares of
Series G Preferred Stock or the exercise of any rights pursuant
hereto.
1.9. Other Dilutive Events. In case any event shall
occur as to which the provisions of Section 1.7 or Section 1.8
are not strictly applicable but the failure to make any
adjustment would not fairly protect the conversion rights
pertaining to shares of Series G Preferred Stock in accordance
with the essential intent and principles of such sections,
then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national
standing (such firm to be subject to the approval of the
holders of a majority of the Series F Preferred Stock and the
Series G Preferred Stock), which shall give their opinion
regarding the adjustment, if any, on a basis consistent with
the essential intent and principles established in Sections 1.7
and 1.8, necessary to preserve, without dilution, the
conversion rights of the Series F Preferred Stock and the
Series G Preferred Stock. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to each holder of
Series F Preferred Stock and the Series G Preferred Stock and
shall make the adjustments described therein.
1.10. No Dilution or Impairment. The Company will
not, by amendment of its certificate of incorporation or by-
laws or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Series G
Preferred Stock, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to
protect the rights of the holders of shares of Series G
Preferred Stock against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will
not permit the par value of any shares of stock receivable upon
the conversion of Series G Preferred Stock to exceed the amount
payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-
assessable shares of stock on the conversion of the shares of
Series G Preferred Stock from time to time outstanding, and (c)
will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the
conversion of all of the outstanding shares of Series G
Preferred Stock would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the
Company's certificate of incorporation and available for the
purpose of issue upon such exercise.
1.11. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares of
Common Stock (or Other Securities) issuable upon the conversion
of shares of Series G Preferred Stock, the Company at its
expense will promptly compute such adjustment or readjustment
in accordance with the terms hereof and cause independent
certified public accountants of recognized standing (such firm
to be subject to the approval of the holders of a majority of
the outstanding Series F Preferred Stock and Series G Preferred
Stock) selected by the Company to verify such computation and
prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation
thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to
have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Conversion
Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 1.7) on account
thereof. The Company will forthwith mail a copy of each such
report to each holder of shares of Series F Preferred Stock and
Series G Preferred Stock and will, upon the written request at
any time of any holder of shares of Series F Preferred Stock
and Series G Preferred Stock, furnish to such holder a like
report setting forth the Conversion Price at the time in effect
and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its
principal office and will cause the same to be available for
inspection at such office during normal business hours by any
holder of Series F Preferred Stock and Series G Preferred Stock
or any prospective purchaser of Series F Preferred Stock or
Series G Preferred Stock designated by the holder thereof.
1.12. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any
dividend (other than dividends payable with respect to the
Series F Preferred Stock and Series G Preferred Stock) or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any consolidation or merger involving the
Company and any other Person or any transfer of all or
substantially all of the assets of the Company to any other
Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of shares of Series F
Preferred Stock and Series G Preferred Stock a notice
specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected
date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place and the time, if any
such time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for
the securities or other property deliverable upon such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or
winding-up.
1.13. Retirement of Converted or Redeemed Shares.
No share or shares of Series G Preferred Stock acquired by the
Company by reason of optional or mandatory redemption,
purchase, conversion or otherwise shall be re-issued and all
such shares shall be cancelled, retired and eliminated from the
shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of
shares of Series G Preferred Stock accordingly.
1.14. Restrictions on Transfer and Conversion of the
Series G Preferred Stock By BHCA Holders.
1.14.1. A BHCA Holder may transfer Series G
Preferred Stock only to an unaffiliated third party (a) in a
widely dispersed public offering, (b) to one or more investors,
in one or more transactions, none of whom, after such purchase
would hold more than 2% of the voting securities of the Company
then outstanding assuming that the Series G Preferred Stock
being transferred to such investor has been fully converted by
such investor, (c) to any Person that already controls the
Company prior to such transfer, (d) in a transaction that
complies with Rule 144 (or any successor thereto) of the
Securities Act of 1933, as amended, or (e) in any other
transaction approved in advance by the Federal Reserve System.
1.14.2. A BHCA Holder may only convert Series G
Preferred Stock into Common Stock in connection with the sale
of the Common Stock to an unaffiliated party (a) in a widely
dispersed public offering, (b) to one or more investors, in one
or more transactions, none of whom, after such purchase would
hold more than 2% of the voting securities of the Company then
outstanding, (c) to any Person that already controls the
Company prior to such transfer, (d) in a transaction that
complies with Rule 144 (or any successor thereto) of the
Securities Act of 1933, as amended, or (e) in any other
transaction approved in advance by the Federal Reserve System.
FURTHER RESOLVED, that, before the Company shall issue any
shares of Series G Preferred Stock, a certificate pursuant to
Section 151 of the DGCL shall be made, executed, acknowledged,
filed, and recorded in accordance with the provisions of
Section 103 and 151 of the DGCL, and the proper officers of the
Company be, and they hereby are, authorized and directed to do
all acts and things which may be necessary or proper in their
opinion to carry into effect the purposes and intent of this
and the foregoing resolutions.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be signed in its name and on its behalf and attested on this
30th day of January, 1996 by duly authorized officers of this
Corporation.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Name: Simon N. Heifetz
Title: Vice Chairman
NESTOR, INC.
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND SPECIAL RIGHTS
OF SERIES H CONVERTIBLE PREFERRED STOCK
RELATIVE RIGHTS AND PREFERENCES AND
OTHER TERMS AS FIXED AND DETERMINED BY THE
BOARD OF DIRECTORS
* * * * * *
Nestor, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State
of Delaware, does hereby certify that pursuant to the
provisions of Section 151 of the General Corporation Law
of the State of Delaware, the Board of Directors of the
Company, by action taken on January 13, 1996, adopted the
following resolution, which resolution remains in full
force and effect as of the date hereof;
WHEREAS, the Board of Directors of the Company is
authorized, within the limitations and restrictions
stated in the Certificate of Incorporation, to fix by
resolution or resolutions the designation of each series
of preferred stock and the powers, preferences and
relative, participating, optional or other special rights
and qualifications, limitations or restrictions thereof,
including, without limiting the generality of the
foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution
or resolutions of the Board of Directors under the
General Corporation Law of Delaware; and
WHEREAS, it is the desire of the Board of Directors of
the Company pursuant to its authority as aforesaid, to
authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby
authorized such series of preferred stock on the terms
and with the provisions herein set forth:
Designation, Amount and Rank. Two thousand twenty-six
(2,026) shares of a convertible preferred stock, $1.00
par value per share, shall constitute a series of such
preferred stock designated as "Series H Convertible
Preferred Stock" (the "Series H Preferred Stock"). With
respect to dividend rights, redemption rights and rights
on liquidation, winding up and dissolution, the Series H
Preferred Stock (i) shall rank junior to the Series F
Preferred Stock and the Series G Preferred Stock, (ii)
shall rank pari passus with the Series A Preferred Stock
and Series E Preferred Stock, and (iii) shall rank prior
to the Series B Preferred Stock, the Series D Preferred
Stock, the Common Stock and any other class of capital
stock or series of preferred stock hereafter created.
The Series H Preferred Stock shall be issued pursuant to
the following additional terms and conditions:
1. Series H Preferred Stock.
1.1. Definitions.
As used herein, unless the context otherwise
requires, the following terms have the following
meanings:
1.1.1. "Additional Director" means any
director whom holders of shares of Series E Preferred
Stock and Series H Preferred Stock shall be entitled to
elect by virtue of the provisions of Section 1.4.3
hereof.
1.1.2. "Additional Shares of Common Stock"
means all shares (including treasury shares) of Common
Stock issued or sold (or, pursuant to Sections 1.7.3 or
1.7.4, deemed to be issued) by the Company after the date
hereof, whether or not subsequently reacquired or retired
by the Company other than (a) the issuance of shares upon
conversion of the Preferred Stock; (b) shares issued upon
the exercise of the Currently Outstanding Warrants; (c)
shares issued upon the exercise of the Warrants; (d)
shares to be issued pursuant to Company sponsored
employee benefit and compensation arrangements, but not
to exceed 2,000,000 (subject to equitable adjustment in
the event of any combination, reclassification, stock
split, dividend or recapitalization of the Company); and
(e) such additional number of shares, if any, as may
become issuable upon the conversion or exercise of any of
the securities referred to in the foregoing clauses (a)
through (d) and by reason of adjustments required
pursuant to anti-dilution provisions applicable to such
Preferred Stock as in effect on the date hereof, but only
if and to the extent that such adjustments are required
as the result of the original issuance of such Series H
Preferred Stock.
1.1.3. "Book Value Event" means the end of any
fiscal quarter of the Company if the book value per share
of Common Stock of the Company determined in accordance
with generally accepted accounting principles (assuming
the conversion of all outstanding Convertible Securities
and the exercise of all outstanding Company stock options
but excluding the effect of the exercise of the Currently
Outstanding Warrants or the Warrants) exceeds $.70.
1.1.4. "Business Day" means any day other than
a Saturday or a Sunday or a day on which commercial
banking institutions in the City of New York are
authorized by law or other governmental action to be
closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
1.1.5. "Closing" means the date of closing of
any Triggering Event, as contemplated by Section 1.6.2
hereof.
1.1.6. "Common Stock" means the Company's
Common Stock, $.01 par value, such term to include any
stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification
of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders
of which have the right, without limitation as to amount,
either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to
preference.
1.1.7. "Conversion Price" means (a) prior to
August 1, 2004, $1.50, subject to adjustment pursuant to
Sections 1.7 and 1.9 hereof or (b) on or after August 1,
2004, the lower of $1.00 or the Conversion Price then
otherwise in effect pursuant to the preceding subsection
(a).
1.1.8. "Convertible Securities" means any
evidences of indebtedness, shares of stock (other than
Common Stock) or other securities directly or indirectly
convertible into or exchangeable for additional shares of
Common Stock.
1.1.9. "Current Market Price" means on any
date specified herein, the average daily Market Price
during the period of the most recent twenty (20) days,
ending on such date, on which the national securities
exchanges were open for trading, except that if no Common
Stock is then listed or admitted to trading on any
national securities exchange or quoted in the over-the-
counter market, the Current Market Price shall be the
Market Price on such date.
1.1.10. "Currently Outstanding Warrants" means
the common stock purchase warrants and non-qualified
options listed in Exhibit A hereto for the purchase of an
aggregate of 1,407,375 shares of the Common Stock (based
on the current capitalization of the Company).
1.1.11. "Dividend Payment Date" means March
31, June 30, September 30 and December 31 of each year,
commencing September 30, 1994.
1.1.12. "Dividend Period" means each of the
periods commencing January 1 and ending March 31 of any
year, commencing April 1 and ending June 30 of any year,
commencing July 1 and ending September 30 of any year and
commencing October 1 and ending December 31 of any year.
1.1.13. "Four-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series E Preferred Stock and the Series
H Preferred Stock for any four (4) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any four Dividend Periods within any
eight (8) consecutive Dividend Periods after such date.
1.1.14. "Lender Default" means any time when
(i) the Company shall violate the provisions of or be in
default under the terms of any loan or other agreement
relating to indebtedness of the Company or its
subsidiaries or (ii) a judgement shall be entered against
the Company or any of its subsidiaries, in an amount
exceeding $50,000 for failure to pay trade creditors or
indebtedness and such judgment shall remain unpaid for
more than sixty days.
1.1.15. "Mandatory Redemption Date" means the
Mandatory Redemption Date stated in Section 1.5.2 hereof.
1.1.16. "Market Price" means on any date
specified herein, the amount per share of the Common
Stock, equal to (a) the last sale price of such Common
Stock, regular way, on such date or, if no such sale
takes place on such date, the average of the closing bid
and asked prices thereof on such date, in each case as
officially reported on the principal national securities
exchange on which such Common Stock is then listed or
admitted to trading, or (b) if such Common Stock is not
then listed or admitted to trading on any national
securities exchange but is designated as a national
market system security by the NASD, the last trading
price of the Common Stock on such date, or (c) if there
shall have been no trading on such date or if the Common
Stock is not so designated, the average of the closing
bid and asked prices of the Common Stock on such date as
shown by the NASD automated quotation system, or (d) if
such Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in
the over-the-counter market, the value as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the
Company (and approved by the holders of a majority of the
outstanding shares of Series E Preferred Stock and Series
H Preferred Stock) as of the last day of any month ending
within thirty (30) days preceding the date as of which
the determination is to be made.
1.1.17. "Options" means rights, options or
warrants to subscribe for, purchase or otherwise acquire
either Additional Shares of Common Stock or Convertible
Securities.
1.1.18. "Other Securities" means any stock
(other than Common Stock) and other securities of the
Company or any other Person (corporate or otherwise)
which the holders of Preferred Stock at any time shall be
entitled to receive, or shall have received, upon the
conversion of Preferred Stock, in lieu of or in addition
to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities.
1.1.19. "Person" means a corporation, an
association, a partnership, an organization, a business,
an individual, a government or political subdivision
thereof or a governmental agency.
1.1.20. "Preferred Stock" means, collectively,
the Series A Preferred Stock, the Series B Preferred
Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock, the Series
G Preferred Stock and the Series H Preferred Stock.
1.1.21. "Redemption Date" means any date fixed
for redemption of shares of Series E Preferred Stock and
Series H Preferred Stock pursuant to the provisions of
Section 1.5 hereof.
1.1.22. "Redemption Notice" means the written
notice of redemption contemplated by Section 1.5.5
hereof.
1.1.23. "Restricted Period" shall mean the
period beginning on the date of original issue of any
shares of the Series C Preferred Stock in exchange for
which (and upon the cancellation of) the shares of Series
E Preferred Stock or shares of Series H Preferred Stock
were issued and ending on the earlier of (i) the first
day of the calendar quarter in which the Company first
pays cash dividends on its Common Stock pursuant to
Section 1.2.5 hereof and (ii) June 30, 1998.
1.1.24. "Securities Act" means the Securities
Act of 1933, as amended.
1.1.25. "Series A Preferred Stock" means the
Series A Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 30, 1990 with the Secretary of
State of the State of Delaware.
1.1.26. "Series B Preferred Stock" means the
Series B Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed June 10, 1992 with the Secretary of
State of the State of Delaware.
1.1.27. "Series C Preferred Stock" means the
Series C Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 1, 1994 with the Secretary of
State of the State of Delaware, and cancelled, pursuant
to a Certificate of Cancellation filed with the Secretary
of State of the State of Delaware following the issuance
of the Series E Preferred Stock and the Series H
Preferred Stock.
1.1.28. "Series D Preferred Stock" means the
Series D Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed August 9, 1995 with the Secretary of
State of the State of Delaware.
1.1.29. "Series E Preferred Stock" means the
Series E Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.30. "Series F Preferred Stock" means the
Series F Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.31. "Series G Preferred Stock" means the
Series G Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.32. "Series H Preferred Stock" means the
Series H Convertible Preferred Stock, $1.00 par value, of
the Company created pursuant to a Certificate of
Designation filed January 30, 1996 with the Secretary of
State of the State of Delaware.
1.1.33. "Special Redemption Event" has the
meaning set forth in Section 1.5.3.
1.1.34. "Special Series H Voting Rights" means
the special voting rights which holders of the Series H
Preferred Stock are entitled to exercise by virtue of the
provisions of Section 1.4.3 hereof.
1.1.35. "Stated Value" per share means (i)
with respect to the Series A Preferred Stock, two dollars
($2.00), (ii) with respect to the Series B Preferred
Stock, one dollar ($1.00), (iii) with respect to the
Series D Preferred Stock, one dollar and fifty cents
($1.50), and (iv) with respect to the Series E Preferred
Stock, One Thousand Dollars ($1,000) plus all accumulated
and unpaid dividends, if any, added thereto pursuant to
Section 1.2.2 and minus all amounts paid in cash in
respect of such previously accumulated and unpaid
dividends that were originally added to such Stated Value
pursuant to Section 1.2.2., and (v) with respect to the
Series H Preferred Stock, One Thousand Dollars ($1,000)
plus all accumulated and unpaid dividends, if any, added
thereto pursuant to Section 1.2.2 and minus all amounts
paid in cash in respect of such previously accumulated
and unpaid dividends that were originally added to such
Stated Value pursuant to Section 1.2.2.
1.1.36. "Two-Dividend Default" means any time
when the Company is in default in the payment of cash
dividends on the Series E Preferred Stock and Series H
Preferred Stock for any two (2) consecutive Dividend
Periods occurring after the date on which the Restricted
Period ends or for any two Dividend Periods within any
six (6) consecutive Dividend Periods occurring after such
date.
1.1.37. "Triggering Event" means the
consummation of an underwritten public offering prior to
August 1, 1997 pursuant to an effective registration
statement under the Securities Act covering the offering
and sale of shares of Common Stock (i) in which the
aggregate proceeds to the Company exceed $10,000,000 and
(ii) in which the price per share at which the Common
Stock is initially offered to the public equals or
exceeds $3.00 per share (which amount shall be equitably
adjusted to take into account any changes in
capitalization of the Company occurring after August 1,
1994).
1.1.38. "Unpaid Dividends" means all dividends
with respect to the Series E Preferred Stock and the
Series H Preferred Stock which have accrued but which
have not been either paid in cash or added to the Stated
Value thereof pursuant to Section 1.2.2.
1.1.39. "Warrants" means those certain Common
Stock Purchase Warrants, initially providing for the
acquisition of an aggregate of 1,400,000 shares of Common
Stock, originally issued pursuant to (a) the Securities
Purchase Agreement, dated August 1, 1994, by and between
the Company and Wand/Nestor Investments L.P. (and any
Warrants issued in substitution therefor), and (b) the
Letter of Engagement, dated April 26, 1994, among the
Company, Hill & Partners and Wand Partners Inc. (and any
Warrants issued in substitution therefor).
1.2. Dividends.
1.2.1. The holder of each issued and
outstanding share of Series E Preferred Stock and Series
H Preferred Stock shall be entitled to receive, out of
the funds of the Company legally available for such
purpose, when, as and if declared by the Board of
Directors of the Company, before any dividend shall be
declared, paid or set aside, or any other distribution
shall be declared or made, upon the Common Stock or any
other class or series of stock of the Company (other than
the Series F Preferred Stock and the Series G Preferred
Stock), dividends in cash at a dividend rate of seven
percent (7.0%) per annum of the Stated Value per share of
Series E Preferred Stock and Series H Preferred Stock,
calculated on a daily basis, for each Dividend Period or
portion thereof during which such Series E Preferred
Stock and Series H Preferred Stock are outstanding.
Notwithstanding the foregoing, the Company may declare
and pay dividends in the form of Common Stock (with
fractional shares to be paid in cash) pursuant to the
terms of the Series D Preferred Stock.
1.2.2. Notwithstanding anything to the
contrary herein provided, in the event that any portion
of the quarterly dividend for a Dividend Period on the
Series E Preferred Stock and the Series H Preferred Stock
is not declared and paid in cash on any Dividend Payment
Date, the amount of such accrued dividend which is not so
paid shall be accumulated and shall automatically be
added to the Stated Value of such share on such date.
Accumulated dividends on shares of Series E Preferred
Stock and the Series H Preferred Stock that have
previously been added to the Stated Value thereof
pursuant to the terms hereof may not thereafter be paid
in cash except upon redemption by the Company. Unpaid
dividends shall not bear interest but, to the extent
accumulated and added to the Stated Value, shall continue
to accrue dividends on a daily basis. Accumulated
dividends on any share of Series E Preferred Stock and
the Series H Preferred Stock which are added to the
Stated Value thereof pursuant to the terms hereof shall
not be deemed to be in arrears for any purpose
whatsoever. Any dividends that have accrued on the
Series E Preferred Stock and Series H Preferred Stock but
have not yet been added to the Stated Value thereof shall
constitute Unpaid Dividends. Notwithstanding anything to
the contrary herein provided, no cash dividends shall be
paid with respect to the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock or the
Series D Preferred Stock at any time when there are
Unpaid Dividends with respect to the Series E Preferred
Stock or the Series H Preferred Stock.
1.2.3. Dividends payable with respect to the
Series E Preferred Stock and the Series H Preferred Stock
shall be calculated on the basis of a 360-day year
consisting of twelve (12) months of thirty (30) days each
and shall be payable on each Dividend Payment Date to the
holders of record of the Series E Preferred Stock and the
Series H Preferred Stock at the close of business on the
date specified by the Board of Directors of the Company;
provided, however, that no such record date shall be more
than thirty (30) days nor less than ten (10) days prior
to the respective Dividend Payment Date. Dividends on
shares of Series E Preferred Stock and the Series H
Preferred Stock shall accrue from the date of original
issue of the shares of Series C Preferred Stock in
exchange for which such shares of Series E Preferred
Stock and Series H Preferred Stock were issued. Such
dividends will accrue whether or not they have been
declared and whether or not there are profits, surplus or
other funds of the Company legally available for the
payment of dividends. The date on which the Company
originally issues any share of Series E Preferred Stock
or Series H Preferred Stock will be deemed to be its
"date of original issue" regardless of the number of
times transfer of such share is made on the stock records
maintained by or for the Company.
1.2.4. All dividends paid or added to Stated
Value, as the case may be, with respect to shares of the
Series E Preferred Stock or Series H Preferred Stock
shall be paid or added to Stated Value, as the case may
be, ratably (based on the respective Stated Values plus
Unpaid Dividends of the Series E Preferred Stock and the
Series H Preferred Stock) with respect to such shares to
the holders of Series E Preferred Stock and Series H
Preferred Stock entitled thereto.
1.2.5. So long as any shares of the Series E
Preferred Stock or Series H Preferred Stock are
outstanding, the Company shall not declare, pay or set
apart for payment any dividend or other distribution on
any of the Company's Common Stock, or Preferred Stock
(other than the Series F Preferred Stock, the Series G
Preferred Stock, the Series E Preferred Stock and the
Series H Preferred Stock) or make any payment on account
of, or set apart for payment money for a sinking fund or
other similar fund for the purchase, redemption or other
retirement of, any of the Common Stock, or Preferred
Stock (other than the Series F Preferred Stock, the
Series G Preferred Stock, the Series E Preferred Stock
and the Series H Preferred Stock) or any warrants,
rights, calls or options exercisable for any of the
Common Stock or make any distribution in respect thereof,
either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property
(other than distributions or dividends in stock to the
holders of such stock), and shall not permit any Person
directly or indirectly controlled by the Company to
purchase or redeem any of the Common Stock or Preferred
Stock (other than the Series F Preferred Stock, the
Series G Preferred Stock, the Series E Preferred Stock
and the Series H Preferred Stock) or any warrants,
rights, calls or options exercisable for any of the
Common Stock, unless prior to or concurrently with such
declaration, payment, setting apart for payment, purchase
or distribution, as the case may be, all funds then
required for the mandatory redemption of shares of the
Series E Preferred Stock and the Series H Preferred Stock
pursuant to Section 1.5.2 hereof, shall have been paid or
be paid, and all Unpaid Dividends on shares of the Series
E Preferred Stock and the Series H Preferred Stock not
paid in cash, shall have been paid in cash or be paid in
cash. Notwithstanding the foregoing, the Company may
declare and pay cash dividends on the Common Stock
provided that (a) the Company is not then in default with
respect to any of its obligations to pay dividends on the
Series E Preferred Stock and the Series H Preferred
Stock, (b) cash dividends on Common Stock during any
fiscal year of the Company do not exceed twenty percent
(20%) of the after-tax earnings per share of Common Stock
for the immediately preceding fiscal year of the Company
and (c) all Unpaid Dividends on the Series E Preferred
Stock and the Series H Preferred Stock shall be paid in
cash concurrently with the payment of such cash dividend
on the Common Stock. Notwithstanding the foregoing, the
Company many declare and pay dividends in the form of
Common Stock (with fractional shares to be paid in cash)
pursuant to the terms of the Series D Preferred Stock.
1.3. Rights on Liquidation, Dissolution or
Winding-Up.
1.3.1. In the event of any liquidation,
dissolution or winding-up of the Company (including,
without limitation, a liquidation or reorganization under
Chapter 7 or 11 of Title 11 of the United States Code, as
amended), after payment in full of all amounts due to the
holders of Series F Preferred Stock and Series G
Preferred Stock, the holders of shares of the Series A
Preferred Stock, the Series E Preferred Stock and the
Series H Preferred Stock then issued and outstanding
shall be entitled to be paid out of the assets of the
Company available for distribution to its stockholders,
before any payment shall be made to the holders of Series
B Preferred Stock, Series D Preferred Stock, Common Stock
or of shares of any other class or series of stock of the
Company (other than the Series F Preferred Stock and
Series G Preferred Stock), an amount equal to the Stated
Value per share, plus an amount equal to any Unpaid
Dividends to and including the date of distribution with
respect to such shares. If, upon any liquidation,
dissolution or winding-up of the Company (including,
without limitation, a liquidation or reorganization under
Chapter 7 or 11 of Title 11 of the United States Code, as
amended), the assets of the Company available for
distribution to its stockholders shall, after payment in
full of all amounts due the holders of Series F Preferred
Stock and Series G Preferred Stock, be insufficient (a
"Liquidation Insufficiency") to pay the holders of shares
of the Series A Preferred Stock, the Series E Preferred
Stock and the Series H Preferred Stock the full amounts
to which they shall respectively be entitled, the holders
of shares of the Series A Preferred Stock, the Series E
Preferred Stock and the Series H Preferred Stock shall be
entitled to receive all the assets of the Company
available for distribution and each such holder of shares
of the Series A Preferred Stock, the Series E Preferred
Stock and the Series H Preferred Stock shall share in any
distribution in the proportion which the aggregate Stated
Values of the shares of the Series A Preferred Stock
(plus all Unpaid Dividends thereon), the Series E
Preferred Stock (plus all Unpaid Dividends thereon) and
the Series H Preferred Stock (plus all Unpaid Dividends
thereon) held by such holder of the Series A Preferred
Stock, Series E Preferred Stock or Series H Preferred
Stock bears to the aggregate Stated Values of all shares
of the Series A Preferred Stock (plus all Unpaid
Dividends thereon), Series E Preferred Stock (plus all
Unpaid Dividends thereon) and the Series H Preferred
Stock (plus all Unpaid Dividends thereon) then
outstanding. If there is no Liquidation Insufficiency
and payment shall have been made to the holders of shares
of the Series A Preferred Stock, Series E Preferred Stock
and Series H Preferred Stock of the full amount to which
they shall be entitled, then the holders of shares of the
Series A Preferred Stock, Series E Preferred Stock and
Series H Preferred Stock shall be entitled to receive no
further distributions thereon and the holders of shares
of the Series B Preferred Stock shall be entitled to
receive an amount equal to the Stated Value (plus all
Unpaid Dividends thereon) per share thereof. After
payment shall have been made to the holders of shares of
the Series B Preferred Stock of the full amounts to which
they shall be entitled, the holders of shares of the
Common Stock and of shares of any other class of stock of
the Company, if any, shall be entitled to share,
according to their respective rights and preferences, in
all remaining assets of the Company available for
distribution to its stockholders.
1.4. Voting Power.
1.4.1. Except as otherwise expressly provided
herein or as required by law, (i) each holder of
Series H Preferred Stock shall be entitled to vote on all
matters as to which stockholders of the Company are
entitled to vote, and (ii) each holder of Series H
Preferred Stock shall be entitled to cast a number of
votes equal to the greatest number of whole shares of
Common Stock into which such holder's shares of Series H
Preferred Stock could be converted, pursuant to the
provisions of Section 1.6 hereof, at the record date for
the determination of stockholders entitled to vote on
such matter or, if no such record date is established, at
the date such vote is taken or any written consent of
stockholders is solicited. Except as otherwise expressly
provided herein or as required by law, the holders of
shares of Series B Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock
and Common Stock shall be entitled to vote together as a
class with respect to all matters as to which such
stockholders of the Company are entitled to vote.
1.4.2. The holders of Series E Preferred Stock
and Series H Preferred Stock shall have the right, voting
together separately as a single class, to elect two (2)
directors to the Board of Directors of the Company,
which, unless increased pursuant to the Special Voting
Rights, shall be composed of no more than ten (10)
directors.
1.4.3. In the event that at any time there
shall occur a Two-Dividend Default, then immediately upon
the happening of such Two-Dividend Default and until such
Two-Dividend Default and all defaults in the payment of
quarterly dividends on the Series E Preferred Stock and
Series H Preferred Stock subsequent to and occurring
while such Two-Dividend Default exists shall be cured,
the number of directors constituting the Board of
Directors of the Company shall, without further action,
be increased by two and the holders of Series E Preferred
Stock and Series H Preferred Stock shall have, in
addition to the other voting rights set forth herein, the
exclusive right, voting separately as a class, to elect
two directors of the Company to fill such newly created
directorship, the remaining directors to be elected by
the class or classes of stock (including the Series E
Preferred Stock and the Series H Preferred Stock)
entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors.
In the event that at any time there shall occur a Four-
Dividend Default or a Lender Default, then immediately on
the happening of such Four-Dividend Default or Lender
Default and until such Lender Default or Four-Dividend
Default and all defaults in the payment of quarterly
dividends on the Series E Preferred Stock subsequent to
and occurring while such Four-Dividend Default exists
shall be cured, then the number of directors constituting
the Board of Directors of the Company shall, without
further action, be further increased by six (in the case
of a Four-Dividend Default) or by eight (in the case of a
Lender Default) and the holders of Series E Preferred
Stock and the Series H Preferred Stock shall have, in
addition to the other voting rights set forth herein, the
exclusive right, voting separately as a class, to elect
directors of the Company to fill such newly created
directorships, the remaining directors to be elected by
the class or classes of stock (including the Series E
Preferred Stock and the Series H Preferred Stock)
entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing directors.
During the existence of a Four Dividend Default, a
majority of the Directors not elected by the holders of
the Series E Preferred Stock and the Series H Preferred
Stock (or their affiliates) shall have the right to
declare and pay dividends on the Series E Preferred Stock
and the Series H Preferred Stock out of funds legally
available for the payment of such dividends.
Notwithstanding the foregoing provisions of this Section
1.4.3, upon payment in full of all quarterly dividends on
the Series E Preferred Stock and the Series H Preferred
Stock coming due subsequent to a Four-Dividend Default
and the dividend which resulted in the Four-Dividend
Default, so that no more than three consecutive quarterly
dividends on the Series E Preferred Stock and the Series
H Preferred Stock remain in default, the Special Series H
Voting Rights of the holders of Series E Preferred Stock
and the Series H Preferred Stock shall be reduced so that
they have the right, voting separately as a class, to
elect two Additional Directors of the Company.
Notwithstanding the foregoing provisions of this Section
1.4.3, upon payment in full of (i) all quarterly
dividends on the Series E Preferred Stock and the Series
H Preferred Stock coming due subsequent to a Two-Dividend
Default and the dividend which resulted in the Two-
Dividend Default, or (ii) upon payment in full of all
quarterly dividends on the Series E Preferred Stock and
the Series H Preferred Stock coming due subsequent to a
Four-Dividend Default and three of the dividends which
resulted in a Four-Dividend Default, so that, in each
case, no more than one quarterly dividend remains in
default, or (iii) upon payment in full or cure of all
Lender Defaults, the Special Series H Voting Rights shall
terminate. Upon any termination of the aforesaid Special
Series H Voting Rights, the term of office of each
director elected by the holders of the Series E Preferred
Stock and the Series H Preferred Stock pursuant to this
Section 1.4.3 then in office shall thereupon terminate
and upon such termination the number of directors
constituting the Board of Directors shall, by resolution
of the Board of Directors, be reduced accordingly,
subject always to the subsequent increase of the number
of directors from time to time pursuant to this Section
1.4.3 in the event of the periodic future vesting of the
right of the holders of the Series E Preferred Stock and
Series H Preferred Stock to elect Additional Directors.
The term of office of any director elected by the holders
of the Series E Preferred Stock and Series H Preferred
Stock pursuant to this Section 1.4.3 shall terminate upon
the earlier of the termination of the Special Series H
Voting Rights and the election of a successor to such
director at any meeting of holders of the Series E
Preferred Stock and the Series H Preferred Stock for the
purpose of electing directors.
1.4.4. Special Series H Voting Rights may be
exercised either at a special meeting of holders of the
Series E Preferred Stock and the Series H Preferred
Stock, or at any annual or special meeting of
stockholders of the Company, or may be exercised by the
written consent of holders of the Series E Preferred
Stock and the Series H Preferred Stock pursuant to the
Delaware General Corporation Law.
1.4.5. At any time when Special Series H
Voting Rights pursuant to Section 1.4.3 above shall have
vested in holders of the Series E Preferred Stock and the
Series H Preferred Stock, and if such rights shall have
not already been initially exercised, a proper officer of
the Company shall, upon the written request of any holder
of record of the Series E Preferred Stock or Series H
Preferred Stock then outstanding, addressed to the
secretary of the Company, call a special meeting of
holders of the Series E Preferred Stock and Series H
Preferred Stock for the purpose of electing directors.
Such meeting shall be held at the earliest practicable
date upon the notice required for annual meetings of the
stockholders at the place for holding annual meetings of
the stockholders of the Company or, if none, at a place
designated by the secretary of the Company. If such a
meeting shall not be called by the proper officer of the
Company within ten (10) days after the personal service
of such written request upon the secretary of the
Company, or within ten (10) days after mailing the same
within the United States, by first-class registered mail,
addressed to the secretary of the Company at the
Company's principal office (such mailing to be evidenced
by registry receipt issued by the postal authorities),
then the holders of record of ten percent (10%) of the
shares of the Series E Preferred Stock or the Series H
Preferred Stock then outstanding may designate in writing
a holder of Series E Preferred Stock or Series H
Preferred Stock to call such meeting at the expense of
the Company, and such meeting may be called by such
person so designated upon the notice required for annual
meetings of stockholders and shall be held at the same
place as is elsewhere provided in this Section 1.4.5.
Any holder of Series E Preferred Stock or Series H
Preferred Stock shall have access to the stock books of
the Company for the purpose of causing a meeting of
holders of Series E Preferred Stock and Series H
Preferred Stock to be called pursuant to the provisions
hereof.
1.4.6. At any meeting held for the purpose of
electing directors at which the holders of Series E
Preferred Stock and Series H Preferred Stock shall have
the right to elect directors as provided herein, the
presence in person or by proxy of the holders of twenty-
five percent (25%) of the then outstanding shares of
Series E Preferred Stock and Series H Preferred Stock
shall be required and shall be sufficient to constitute a
quorum of such class for the election of directors by
such class. In the absence of a quorum of the holders of
Series E Preferred Stock and Series H Preferred Stock
entitled to vote for the election of directors, a
majority of the holders present in person or by proxy of
such class shall have the power to adjourn the meeting
for the election of directors which the holders of such
class are entitled to elect, from time to time, without
notice other than announcement at the meeting, until a
quorum shall be present.
1.4.7. Unless the vote of the holders of a
greater number of shares of this Series H Preferred Stock
shall then be required by law, the consent of the holders
of at least 66-2/3% of all of the shares of this Series H
Preferred Stock at the time outstanding, voting together
as a separate class, shall be necessary for authorizing,
effecting or validating any of the following:
(a) the creation, authorization or issue of
any shares of any class or series of stock of the Company
ranking prior to, or pari passu with, the shares of this
Series H Preferred Stock as to dividends or upon
liquidation or otherwise, or the reclassification of any
authorized stock of the Company into any such prior
shares, or the creation, authorization or issue of any
obligation or security convertible into or evidencing the
right to purchase any such prior shares; and
(b) the amendment, alteration or repeal of any
of the provisions of the Certificate of Incorporation or
of any certificate amendatory thereof or supplemental
thereto so as to affect adversely the preferences,
rights, powers or privileges of this Series H Preferred
Stock;
1.5. Redemption.
1.5.1. Optional Redemption. On or after
August 1, 1995, the Company shall have the right to
redeem all or part of the Series H Preferred Stock upon
not less than ten (10) days prior written notice to the
holders of the Series H Preferred Stock.
No shares of Series H Preferred Stock shall be
redeemed pursuant to this Section 1.5.1 unless
concurrently therewith shares of Series E Preferred Stock
are redeemed on a pro rata basis (based on the respective
Stated Values plus Unpaid Dividends of the Series H
Preferred Stock and the Series E Preferred Stock) and no
shares of Series E Preferred Stock shall be redeemed
unless concurrently therewith shares of Series H
Preferred Stock are redeemed on a pro rata basis (based
on the respective Stated Values plus Unpaid Dividends of
the Series H Preferred Stock and the Series E Preferred
Stock).
In the event of optional redemption by the
Company within sixty days following any occurrence of a
Book Value Event or in the event of optional redemption
by the Company after December 31, 2004, shares of Series
E Preferred Stock and Series H Preferred Stock shall be
redeemed at a redemption price equal to the Stated Value
per share, plus all Unpaid Dividends payable with respect
to such shares as of the date fixed for redemption,
without interest. In the event of optional redemption by
the Company prior to January 1, 2005 in the absence of
the existence of a Book Value Event, shares of Series E
Preferred Stock and Series H Preferred Stock shall be
redeemed at a redemption price equal to 107% of the
Stated Value per share, plus all Unpaid Dividends payable
with respect to such shares as of the date fixed for
redemption without interest. In either circumstance,
such redemption price shall be paid in cash.
1.5.2. Mandatory Redemption. The Company
shall redeem all (but not less than all) shares of Series
E Preferred Stock and Series H Preferred Stock on August
1, 2004 (the "Mandatory Redemption Date") at a cash
redemption price equal to the Stated Value per share of
such Series E Preferred Stock and Series H Preferred
Stock, plus all Unpaid Dividends on each such share up to
and including the date of redemption.
Payment shall be applied to the redemption of the shares
of Series E Preferred Stock and Series H Preferred Stock,
pro rata (based on the respective Stated Values plus
Unpaid Dividends) among the holders of all outstanding
shares of the Series E Preferred Stock and Series H
Preferred Stock on the Mandatory Redemption Date and
shall be paid to each such holder upon surrender of the
certificate or certificates evidencing such shares to be
redeemed to the secretary of the Company. If the Company
fails to redeem all outstanding shares of Series E
Preferred Stock and Series H Preferred Stock on the
Mandatory Redemption Date, then the other terms of the
Series E Preferred Stock and Series H Preferred Stock
shall remain in full force and effect and the holder
shall have no further recourse against the Company.
1.5.3. Special Redemption. (a) Upon the
occurrence of any Special Redemption Event (as
hereinafter defined, each holder of Series E Preferred
Stock and Series H Preferred Stock shall have the right
to require that the Company redeem, to the extent the
Company lawfully may do so, all or a portion of the
shares of Series E Preferred Stock and Series H Preferred
Stock held by such holder, at a redemption price in cash
equal to the Stated Value per share (plus all Unpaid
Dividends thereon to the redemption date). No shares of
Series H Preferred Stock shall be redeemed pursuant to
this Section 1.5.3 unless concurrently therewith shares
of Series E Preferred Stock are redeemed on a pro rata
basis (based on the respective Stated Values plus Unpaid
Dividends of the Series E Preferred Stock and the Series
H Preferred Stock) and no shares of Series H Preferred
Stock shall be redeemed pursuant to this Section 1.5.3
unless concurrently therewith shares of Series E
Preferred Stock are redeemed on a pro rata basis (based
on the respective Stated Values plus Unpaid Dividends of
the Series E Preferred Stock and the Series H Preferred
Stock).
(b) Within five Business Days following any
Special Redemption Event (as hereinafter defined), the
Company will mail to each holder of Series E Preferred
Stock and Series H Preferred Stock a notice (the "Special
Redemption Event Notice") (i) stating that a Special
Redemption Event has occurred; (ii) setting forth a
purchase date (the "Special Redemption Date"), which
shall be no earlier than 20 Business Days nor later than
30 Business Days from the date the Special Redemption
Event Notice is mailed; (iii) setting forth the
Conversion Price then in effect with respect to such
shares of Series E Preferred Stock and Series H Preferred
Stock, pursuant to the provisions of Section 1.6 hereof;
and (iv) setting forth the instructions reasonably
determined by the Company, consistent with this Section
1.5.3 and applicable law, that a holder must follow in
order to require the redemption of his Series E Preferred
Stock and Series H Preferred Stock. Holders of Series E
Preferred Stock and Series H Preferred Stock seeking to
require that the Company redeem their shares will be
required to surrender their shares to the Company prior
to the close of business on the third Business Day prior
to the Special Redemption Date.
(c) Immediately prior to the redemption of
any shares of Series E Preferred Stock and Series H
Preferred Stock pursuant to this Section 1.5.3., the
Company shall declare and pay a cash dividend on all
outstanding shares of Series E Preferred Stock and Series
H Preferred Stock in an amount equal to the aggregate
amount of all accumulated and unpaid dividends that have
been added to the Stated Value thereof and all accrued
Unpaid Dividends thereon to the Special Redemption Date.
Upon the Special Redemption Date, the redemption price of
such shares shall be payable to the order of the person
whose name appears on the certificate or certificates
representing such shares as the owner thereof and each
surrendered certificate shall be cancelled. From and
after the date the Company shall irrevocably deposit an
amount equal to the redemption price of the shares of
Series E Preferred Stock and Series H Preferred Stock to
be redeemed in trust for the holders of such shares with
a bank having capital and surplus in excess of $100
million, which bank shall be named in the Special
Redemption Event Notice, all rights of the holders of
such Series E Preferred Stock and Series H Preferred
Stock, except the right to receive such redemption price
without interest upon surrender of their certificate or
certificates, shall cease with respect to such shares,
and such shares shall not thereafter be transferred on
the books of the Company or be deemed to be outstanding
for any purpose whatsoever.
(d) "Special Redemption Event" shall mean:
(i) consummation of any merger,
reorganization or consolidation
transaction involving the Company;
(ii) the acquisition by purchase or
otherwise of a controlling interest in the
business or assets of, or the stock or
other evidence of beneficial ownership of,
any other Person if consummation of such
transaction results in a transfer of
ownership of a majority of the voting
securities of the Company to such other
Person or its stockholders;
(iii) the sale, lease, conveyance,
transfer, exchange, encumbrance or other
disposition, in one transaction or a
series of related transactions, of more
than 25% of the assets of the Company;
provided, however, that a definitive
agreement between the Company and a party
with which it is currently negotiating
that contemplates an ongoing revenue
stream to the Company based on commercial
exploitation of the Company's technology
and requiring a payment to the Company
upon execution of at least $1.25 million,
such payment to be not primarily in
consideration of any requirement that the
Company render services, shall not be
deemed to breach this provision if such
agreement is executed on or before July
31, 1996; or
(iv) the sale or other disposition of
voting securities of the Company, in a
transaction or a series of related
transactions, if consummation of such
transaction or transactions results in a
transfer of ownership of a majority of the
voting securities of the Company.
1.5.4. With respect to any optional redemption
of Series H Preferred Stock, each redemption of Series H
Preferred Stock shall be made so that the number of
shares of Series H Preferred Stock held by each
registered holder thereof shall be reduced in an amount
which shall bear the same ratio to the total number of
shares of Series H Preferred Stock being so redeemed as
the number of shares of Series H Preferred Stock then
held by such holder bears to the aggregate number of
shares of Series H Preferred Stock then outstanding.
1.5.5. Except as otherwise provided herein, at
least twenty (20) days before any Redemption Date (ten
(10) days if such redemption is in connection with a Book
Value Event), a Redemption Notice shall be mailed,
postage prepaid, to each holder of record of the Series E
Preferred Stock and Series H Preferred Stock which is to
be redeemed, at its address shown on the records of the
Company; provided, however, that the Company's failure to
give such Redemption Notice shall in no way affect its
obligation to redeem the shares of Series E Preferred
Stock and Series H Preferred Stock as provided herein.
The Redemption Notice shall set forth:
(i) the number of shares of Series H
Preferred Stock held by the holder which shall
be redeemed by the Company, and the total
number of shares of Series E Preferred Stock
and Series H Preferred Stock held by all
holders of such series to be so redeemed;
(ii) the Redemption Date and the
redemption price;
(iii) that the holder is to surrender to
the Company, at the place designated therein,
its certificate or certificates representing
the shares of Series E Preferred Stock and
Series H Preferred Stock to be redeemed;
(iv) the Conversion Price then in effect
with respect to such shares of Preferred Stock,
pursuant to the provisions of Section 1.6
hereof; and
(v) that the conversion rights of shares
of Series E Preferred Stock and Series H
Preferred Stock to be redeemed shall terminate
at the close of business on the date prior to
the Redemption Date.
1.5.6. Each holder of shares of Series E
Preferred Stock and Series H Preferred Stock to be
redeemed shall surrender the certificate or certificates
representing such shares to the Company at the place
designated in the Redemption Notice and thereupon the
applicable redemption price for such shares shall be paid
to the order of the Person whose name appears on such
certificate or certificates and each surrendered
certificate shall be cancelled and retired.
1.5.7. From and after the Redemption Date, no
shares of Series E Preferred Stock and Series H Preferred
Stock thereupon subject to redemption shall be entitled
to any further accrual of any dividends pursuant to
Section 1.2 hereof or to the conversion provisions set
forth in Section 1.6 hereof; provided, however, that
sufficient funds for payment of the redemption price for
the shares of Series E Preferred Stock and Series H
Preferred Stock to be redeemed are deposited or held and
set apart for that purpose at the place of payment on or
prior to the Redemption Date.
1.5.8. If the Redemption Notice shall have
been mailed as provided herein, and if on or before the
Redemption Date specified in such notice the
consideration necessary for such redemption shall have
been set apart so as to be available therefor, then on
and after the close of business on the Redemption Date
the shares of Series E Preferred Stock and Series H
Preferred Stock called for redemption, notwithstanding
that any certificate therefor shall not have been
surrendered for cancellation, shall no longer be deemed
outstanding, and all rights with respect to such shares
shall forthwith cease and terminate, except only the
right of the holders thereof to receive upon surrender of
their certificates the consideration payable upon
redemption thereof. In case fewer than all the shares
represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
1.6. Conversion Rights.
1.6.1. Each holder of the shares of Series H
Preferred Stock shall have the right, at the election of
such holder, exercised at any time and from time to time,
to convert, subject to the terms and provisions hereof,
all or any portion of such shares of Series H Preferred
Stock into fully paid and non-assessable shares of Common
Stock of the Company or any capital stock or other
securities into which such Common Stock shall have been
changed or any capital stock or other securities
resulting from a reclassification thereof. Such
conversion of Series H Preferred Stock to shares of
Common Stock shall be made at the Conversion Price,
subject to adjustment from time to time as set forth
herein. Series H Preferred Stock may be converted by the
holder thereof during normal business hours on any
Business Day by surrender of the required number of
shares of Series H Preferred Stock, accompanied by
written evidence of the holder's election to convert such
holder's Series H Preferred Stock or portion thereof, to
the Company at its principal executive offices. Payment
of the Conversion Price for the shares of Common Stock
specified in such election shall be made by applying
shares of Series H Preferred Stock, valued at the Stated
Value per share. Payment of Unpaid Dividends, if any,
applicable to such converted shares of Series H Preferred
Stock shall be made in accordance with Section 1.6.5.
1.6.2. All or part of the outstanding shares
of Series H Preferred Stock shall, at the option of the
Company and upon written notice to the holders thereof
given not less than ten (10) days prior to the Closing of
a Triggering Event be converted, by applying shares of
Series H Preferred Stock valued at the Stated Value per
share, as of the date and time of the Closing into shares
of Common Stock at the Conversion Price automatically and
without any further action by the holders of such shares
and whether or not the certificates representing such
shares are surrendered to the Company or its transfer
agent. Payment of Unpaid Dividends, if any, applicable
to such converted shares of Series H Preferred Stock
shall be made in accordance with Section 1.6.5.
1.6.3. Upon the conversion of Series H
Preferred Stock, the holders of such Series H Preferred
Stock shall surrender the certificates representing such
shares at the office of the Company. The Company shall
not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion (or
to pay any Unpaid Dividends in connection with such
conversion) unless certificates evidencing such shares of
Series H Preferred Stock being converted are either
delivered to the Company or the holder notifies the
Company that such certificates have been lost, stolen, or
destroyed and delivers to the Company an agreement
satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection therewith.
1.6.4. Each conversion of Series H Preferred
Stock shall be deemed to have been effected immediately
prior to the close of business on the Business Day on
which such Series H Preferred Stock shall have been
surrendered to the Company as provided herein (except
that if such conversion is in connection with a
Triggering Event, then such conversion shall be deemed to
have been effected concurrently with the Closing of such
Triggering Event), and such conversion shall be at the
Conversion Price in effect at such time. On each such
day that the conversion of shares of Series H Preferred
Stock is deemed effected, the person or persons in whose
name or names any certificate or certificates for shares
of Common Stock are issuable upon such conversion shall
be deemed to have become the holder or holders of record
thereof.
1.6.5. As promptly as practical after the
conversion of shares of Series H Preferred Stock, in
whole or in part, and in any event within five (5)
Business Days thereafter (unless such conversion is in
connection with a Triggering Event, in which event
concurrently with such conversion), the Company at its
expense (including the payment by it of any applicable
issue, stamp or other taxes, other than any income taxes
and other than any taxes arising by reason of issuance of
shares of Common Stock to any person other than such
holder) will cause to be issued in the name of and
delivered to the holder thereof or as such holder may
direct, (i) a certificate or certificates for the number
of shares of Common Stock to which such holder shall be
entitled upon such conversion plus, in lieu of any
fractional shares to which such holder would otherwise be
entitled, cash in an amount equal to the same fraction of
the Current Market Price per share of Common Stock and
(ii) Unpaid Dividends, if any, applicable as of the time
of conversion to those shares of Preferred Stock which
are converted. Such Unpaid Dividends shall be paid in
cash, without interest. In case fewer than all the
shares of Series H Preferred Stock represented by any
surrendered certificate are converted into Common Stock,
a new certificate representing the shares of Series H
Preferred Stock not converted shall be issued without
cost to the holder thereof.
1.7. Anti-Dilution Adjustments. The number of
shares of Common Stock issuable upon any conversion
provided for in Section 1.6 shall be subject to
adjustment, from time to time, in accordance with the
following provisions:
1.7.1. Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section
1.7.3 or 1.7.4) without consideration or for a
consideration per share less than the Conversion Price in
effect immediately prior to such issue or sale, then, in
each such case, subject to Section 1.7.8, such Conversion
Price shall be reduced, concurrently with such issue or
sale, to a price (calculated to the nearest .001 of a
cent) determined by multiplying such Conversion Price by
a fraction
(a) the numerator of which shall be (i)
the number of shares of Common Stock
outstanding immediately prior to such issue or
sale plus (ii) the number of shares of Common
Stock which the aggregate consideration
received by the Company for the total number of
such Additional Shares of Common Stock so
issued or sold would purchase at such
Conversion Price, and
(b) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after such issue or sale,
provided that, for the purposes of this Section 1.7.1,
(x) immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to Section
1.7.3 or 1.7.4, such Additional Shares shall be deemed to
be outstanding and (y) treasury shares shall not be
deemed to be outstanding.
1.7.2. Adjustment of Conversion Price Upon
Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the date
hereof shall declare, order, pay or make a dividend or
other distribution (including, without limitation, any
distribution of other or additional stock or other
securities or property or Options by way of dividend or
spin-off, reclassification, recapitalization or similar
corporate rearrangement) on the Common Stock, other than
(a) a dividend payable in Additional Shares of Common
Stock or (b) a cash dividend permitted pursuant to
Section 1.2.5 hereof, then, and in each such case,
subject to Section 1.7.8, the Conversion Price in effect
immediately prior to the close of business on the record
date fixed for the determination of holders of any class
of securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Conversion Price by a fraction
(a) the numerator of which shall be the
Current Market Price in effect on such record
date or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the
commencement of ex-dividend trading, less the
amount of such dividend or distribution (as
determined in good faith by the Board of
Directors of the Company) applicable to one
share of Common Stock,
(b) the denominator of which shall be
such Current Market Price,
provided that, in the event that the amount of such
dividend as so determined is equal to or greater than 25%
of such Current Market Price or in the event that such
fraction is less than three fourths (3/4), in lieu of the
foregoing adjustment, adequate provision shall be made so
that the holders of the Series H Preferred Stock shall
receive, in the same form and at the same time such
dividend is payable to holders of Common Stock, a pro
rata share of such dividend based upon the maximum number
of shares of Common Stock at the time issuable to such
holders upon conversion of such Series H Preferred Stock.
1.7.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to Section 1.7.5) of such shares would be less
than the Conversion Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the
Conversion Price shall be made upon the
subsequent issue or sale of Convertible
Securities or shares of Common Stock upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities;
(b) if such Options or Convertible
Securities by their terms provide, with the
passage of time or otherwise, for any increase
in the consideration payable to the Company, or
decrease in the number of Additional Shares of
Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of
rate or otherwise), the Conversion Price
computed upon the original issue, sale, grant
or assumption thereof (or upon the occurrence
of the record date, or date prior to the
commencement of ex-dividend trading, as the
case may be, with respect thereto), and any
subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such
increase or decrease insofar as it affects such
Options, or the rights of conversion or
exchange under such Convertible Securities,
which are outstanding at such time;
(c) upon the expiration (or purchase by
the Company and cancellation or retirement) of
any such Options which shall not have been
exercised or the expiration of any rights of
conversion or exchange under any such
Convertible Securities which shall not have
been exercised (or purchase by the Company and
cancellation or retirement of any such
Convertible Securities the rights of conversion
or exchange under which shall not have been
exercised), the Conversion Price computed upon
the original issue, sale, grant or assumption
(or upon the occurrence of the record date, or
date prior to the commencement of ex-dividend
trading, as the case may be, with respect
thereto), and any subsequent adjustments based
thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may
be), be recomputed as if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to Section 1.7.5) upon
the issue or sale of such Convertible
Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to
subdivision (b) or (c) above shall have the
effect of increasing the Conversion Price by an
amount in excess of the amount of the
adjustment thereof originally made in respect
of the issue, sale, grant or assumption of such
Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than thirty (30)
days after the date of issue, sale, grant or
assumption thereof, no adjustment of the
Conversion Price shall be made until the
expiration or exercise of all such Options,
whereupon such adjustment shall be made in the
manner provided in subdivision (c) above.
1.7.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the date immediately prior to the day upon
which such corporate action becomes effective.
1.7.5. Computation of Consideration. For the
purposes of this Section 1.7,
(a) the consideration for the issue or
sale of any Additional Shares of Common Stock
shall, irrespective of the accounting treatment
of such consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by the holders of
a majority of the Series E Preferred Stock and
Series H Preferred Stock), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by the holders of
a majority of the Series E Preferred Stock and
Series H Preferred Stock);
(b) Additional Shares of Common Stock
deemed to have been issued pursuant to Section
1.7.3, relating to Options and Convertible
Securities, shall be deemed to have been issued
for a consideration per share determined by
dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock
deemed to have been issued pursuant to Section
1.7.4, relating to stock dividends, stock
splits, etc., shall be deemed to have been
issued for no consideration.
1.7.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Conversion Price in effect immediately prior
to such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
1.7.7. Dilution in Case of Other Securities.
In case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in Section 1.8) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this Section 1.7, the conversion
rights granted to holders of Series C Preferred Stock,
then, and in each such case, the computations,
adjustments and readjustments provided for in this
Section 1.7 with respect to the Conversion Price shall be
made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from
time to time receivable upon the conversion of the shares
of Series H Preferred Stock, so as to protect the holders
of the Series H Preferred Stock against the effect of
such dilution.
1.7.8. Minimum Adjustment of Conversion Price.
If the amount of any adjustment of the Conversion Price
required pursuant to this Section 1.7 would be less than
one-half of one percent (1%) of the Conversion Price in
effect at the time such adjustment is otherwise so
required to be made, such amount shall be carried forward
and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which,
together with such amount and any other amount or amounts
so carried forward, shall aggregate at least one-half of
one percent (1%) of such Conversion Price.
1.8. Consolidation, Merger, etc.
1.8.1. Adjustments for Consolidation, Merger,
Sale of Assets, Reorganization, etc. In case the Company
after the date hereof (a) shall consolidate with or merge
into any other Person and shall not be the continuing or
surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or
merge into the Company and the Company shall be the
continuing or surviving Person but, in connection with
such consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any Other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Conversion Price is provided in subsection 1.7.1 or
1.7.2), then, and in the case of each such transaction
(excluding any such transaction which constitutes a
Triggering Event and in connection with which the Company
requires conversion of the Series H Preferred Stock),
proper provision shall be made so that, upon the basis
and the terms and in the manner provided herein, the
holders of shares of Series H Preferred Stock, upon the
conversion thereof at any time after the consummation of
such transaction, shall be entitled to receive (at the
aggregate Conversion Price in effect at the time of such
consummation for all Common Stock or Other Securities
issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or Other
Securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or
other property to which such holder would actually have
been entitled as a stockholder upon such consummation if
such holder had exercised the conversion rights
pertaining to the Series H Preferred Stock immediately
prior thereto.
1.8.2. Assumption of Obligations.
Notwithstanding anything to the contrary herein provided,
the Company will not effect any of the transactions
described in subsections (a) through (d) of Section 1.8.1
(excluding any such transaction which constitutes a
Triggering Event and in connection with which the Company
requires conversion of the Series H Preferred Stock)
unless, prior to the consummation thereof, each Person
(other than the Company) which may be required to deliver
any stock, securities, cash or property upon the
conversion of shares of Series H Preferred Stock as
provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holders
of the Series H Preferred Stock (a) the obligations of
the Company with respect to the Series H Preferred Stock
(and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition
to, and shall not release the Company from, any
continuing obligations of the Company with respect to the
Series H Preferred Stock), and (b) the obligation to
deliver to such holder such shares of stock, securities,
cash or property as, in accordance with the foregoing
provisions of this Section 1.8, such holder may be
entitled to receive, and such Person shall have similarly
delivered to such holders of Series H Preferred Stock an
opinion of counsel for such Person, which counsel shall
be reasonably satisfactory to such holders, stating that
the rights and privileges of the Series H Preferred Stock
shall thereafter continue in full force and effect and
the terms thereof (including, without limitation, all of
the provisions of this Section 1.8) shall be applicable
to the stock, securities, cash or property which such
Person may be required to deliver upon any conversion of
shares of Series H Preferred Stock or the exercise of any
rights pursuant hereto.
1.9. Other Dilutive Events. In case any event
shall occur as to which the provisions of Section 1.7 or
Section 1.8 are not strictly applicable but the failure
to make any adjustment would not fairly protect the
conversion rights pertaining to shares of Series H
Preferred Stock in accordance with the essential intent
and principles of such sections, then, in each such case,
the Company shall appoint a firm of independent certified
public accountants of recognized national standing (such
firm to be subject to the approval of the holders of a
majority of the Series E Preferred Stock and the Series H
Preferred Stock"), which shall give their opinion
regarding the adjustment, if any, on a basis consistent
with the essential intent and principles established in
Sections 1.7 and 1.8, necessary to preserve, without
dilution, the conversion rights of the Series E Preferred
Stock and the Series H Preferred Stock. Upon receipt of
such opinion, the Company will promptly mail a copy
thereof to each holder of Series E Preferred Stock and
Series H Preferred Stock and shall make the adjustments
described therein.
1.10. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or
performance of any of the terms of the Series H Preferred
Stock, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order
to protect the rights of the holders of shares of Series
H Preferred Stock against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the conversion of Series H
Preferred Stock to exceed the amount payable therefor
upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable
shares of stock on the conversion of the shares of Series
H Preferred Stock from time to time outstanding, and (c)
will not take any action which results in any adjustment
of the Conversion Price if the total number of shares of
Common Stock (or Other Securities) issuable after the
action upon the conversion of all of the outstanding
shares of Series H Preferred Stock would exceed the total
number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon
such exercise.
1.11. Accountants' Report as to Adjustments.
In each case of any adjustment or readjustment in the
shares of Common Stock (or Other Securities) issuable
upon the conversion of shares of Series H Preferred
Stock, the Company at its expense will promptly compute
such adjustment or readjustment in accordance with the
terms hereof and cause independent certified public
accountants of recognized standing (such firm to be
subject to the approval of the holders of a majority of
the outstanding Series E Preferred Stock and Series H
Preferred Stock) selected by the Company to verify such
computation and prepare a report setting forth such
adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received
or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have
been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the
Conversion Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by Section 1.7) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of shares of Series E Preferred Stock and Series H
Preferred Stock and will, upon the written request at any
time of any holder of shares of Series E Preferred Stock
and Series H Preferred Stock, furnish to such holder a
like report setting forth the Conversion Price at the
time in effect and showing in reasonable detail how it
was calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of Series E Preferred
Stock or Series H Preferred Stock or any prospective
purchaser of Series E Preferred Stock or Series H
Preferred Stock designated by the holder thereof.
1.12. Notices of Corporate Action. In the
event of
(a) any taking by the Company of a record
of the holders of any class of securities for
the purpose of determining the holders thereof
who are entitled to receive any dividend (other
than dividends payable with respect to the
Series E Preferred Stock and the Series H
Preferred Stock and other than a regular
periodic dividend payable in cash out of earned
surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for
such period) or other distribution, or any
right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any
other securities or property, or to receive any
other right, or
(b) any capital reorganization of the
Company, any reclassification or
recapitalization of the capital stock of the
Company or any consolidation or merger
involving the Company and any other Person or
any transfer of all or substantially all of the
assets of the Company to any other Person, or
(c) any voluntary or involuntary
dissolution, liquidation or winding-up of the
Company,
the Company will mail to each holder of shares of Series
E Preferred Stock and the Series H Preferred Stock a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Except for
notices relating to mandatory conversion or optional
redemption in connection with a Triggering Event, such
notices shall be mailed at least forty-five (45) days
prior to the date of the action therein specified.
1.13. Retirement of Converted or Redeemed
Shares. No share or shares of Series H Preferred Stock
acquired by the Company by reason of optional or
mandatory redemption, purchase, conversion or otherwise
shall be re-issued and all such shares shall be
cancelled, retired and eliminated from the shares which
the Company shall be authorized to issue. The Company
may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized
number of shares of Series H Preferred Stock accordingly.
FURTHER RESOLVED, that, before the Company shall issue
any shares of Series H Preferred Stock, a certificate
pursuant to Section 151 of the DGCL shall be made,
executed, acknowledged, filed, and recorded in accordance
with the provisions of Section 103 and 151 of the DGCL,
and the proper officers of the Company be, and they
hereby are, authorized and directed to do all acts and
things which may be necessary or proper in their opinion
to carry into effect the purposes and intent of this and
the foregoing resolutions.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be signed in its name and on its behalf and attested on this
30th day of January, 1996 by duly authorized officers of this
Corporation.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Name: Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
Currently Outstanding Warrants
(A) outstanding Warrants to Purchase 1,114,375 shares of the
Common Stock of the Company at $3.00 per share expiring at
various times in 1995 and 1996, and (B) other outstanding
warrants and non-qualified options to purchase 293,000 shares
of the Common Stock of the Company at prices between $1.20 per
share and $2.56 per share expiring in 1995 and 1997.
NESTOR, INC.
Common Stock Purchase Warrant
New York, New York
No. W-S January 31, 1996
Nestor, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that
Wand/Nestor Investments L.P. ("Wand"), or registered
assigns, is entitled to purchase from the Company 511,885
duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock par value $.01 per
share (the "Common Stock"), of the Company at the
purchase price per share of $.65, at any time or from
time to time prior to 5:00 P.M., New York City time, on
August 1, 2004 (or such later date as may be determined
pursuant to section 19), all subject to the terms,
conditions and adjustments set forth below in this
Warrant.
This Warrant is issued in exchange for a
warrant issued pursuant to the First Amended and Restated
Standby Financing and Purchase Agreement, dated as of
June 30, 1995 (the "Revised Standby Agreement"), by and
between the Company and Wand in exchange for the Common
Stock Purchase Warrants originally issued in connection
with the issue and private sale by the Company of Series
C Preferred Stock, pursuant to the Securities Purchase
Agreement (the "Purchase Agreement"), dated as of August
1, 1994, between the Company and Wand. This Warrant is
being issued in connection with the exchange of the
outstanding Series C Preferred Stock for Series E
Convertible Preferred Stock (the "Series E Preferred
Stock") and Series H Convertible Preferred Stock (the
"Series H Preferred Stock") of the Company pursuant to
the Securities Purchase and Exchange Agreement, dated as
of January 31, 1996, among the Company, Wand and certain
affiliates of Wand. Certain capitalized terms used in
this Warrant are defined in section 14; references to an
"Exhibit" are, unless otherwise specified, to one of the
Exhibits attached to this Warrant and references to a
"section" are, unless otherwise specified, to one of the
sections of this Warrant.
1. Exercise of Warrant. 1.1. Manner of
Exercise. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours
on any Business Day, by surrender of this Warrant to the
Company at its principal office, accompanied by a
subscription substantially in the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed
by such holder and accompanied by payment, in cash, by
certified or official bank check payable to the order of
the Company, or in the manner provided in Section 1.5, in
the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by
(b) $.65, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or
Other Securities) determined as provided in sections 2
through 4.
1.2. When Exercise Effective. Each exercise
of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the
Business Day on which this Warrant shall have been
surrendered to the Company as provided in section 1.1,
and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon
such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As
soon as practicable after each exercise of this Warrant,
in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9,
as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the
number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any
fractional share to which such holder would
otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per share on
the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in
the aggregate on the face or faces thereof for the
number of shares of Common Stock equal (without
giving effect to any adjustment thereof) to the
number of such shares called for on the face of this
Warrant minus the number of such shares designated
by the holder upon such exercise as provided in
section 1.1.
1.4. Company to Reaffirm Obligations. The
Company will, at the time of each exercise of this
Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without
limitation, any rights to registration, pursuant to the
Registration Rights Agreement referred to in section 8,
of the shares of Common Stock or Other Securities issued
upon such exercise) to which such holder shall continue
to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of
this Warrant shall fail to make any such request, such
failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Shares
Otherwise Issuable. Upon any exercise of this Warrant,
the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of
this Warrant at the time of such exercise, to apply to
the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder
upon such exercise as shall be specified in such notice,
in which case an amount equal to the excess of the
aggregate Current Market Price of such specified number
of shares on the date of exercise over the portion of the
payment required by section 1.1 attributable to such
shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise
shall be reduced by such specified number.
2. Adjustment of Common Stock Issuable Upon
Exercise. 2.1. General; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant
shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares
of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator
is $.65 and (b) the denominator is the Warrant Price in
effect on the date of such exercise. The "Warrant Price"
shall initially be $.65 per share, shall be adjusted and
readjusted from time to time as provided in this section
2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof
is required by this section 2. In addition to the other
adjustments herein provided, the "Warrant Price" shall be
subject to the following special adjustments:
(i) If the Series E Preferred Stock and Series
H Preferred Stock are redeemed by the
Company on or prior to August 1, 2000 then
the "Warrant Price" shall
(A) be reduced by 25%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs prior to August 1, 1996;
(B) be reduced by 20%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1996 and
prior to August 1, 1997;
(C) be reduced by 15%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1997 and
prior to August 1, 1998;
(D) be reduced by 10%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1998 and
prior to August 1, 1999; and
(E) be reduced by 5%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1999 and
prior to August 1, 2000.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3
or 2.4) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(a) the numerator of which shall be (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the
aggregate consideration received by the Company for
the total number of such Additional Shares of Common
Stock so issued or sold would purchase at such
Warrant Price, and
(b) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1,
(x) immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to section
2.3 or 2.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed
to be outstanding.
2.2.2 Extraordinary Dividends and
Distributions. In case the Company at any time or from
time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including,
without limitation, any distribution of other or
additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on
the Common Stock, other than (a) a dividend payable in
Additional Shares of Common Stock or (b) cash dividends
during any fiscal year of the Company that do not exceed
twenty percent (20%) of the after tax earnings per share
of the Common Stock for the immediately preceding fiscal
year of the Company, then, and in each such case, subject
to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed
for the determination of holders of any class of
securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(x) the numerator of which shall be the
Current Market Price in effect on such record date
or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-
dividend trading, less the amount of such dividend
or distribution (as determined in good faith by the
Board of Directors of the Company, subject to
confirmation by a firm of independent certified
public accountants of recognized national standing
approved by Wand/Nestor Investments L.P.) applicable
to one share of Common Stock, and
(y) the denominator of which shall be such
Current Market Price.
2.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less
than the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price
shall be made upon the subsequent issue or sale of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which (or
purchase by the Company and cancellation or
retirement of any such Convertible Securities the
rights of conversion or exchange under which) shall
not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as
if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities
with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of increasing
the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of
such Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than 30 days after
the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be
made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the
purposes of this section 2,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.);
(b) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.3,
relating to Options and Convertible Securities,
shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.4,
relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Warrant Price in effect immediately prior to
such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in section 3) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this section 2, the purchase
rights granted by this Warrant, then, and in each such
case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the
Warrant Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If
the amount of any adjustment of the Warrant Price
required pursuant to this section 2 would be less than
one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent (1%) of such Warrant
Price.
3. Consolidation, Merger, etc. 3.1.
Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall
permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or
surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the
holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the
Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount
of securities, cash or other property to which such
holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the
rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations.
Notwithstanding anything contained in the Warrants or in
the Purchase Agreement to the contrary, the Company will
not effect any of the transactions described in clauses
(a) through (d) of section 3.1 unless, prior to the
consummation thereof, each Person (other than the
Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to,
the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c)
the obligation to deliver to such holder such shares of
stock, securities, cash or property as, in accordance
with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without
limitation, all of the provisions of this section 3)
shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any
rights pursuant hereto. Nothing in this section 3 shall
be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Purchase
Agreement.
4. Other Dilutive Events. In case any event
shall occur as to which the provisions of section 2 or
section 3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the
essential intent and principles of such sections, then,
in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized
national standing (such firm to be subject to the
approval of Wand/Nestor Investments L.P.), which shall
give their opinion regarding the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the
total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such
exercise.
6. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause
independent certified public accountants of recognized
standing (such firm to be subject to the approval of
Wand/Nestor Investments L.P.) selected by the Company to
verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and
the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration
received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by section 2) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the
holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of
earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such
period) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least 45 days prior to the date
therein specified.
8. Registration of Common Stock. If any
shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any
federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The
shares of Common Stock (and Other Securities) issuable
upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is
defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and
such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions
of the Registration Rights Agreement applicable to such
holder as a holder of such Registrable Securities. At
any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on
each such exchange, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also
list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of,
any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer. 9.1.
Restrictive Legends. Except as otherwise permitted by
this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped
or otherwise imprinted with a legend in substantially the
following form:
"THE WARRANT REPRESENTED BY THIS
CERTIFICATE (AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH
WARRANT) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH WARRANT (AND OF SUCH
SHARES OF COMMON STOCK OR OTHER SECURITIES) IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN SECURITIES PURCHASE AGREEMENT AND
RELATED AGREEMENTS DATED AS OF AUGUST 1, 1994.
THE HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
HEREOF AGREES TO BE BOUND BY SUCH RESTRICTIONS
AND CONDITIONS. A COPY OF THE PURCHASE
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
Except as otherwise permitted by this section 9, each
certificate for Common Stock (or Other Securities) issued
upon the exercise of any Warrant, and each certificate
issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH SHARES IS SUBJECT TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND
REGULATIONS AND CERTAIN RESTRICTIONS AND
CONDITIONS CONTAINED IN A CERTAIN SECURITIES
PURCHASE AGREEMENT AND RELATED AGREEMENTS DATED
AS OF AUGUST 1, 1994. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE PURCHASE AGREEMENT IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
10. Availability of Information. The Company
shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly
available other information) and will take such further
action as any holder of Registrable Securities may
reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement
as to whether it has complied with the requirements of
this section 10.
11. Reservation of Stock, etc. The Company
will at all times reserve and keep available, solely for
issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities)
from time to time issuable upon exercise of all Warrants
at the time outstanding. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants
shall be duly authorized and, when issued upon such
exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on
the part of the holders thereof.
12. Registration and Transfer of Warrants,
etc.
12.1. Warrant Register; Ownership of Warrants.
The Company will keep at its principal office a register
in which the Company will provide for the registration of
Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any
Warrant is registered on such register as the owner
thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon
surrender of any Warrant for registration of transfer or
for exchange to the Company at its principal office, the
Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange
therefor a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction
of any Warrant, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine or,
in the case of any such mutilation, upon the surrender of
such Warrant for cancellation to the Company at its
principal office, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Registration Rights. Wand or any assignee
of this Warrant shall be entitled to all rights and
benefits regarding the registration of Common Stock and
Registrable Securities set forth in the Registration
Rights Agreement.
14. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Additional Shares of Common Stock: All shares
(including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be
issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company,
other than
(a) the issuance of shares upon conversion of
the Company's Series A, Series B and Series C and
Series D Convertible Preferred Stock,
(b) Shares issued upon the exercise of the
common stock purchase warrants and non-qualified
options listed in Exhibit A hereto, providing for
the purchase of an aggregate of 849,875 shares of
Common Stock (based on the current capitalization of
the Company);
(c) shares issued upon the exercise of the
Warrants,
(d) not to exceed 2,000,000 shares (subject to
equitable adjustment in the event of any
combination, reclassification, stocksplit, dividend
or recapitalization of the Company) issued upon the
exercise of options granted or to be granted under
the Company's stock option plans as in effect on the
date hereof or under any other employee stock
option, compensation or purchase plan or plans
adopted or assumed after such date,
(e) such additional number of shares as may
become issuable upon the exercise of any of the
securities referred to in the foregoing clauses (a)
through (d) by reason of adjustments required
pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are
required as the result of the original issuance of
the Warrants, and
(f) such additional number of shares as may
become issuable upon the exercise or conversion of
any of the securities referred to in the foregoing
clauses (a) through (d) by reason of adjustments
required pursuant to anti-dilution provisions
applicable to such securities as in effect on the
date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable
in Common Stock.
Business Day: Any day other than a Saturday or
a Sunday or a day on which commercial banking
institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
Common Stock: As defined in the introduction
to this Warrant, such term to include any stock into
which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes
(however designated) of the Company the holders of which
have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
Company: As defined in the introduction to
this Warrant, such term to include any corporation which
shall succeed to or assume the obligations of the Company
hereunder in compliance with section 3.
Convertible Securities: Any evidences of
indebtedness, shares of stock (other than Common Stock)
or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common
Stock.
Current Market Price: On any date specified
herein, the average daily Market Price during the period
of the most recent 20 days, ending on such date, on which
the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted
to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of
1934, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Market Price: On any date specified herein,
the amount per share of the Common Stock, equal to (a)
the last sale price of such Common Stock, regular way, on
such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the
principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or
(b) if such Common Stock is not then listed or admitted
to trading on any national securities exchange but is
designated as a national market system security by the
NASD, the last trading price of the Common Stock on such
date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the value as
determined by a firm of independent public accountants of
recognized standing selected by the Board of Directors of
the Company, and approved by Wand/Nestor Investments
L.P., as of the last day of any month ending within 30
days preceding the date as of which the determination is
to be made.
NASD: The National Association of Securities
Dealers, Inc.
Options: Rights, options or warrants to
subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common
Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the holders of the
Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Person: A corporation, an association, a
partnership, an organization, a business, an individual,
a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the
introduction to this Warrant.
Registrable Securities: As defined in Section
3 of the Registration Rights Agreement.
Registration Rights Agreement: The Amended and
Restated Registration Rights Agreement dated as of July
__, 1994, substantially in the form of Exhibit F to the
Standby Agreement.
Revised Standby Agreement: The First Amended
and Restated Standby Financing and Purchase Agreement,
dated as of June 30, 1995, by and between the Company and
Wand.
Securities Act: The Securities Act of 1933, or
any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Transfer: Any sale, assignment, pledge or
other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is
defined in section 2(3) of the Securities Act.
Wand: Wand/Nestor Investments L.P., a Delaware
limited partnership, and its successors and assigns.
Warrant Price: As defined in section 2.1.
Warrants: (a) Those certain Common Stock
Purchase Warrants, initially providing for the
acquisition of an aggregate of 400,000 shares of Common
Stock, originally issued pursuant to the Letter of
Engagement, dated April 26, 1994, among the Company, Hill
& Partners and Wand Partners Inc. (and any warrants
issued in substitution therefor), and (b) those certain
Common Stock Purchase Warrants, initially providing for
the acquisition of an aggregate of 1,700,000 shares of
Common Stock, originally issued to Wand/Nestor
Investments L.P. and Wand Nestor Investments II L.P. as
the "New Warrant" and the "Fee Warrant" pursuant to the
Revised Standby Agreement (and any warrants issued in
substitution therefor).
15. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the
event of any default or threatened default by the Company
in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof
or otherwise.
16. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing
any liabilities on such holder as a stockholder of the
Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
17. Notices. All notices and other
communications under this Warrant shall be in writing and
shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed
(a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept
at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its
principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in
section 1.
18. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought.
19. Expiration. The Company will give the
holder of this Warrant not less than six weeks nor more
than two months notice of the expiration of the right to
exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 p.m., New York City time, on
August 1, 2004, unless the Company shall fail to give
such notice as aforesaid, in which event the right to
exercise this Warrant shall not expire until a date six
weeks after the date on which the Company shall give the
holder hereof notice of the expiration of the right to
exercise this Warrant.
20. Descriptive Headings. The headings in
this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
22. Judicial Proceedings; Waiver of Jury. Any
judicial proceeding brought against the Company with
respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the
United States of America for the Southern District of New
York and, by execution and delivery of this Agreement,
the Company (a) accepts, generally and unconditionally,
the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with
this Warrant, subject to any rights of appeal, and (b)
irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court
is an inconvenient forum. The Company hereby waives
personal service of process and consents, that service of
process upon it may be made by certified or registered
mail, return receipt requested, at its address specified
or determined in accordance with the provisions of
section 17, and service so made shall be deemed completed
on the third Business Day after such service is deposited
in the mail or, if earlier, when delivered. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of
any holder of any Warrant to bring proceedings against
the Company in the courts of any other jurisdiction. THE
COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
The Company has currently outstanding: (a) warrants to
Purchase 646,875 shares of the Common Stock of the
Company at $3.00 per share expiring at various times in
1995 and 1996, and (b) other warrants and non-qualified
options to purchase 293,000 shares of the Common Stock of
the Company at prices between $1.20 per share and $2.56
per share expiring in 1995 and 1997. These warrants are
issued as follows:
Underlying Exercise
Shares of Price per
Common Share of
Warrant Holders Stock Common Stock Expiration
Purchasers of Series 646,875 $3.00 February 21, 1996
B Convertible Preferred Stock and August 31,1996
Assignees of Reich & Co., Inc.:
James Gerson 38,667 $1.20 June 30, 1997
Rodd Macklin 5,800 $1.20 June 30, 1997
One Hundred Pearl Ltd. 71,533 $1.20 June 30, 1997
Hampshire Securities Corp. 2,000 $1.20 June 30, 1997
Officers and Directors of
Nestor, Inc.:
Sam Albert 10,000 $4.20 April 30, 1996
Sam Albert 10,000 $1.30 February 23, 1997
David Fox 68,000 $2.56 April 12, 1999
TOTAL 849,875
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To NESTOR, INC.;
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and
purchases thereunder, ______(*) shares of Common Stock of
Nestor, Inc. and herewith makes payment of $
therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to
, whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
(Street Address)
(City)(State)(Zip Code)
* Insert here the number of shares called for on the
face of this Warrant (or, in the case of a partial
exercise, the portion thereof as to which this
Warrant is being exercised), in either case without
making any adjustment for Additional Shares of
Common Stock or any other stock or other securities
or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of partial
exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the
Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of
the within Warrant hereby sells, assigns and transfers
unto the right represented by such Warrant
to purchase shares of Common Stock of Nestor,
Inc. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of
Nestor, Inc. maintained for such purpose, 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
Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
WAND I BALANCE $.65 WARRANT
________________________________________________________
NESTOR, INC.
Common Stock Purchase Warrant
Dated as of January 31, 1996
_________________________________________________________
[THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER
SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS WARRANT.]
NESTOR, INC.
Common Stock Purchase Warrant
New York, New York
No. W-T January 31, 1996
Nestor, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that
Wand/Nestor Investments L.P. ("Wand"), or registered
assigns, is entitled to purchase from the Company 358,319
duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company at the
purchase price per share of $1.00, at any time or from
time to time prior to 5:00 P.M., New York City time, on
October 5, 2005 (or such later date as may be determined
pursuant to section 19), all subject to the terms,
conditions and adjustments set forth below in this
Warrant.
This Warrant is being issued in connection with
the Securities Purchase and Exchange Agreement, dated as
of January 31, 1996, among the Company, Wand and certain
affiliates of Wand, as a replacement for a portion of a
warrant originally issued by the Company in consideration
of Wand's performance of its obligations pursuant to the
First Amended and Restated Standby Financing and Purchase
Agreement dated as of June 30, 1995 by and between the
Company and Wand (the "Revised Standby Agreement").
Certain capitalized terms used in this Warrant are
defined in section 14; references to an "Exhibit" are,
unless otherwise specified, to one of the Exhibits
attached to this Warrant and references to a "section"
are, unless otherwise specified, to one of the sections
of this Warrant.
1. Exercise of Warrant. 1.1. Manner of
Exercise. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours
on any Business Day, by surrender of this Warrant to the
Company at its principal office, accompanied by a
subscription substantially in the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed
by such holder and accompanied by payment, in cash, by
certified or official bank check payable to the order of
the Company, or in the manner provided in Section 1.5, in
the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by
(b) $1.00, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or
Other Securities) determined as provided in sections 2
through 4.
1.2. When Exercise Effective. Each exercise
of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the
Business Day on which this Warrant shall have been
surrendered to the Company as provided in section 1.1,
and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon
such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As
soon as practicable after each exercise of this Warrant,
in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9,
as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the
number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any
fractional share to which such holder would
otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per share on
the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in
the aggregate on the face or faces thereof for the
number of shares of Common Stock equal (without
giving effect to any adjustment thereof) to the
number of such shares called for on the face of this
Warrant minus the number of such shares designated
by the holder upon such exercise as provided in
section 1.1.
1.4. Company to Reaffirm Obligations. The
Company will, at the time of each exercise of this
Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without
limitation, any rights to registration, pursuant to the
Registration Rights Agreement referred to in section 8,
of the shares of Common Stock or Other Securities issued
upon such exercise) to which such holder shall continue
to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of
this Warrant shall fail to make any such request, such
failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Shares
Otherwise Issuable. Upon any exercise of this Warrant,
the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of
this Warrant at the time of such exercise, to apply to
the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder
upon such exercise as shall be specified in such notice,
in which case an amount equal to the excess of the
aggregate Current Market Price of such specified number
of shares on the date of exercise over the portion of the
payment required by section 1.1 attributable to such
shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise
shall be reduced by such specified number.
2. Adjustment of Common Stock Issuable Upon
Exercise. 2.1. General; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant
shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares
of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator
is $1.00 and (b) the denominator is the Warrant Price in
effect on the date of such exercise. The "Warrant Price"
shall initially be $1.00 per share, shall be adjusted and
readjusted from time to time as provided in this section
2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof
is required by this section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3
or 2.4) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(a) the numerator of which shall be (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the
aggregate consideration received by the Company for
the total number of such Additional Shares of Common
Stock so issued or sold would purchase at such
Warrant Price, and
(b) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1,
(x) immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to section
2.3 or 2.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed
to be outstanding.
2.2.2 Extraordinary Dividends and
Distributions. In case the Company at any time or from
time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including,
without limitation, any distribution of other or
additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on
the Common Stock, other than a dividend payable in (a)
Additional Shares of Common Stock or (b) cash dividends
during any fiscal year of the Company that do not exceed
twenty percent (20%) of the after tax earnings per share
of the Common Stock for the immediately preceding fiscal
year of the Company, then, and in each such case, subject
to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed
for the determination of holders of any class of
securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(x) the numerator of which shall be the
Current Market Price in effect on such record date
or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-
dividend trading, less the amount of such dividend
or distribution (as determined in good faith by the
Board of Directors of the Company, subject to
confirmation by a firm of independent certified
public accountants of recognized national standing
approved by Wand/Nestor Investments L.P.) applicable
to one share of Common Stock, and
(y) the denominator of which shall be such
Current Market Price.
2.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less
than the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price
shall be made upon the subsequent issue or sale of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which (or
purchase by the Company and cancellation or
retirement of any such Convertible Securities the
rights of conversion or exchange under which) shall
not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as
if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities
with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of increasing
the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of
such Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than 30 days after
the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be
made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the
purposes of this section 2,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.);
(b) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.3,
relating to Options and Convertible Securities,
shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.4,
relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Warrant Price in effect immediately prior to
such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in section 3) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this section 2, the purchase
rights granted by this Warrant, then, and in each such
case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the
Warrant Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If
the amount of any adjustment of the Warrant Price
required pursuant to this section 2 would be less than
one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent (1%) of such Warrant
Price.
3. Consolidation, Merger, etc. 3.1.
Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall
permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or
surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the
holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the
Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount
of securities, cash or other property to which such
holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the
rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations.
Notwithstanding anything contained in the Warrants or in
the Purchase Agreement to the contrary, the Company will
not effect any of the transactions described in clauses
(a) through (d) of section 3.1 unless, prior to the
consummation thereof, each Person (other than the
Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to,
the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c)
the obligation to deliver to such holder such shares of
stock, securities, cash or property as, in accordance
with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without
limitation, all of the provisions of this section 3)
shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
4. Other Dilutive Events. In case any event
shall occur as to which the provisions of section 2 or
section 3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the
essential intent and principles of such sections, then,
in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized
national standing (such firm to be subject to the
approval of Wand/Nestor Investments L.P.), which shall
give their opinion regarding the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the
total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such
exercise.
6. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause
independent certified public accountants of recognized
standing (such firm to be subject to the approval of
Wand/Nestor Investments L.P.) selected by the Company to
verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and
the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration
received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by section 2) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the
holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of
earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such
period) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least 45 days prior to the date
therein specified.
8. Registration of Common Stock. If any
shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any
federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The
shares of Common Stock (and Other Securities) issuable
upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is
defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and
such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions
of the Registration Rights Agreement applicable to such
holder as a holder of such Registrable Securities. At
any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on
each such exchange, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also
list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of,
any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer. 9.1.
Restrictive Legends. Except as otherwise permitted by
this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped
or otherwise imprinted with a legend in substantially the
following form:
"THE WARRANT REPRESENTED BY THIS
CERTIFICATE (AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH
WARRANT) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH WARRANT (AND OF SUCH
SHARES OF COMMON STOCK OR OTHER SECURITIES) IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN REVISED STANDBY FINANCING AND PURCHASE
AGREEMENT AND RELATED AGREEMENTS DATED AS OF
JUNE 30, 1995. THE HOLDER OF THIS CERTIFICATE
BY ACCEPTANCE HEREOF AGREES TO BE BOUND BY SUCH
RESTRICTIONS AND CONDITIONS. A COPY OF THE
PURCHASE AGREEMENT IS ON FILE WITH THE
SECRETARY OF THE COMPANY."
Except as otherwise permitted by this section 9, each
certificate for Common Stock (or Other Securities) issued
upon the exercise of any Warrant, and each certificate
issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH SHARES IS SUBJECT TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND
REGULATIONS AND CERTAIN RESTRICTIONS AND
CONDITIONS CONTAINED IN A CERTAIN REVISED
STANDBY FINANCING AND PURCHASE AGREEMENT DATED
AS OF JUNE 30, 1995. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRI30IONS AND CONDITIONS. A
COPY OF THE STANDBY FINANCING AND PURCHASE
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
10. Availability of Information. The Company
shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly
available other information) and will take such further
action as any holder of Registrable Securities may
reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement
as to whether it has complied with the requirements of
this section 10.
11. Reservation of Stock, etc. The Company
will at all times reserve and keep available, solely for
issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities)
from time to time issuable upon exercise of all Warrants
at the time outstanding. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants
shall be duly authorized and, when issued upon such
exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on
the part of the holders thereof.
12. Registration and Transfer of Warrants,
etc.
12.1. Warrant Register; Ownership of Warrants.
The Company will keep at its principal office a register
in which the Company will provide for the registration of
Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any
Warrant is registered on such register as the owner
thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon
surrender of any Warrant for registration of transfer or
for exchange to the Company at its principal office, the
Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange
therefor a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction
of any Warrant, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine or,
in the case of any such mutilation, upon the surrender of
such Warrant for cancellation to the Company at its
principal office, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Registration Rights. The Purchaser or any
assignee of this Warrant shall be entitled to all rights
and benefits regarding the registration of Common Stock
and Registrable Securities set forth in the Registration
Rights Agreement.
14. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Additional Shares of Common Stock: All shares
(including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be
issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company,
other than
(a) the issuance of shares upon conversion of
the Company's Series A, Series B, Series C and
Series D Convertible Preferred Stock,
(b) Shares issued upon the exercise of the
common stock purchase warrants and non-qualified
options listed in Exhibit A hereto, providing for
the purchase of an aggregate of 849,875 shares of
Common Stock (based on the current capitalization of
the Company);
(c) shares issued upon the exercise of the
Warrants,
(d) not to exceed 2,000,000 shares (subject to
equitable adjustment in the event of any
combination, reclassification, stock split, dividend
or recapitalization of the Company) issued upon the
exercise of options granted or to be granted under
the Company's stock option plans as in effect on the
date hereof or under any other employee stock
option, compensation or purchase plan or plans
adopted or assumed after such date,
(e) such additional number of shares as may
become issuable upon the exercise of any of the
securities referred to in the foregoing clauses (a)
through (d) by reason of adjustments required
pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are
required as the result of the original issuance of
the Warrants, and
(f) such additional number of shares as may
become issuable upon the exercise or conversion of
any of the securities referred to in the foregoing
clauses (a) through (d) by reason of adjustments
required pursuant to anti-dilution provisions
applicable to such securities as in effect on the
date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable
in Common Stock.
Business Day: Any day other than a Saturday or
a Sunday or a day on which commercial banking
institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
Common Stock: As defined in the introduction
to this Warrant, such term to include any stock into
which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes
(however designated) of the Company the holders of which
have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
Company: As defined in the introduction to
this Warrant, such term to include any corporation which
shall succeed to or assume the obligations of the Company
hereunder in compliance with section 3.
Convertible Securities: Any evidences of
indebtedness, shares of stock (other than Common Stock)
or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common
Stock.
Current Market Price: On any date specified
herein, the average daily Market Price during the period
of the most recent 20 days, ending on such date, on which
the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted
to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of
1934, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Market Price: On any date specified herein,
the amount per share of the Common Stock, equal to (a)
the last sale price of such Common Stock, regular way, on
such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the
principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or
(b) if such Common Stock is not then listed or admitted
to trading on any national securities exchange but is
designated as a national market system security by the
NASD, the last trading price of the Common Stock on such
date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the value as
determined by a firm of independent public accountants of
recognized standing selected by the Board of Directors of
the Company, and approved by Wand/Nestor Investments
L.P., as of the last day of any month ending within 30
days preceding the date as of which the determination is
to be made.
NASD: The National Association of Securities
Dealers, Inc.
Options: Rights, options or warrants to
subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common
Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the holders of the
Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Person: A corporation, an association, a
partnership, an organization, a business, an individual,
a government or political subdivision thereof or a
governmental agency.
Registrable Securities: As defined in Section
3 of the Registration Rights Agreement.
Registration Rights Agreement: The Amended and
Restated Registration Rights Agreement dated as of
October 5, 1995, substantially in the form of Exhibit F
to the Revised Standby Agreement.
Revised Standby Agreement: The First Amended
and Restated Standby Financing and Purchase Agreement,
dated as of June 30, 1995, by and between the Company and
Wand.
Securities Act: The Securities Act of 1933, or
any similar federal statute, and the rules and
regulationsof the Commission thereunder, all as the same
shall be in effect at the time.
Transfer: Any sale, assignment, pledge or
other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is
defined in section 2(3) of the Securities Act.
Wand: Wand/Nestor Investments L.P., a Delaware
limited partnership, and its successors and assigns.
Warrant Price: As defined in section 2.1.
Warrants: (a) Those certain Common Stock
Purchase Warrants, initially providing for the
acquisition of an aggregate of 400,000 shares of Common
Stock, originally issued pursuant to the Letter of
Engagement, dated April 26, 1994, among the Company, Hill
& Partners and Wand Partners Inc. (and any warrants
issued in substitution therefor), and (b) those certain
Common Stock Purchase Warrants, initially providing for
the acquisition of 1,700,000 shares of Common Stock,
originally issued to Wand/Nestor Investments L.P. and
Wand/Nestor Investments II L.P. as the "New Warrant" and
the "Fee Warrant" pursuant to the Revised Standby
Agreement (and any warrants issued in substitution
therefor).
15. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the
event of any default or threatened default by the Company
in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof
or otherwise.
16. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing
any liabilities on such holder as a stockholder of the
Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
17. Notices. All notices and other
communications under this Warrant shall be in writing and
shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed
(a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept
at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its
principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in
section 1.
18. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought.
19. Expiration. The Company will give the
holder of this Warrant not less than six weeks nor more
than two months notice of the expiration of the right to
exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 p.m., New York City time, on
October 5, 2005, unless the Company shall fail to give
such notice as aforesaid, in which event the right to
exercise this Warrant shall not expire until a date six
weeks after the date on which the Company shall give the
holder hereof notice of the expiration of the right to
exercise this Warrant.
20. Descriptive Headings. The headings in
this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
22. Judicial Proceedings; Waiver of Jury. Any
judicial proceeding brought against the Company with
respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the
United States of America for the Southern District of New
York and, by execution and delivery of this Agreement,
the Company (a) accepts, generally and unconditionally,
the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with
this Warrant, subject to any rights of appeal, and (b)
irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court
is an inconvenient forum. The Company hereby waives
personal service of process and consents, that service of
process upon it may be made by certified or registered
mail, return receipt requested, at its address specified
or determined in accordance with the provisions of
section 17, and service so made shall be deemed completed
on the third Business Day after such service is deposited
in the mail or, if earlier, when delivered. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of
any holder of any Warrant to bring proceedings against
the Company in the courts of any other jurisdiction. THE
COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
NESTOR, INC.
By: /s/ Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
CURRENTLY OUTSTANDING WARRANTS
The Company has currently outstanding: (a) warrants to
Purchase 646,875 shares of the Common Stock of the
Company at $3.00 per share expiring at various times in
1995 and 1996, (b) warrants to purchase 105,275 shares of
Common Stock of the Company at $2.00 per share expiring
in 1998, and (c) other warrants and non-qualified options
to purchase 293,000 shares of the Common Stock of the
Company at prices between $1.20 per share and $4.20 per
share expiring in 1995 and 1997. These warrants are
issued as follows:
Underlying Exercise
Shares of Price per
Common Share of
Warrant Holders Stock Common Stock Expiration
Purchasers of Series 646,875 $3.00 February 21, 1996
B Convertible Preferred Stock and August 31, 1996
Purchasers of Series 105,275 $2.00 September 28, 1998
D Convertible Preferred Stock
Assignees of Reich & Co., Inc.:
James Gerso 38,667 $1.20 June 30, 1997
Rodd Macklin 5,800 $1.20 June 30, 1997
One Hundred PeaLtd. 71,533 $1.20 June 30, 1997
Hampshire Securities Corp. 2,000 $1.20 June 30, 1997
Officers and Directors of Nestor,
Inc.:
Sam Albert 10,000 $4.20 April 30, 1996
Sam Albert 10,000 $1.30 February 23, 1997
David Fox 68,000 $2.56 April 12, 1999
TOTAL 958,150
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To NESTOR, INC.;
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and
purchases thereunder, ______(*) shares of Common Stock of
Nestor, Inc. and herewith makes payment of $
therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to
, whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
(Street Address)
(City)(State)(Zip Code)
* Insert here the number of shares called for on the
face of this Warrant (or, in the case of a partial
exercise, the portion thereof as to which this
Warrant is being exercised), in either case without
making any adjustment for Additional Shares of
Common Stock or any other stock or other securities
or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of partial
exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the
Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of
the within Warrant hereby sells, assigns and transfers
unto the right represented by such Warrant
to purchase shares of Common Stock of Nestor,
Inc. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of
Nestor, Inc. maintained for such purpose, 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
Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
WAND I $1.00 BALANCE WARRANT
________________________________________________________
NESTOR, INC.
Common Stock Purchase Warrant
Dated as of January 31, 1996
_________________________________________________________
[THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER
SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS WARRANT.]
Wand I Regular Warrant
NESTOR, INC.
Common Stock Purchase Warrant
New York, New York
No. W-U January 31, 1996
Nestor, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that
Wand/Nestor Investments L.P. ("Wand"), or registered
assigns, is entitled to purchase from the Company 152,830
duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company at the
purchase price per share of $1.25 (provided, however, if
the Company has not on or before July 31, 1996 entered
into a definitive agreement with a party with which it is
currently negotiating, such agreement to contemplate an
ongoing revenue stream to the Company, based on
commercial exploitation of the Company's technology, and
to require a payment to the Company upon execution of at
least $1.25 million, such payment to be not primarily in
consideration of any requirement that the Company render
services, then the purchase price shall automatically be
reduced to $.75), at any time or from time to time prior
to 5:00 P.M., New York City time, on August 1, 2004 (or
such later date as may be determined pursuant to section
19), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is being issued by the Company in
consideration of Wand's performance of its obligations
pursuant to the Securities Purchase and Exchange
Agreement dated as of January 31, 1996 by and between the
Company and Wand (the "Purchase and Exchange Agreement").
Certain capitalized terms used in this Warrant are
defined in section 14; references to an "Exhibit" are,
unless otherwise specified, to one of the Exhibits
attached to this Warrant and references to a "section"
are, unless otherwise specified, to one of the sections
of this Warrant.
1. Exercise of Warrant.
1.1. Manner of Exercise. This Warrant may be
exercised after June 30, 1996 by the holder hereof, in
whole or in part, during normal business hours on any
Business Day, by surrender of this Warrant to the Company
at its principal office, accompanied by a subscription
substantially in the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such
holder and accompanied by payment, in cash, by certified
or official bank check payable to the order of the
Company, or in the manner provided in Section 1.5, in the
amount obtained by multiplying (a) the number of shares
of Common Stock (without giving effect to any adjustment
thereof) designated in such subscription by (b) $1.25
(provided, however, if the Company has not on or before
July 31, 1996 entered into a definitive agreement with a
party with which it is currently negotiating, such
agreement to contemplate an ongoing revenue stream to the
Company, based on commercial exploitation of the
Company's technology, and to require a payment to the
Company upon execution of at least $1.25 million, such
payment to be not primarily in consideration of any
requirement that the Company render services, then the
purchase price shall automatically be reduced to $.75),
and such holder shall thereupon be entitled to receive
the number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock (or Other
Securities) determined as provided in sections 2 through
4.
1.2. When Exercise Effective. Each exercise
of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the
Business Day on which this Warrant shall have been
surrendered to the Company as provided in section 1.1,
and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon
such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As
soon as practicable after each exercise of this Warrant,
in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9,
as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the
number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any
fractional share to which such holder would
otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per share on
the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in
the aggregate on the face or faces thereof for the
number of shares of Common Stock equal (without
giving effect to any adjustment thereof) to the
number of such shares called for on the face of this
Warrant minus the number of such shares designated
by the holder upon such exercise as provided in
section 1.1.
1.4. Company to Reaffirm Obligations. The
Company will, at the time of each exercise of this
Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without
limitation, any rights to registration, pursuant to the
Registration Rights Agreement referred to in section 8,
of the shares of Common Stock or Other Securities issued
upon such exercise) to which such holder shall continue
to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of
this Warrant shall fail to make any such request, such
failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Shares
Otherwise Issuable. Upon any exercise of this Warrant,
the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of
this Warrant at the time of such exercise, to apply to
the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder
upon such exercise as shall be specified in such notice,
in which case an amount equal to the excess of the
aggregate Current Market Price of such specified number
of shares on the date of exercise over the portion of the
payment required by section 1.1 attributable to such
shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise
shall be reduced by such specified number.
2. Adjustment of Common Stock Issuable Upon
Exercise.
2.1. General; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant
shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares
of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator
is the price then applicable pursuant to section 1.1(b)
of this Warrant and (b) the denominator is the Warrant
Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $1.25 per share,
provided, however, if the Company has not on or before
July 31, 1996 entered into a definitive agreement with a
party with which it is currently negotiating, such
agreement to contemplate an ongoing revenue stream to the
Company, based on commercial exploitation of the
Company's technology, and to require a payment to the
Company upon execution of at least $1.25 million, such
payment to be not primarily in consideration of any
requirement that the Company render services, then the
Warrant Price shall automatically be reduced to $.75.
The Warrant Price shall be adjusted and readjusted from
time to time as further provided in this section 2 and,
as so adjusted or readjusted, shall remain in effect
until a further adjustment or readjustment thereof is
required by this section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3
or 2.4) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) equal to the
consideration per share paid for such Additional Shares
of Common Stock.
2.2.2 Extraordinary Dividends and
Distributions. In case the Company at any time or from
time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including,
without limitation, any distribution of other or
additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on
the Common Stock, other than a dividend payable in (a)
Additional Shares of Common Stock or (b) cash dividends
during any fiscal year of the Company that do not exceed
twenty percent (20%) of the after tax earnings per share
of the Common Stock for the immediately preceding fiscal
year of the Company, then, and in each such case, subject
to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed
for the determination of holders of any class of
securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(x) the numerator of which shall be the
Current Market Price in effect on such record date
or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-
dividend trading, less the amount of such dividend
or distribution (as determined in good faith by the
Board of Directors of the Company, subject to
confirmation by a firm of independent certified
public accountants of recognized national standing
approved by Wand/Nestor Investments L.P.) applicable
to one share of Common Stock, and
(y) the denominator of which shall be such
Current Market Price.
2.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less
than the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price
shall be made upon the subsequent issue or sale of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which (or
purchase by the Company and cancellation or
retirement of any such Convertible Securities the
rights of conversion or exchange under which) shall
not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as
if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities
with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of increasing
the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of
such Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than 30 days after
the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be
made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the
purposes of this section 2,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.);
(b) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.3,
relating to Options and Convertible Securities,
shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.4,
relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Warrant Price in effect immediately prior to
such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in section 3) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this section 2, the purchase
rights granted by this Warrant, then, and in each such
case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the
Warrant Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If
the amount of any adjustment of the Warrant Price
required pursuant to this section 2 would be less than
one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent (1%) of such Warrant
Price.
3. Consolidation, Merger, etc.
3.1. Adjustments for Consolidation, Merger,
Sale of Assets, Reorganization, etc. In case the Company
after the date hereof (a) shall consolidate with or merge
into any other Person and shall not be the continuing or
surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or
merge into the Company and the Company shall be the
continuing or surviving Person but, in connection with
such consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the
holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the
Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount
of securities, cash or other property to which such
holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the
rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations.
Notwithstanding anything contained in the Warrants or in
the Purchase Agreement to the contrary, the Company will
not effect any of the transactions described in clauses
(a) through (d) of section 3.1 unless, prior to the
consummation thereof, each Person (other than the
Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to,
the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c)
the obligation to deliver to such holder such shares of
stock, securities, cash or property as, in accordance
with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without
limitation, all of the provisions of this section 3)
shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
4. Other Dilutive Events. In case any event
shall occur as to which the provisions of section 2 or
section 3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the
essential intent and principles of such sections, then,
in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized
national standing (such firm to be subject to the
approval of Wand/Nestor Investments L.P.), which shall
give their opinion regarding the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the
total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such
exercise.
6. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause
independent certified public accountants of recognized
standing (such firm to be subject to the approval of
Wand/Nestor Investments L.P.) selected by the Company to
verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and
the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration
received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by section 2) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the
holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of
earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such
period) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least 45 days prior to the date
therein specified.
8. Registration of Common Stock. If any
shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any
federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The
shares of Common Stock (and Other Securities) issuable
upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is
defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and
such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions
of the Registration Rights Agreement applicable to such
holder as a holder of such Registrable Securities. At
any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on
each such exchange, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also
list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of,
any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer.
9.1. Restrictive Legends. Except as otherwise
permitted by this section 9, each Warrant (including each
Warrant issued upon the transfer of any Warrant) shall be
stamped or otherwise imprinted with a legend in
substantially the following form:
"THE WARRANT REPRESENTED BY THIS
CERTIFICATE (AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH
WARRANT) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH WARRANT (AND OF SUCH
SHARES OF COMMON STOCK OR OTHER SECURITIES) IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN SECURITIES PURCHASE AND EXCHANGE
AGREEMENT AND RELATED AGREEMENTS DATED AS OF
JANUARY 31, 1996. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE PURCHASE AGREEMENT IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
Except as otherwise permitted by this section 9, each
certificate for Common Stock (or Other Securities) issued
upon the exercise of any Warrant, and each certificate
issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH SHARES IS SUBJECT TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND
REGULATIONS AND CERTAIN RESTRICTIONS AND
CONDITIONS CONTAINED IN A CERTAIN SECURITIES
PURCHASE AND EXCHANGE AGREEMENT DATED AS OF
JANUARY 31, 1996. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE SECURITIES PURCHASE AND EXCHANGE
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
10. Availability of Information. The Company
shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly
available other information) and will take such further
action as any holder of Registrable Securities may
reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement
as to whether it has complied with the requirements of
this section 10.
11. Reservation of Stock, etc. The Company
will at all times reserve and keep available, solely for
issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities)
from time to time issuable upon exercise of all Warrants
at the time outstanding. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants
shall be duly authorized and, when issued upon such
exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on
the part of the holders thereof.
12. Registration and Transfer of Warrants,
etc.
12.1. Warrant Register; Ownership of Warrants.
The Company will keep at its principal office a register
in which the Company will provide for the registration of
Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any
Warrant is registered on such register as the owner
thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon
surrender of any Warrant for registration of transfer or
for exchange to the Company at its principal office, the
Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange
therefor a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction
of any Warrant, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine or,
in the case of any such mutilation, upon the surrender of
such Warrant for cancellation to the Company at its
principal office, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Registration Rights. The Purchaser or any
assignee of this Warrant shall be entitled to all rights
and benefits regarding the registration of Common Stock
and Registrable Securities set forth in the Registration
Rights Agreement.
14. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Additional Shares of Common Stock: All shares
(including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be
issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company,
other than
(a) the issuance of shares upon conversion of
the Company's Series A, Series B, Series D, Series
E, Series F, Series G and Series H Convertible
Preferred Stock,
(b) Shares issued upon the exercise of the
common stock purchase warrants and non-qualified
options listed in Exhibit A hereto, providing for
the purchase of an aggregate of 1,000,650 shares of
Common Stock (based on the current capitalization of
the Company);
(c) shares issued upon the exercise of the
Warrants,
(d) not to exceed 2,000,000 shares (subject to
equitable adjustment in the event of any
combination, reclassification, stock split, dividend
or recapitalization of the Company) issued upon the
exercise of options granted or to be granted under
the Company's stock option plans as in effect on the
date hereof or under any other employee stock
option, compensation or purchase plan or plans
adopted or assumed after such date,
(e) such additional number of shares as may
become issuable upon the exercise of any of the
securities referred to in the foregoing clauses (a)
through (d) by reason of adjustments required
pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are
required as the result of the original issuance of
the Warrants, and
(f) such additional number of shares as may
become issuable upon the exercise or conversion of
any of the securities referred to in the foregoing
clauses (a) through (d) by reason of adjustments
required pursuant to anti-dilution provisions
applicable to such securities as in effect on the
date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable
in Common Stock.
Business Day: Any day other than a Saturday or
a Sunday or a day on which commercial banking
institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
Common Stock: As defined in the introduction
to this Warrant, such term to include any stock into
which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes
(however designated) of the Company the holders of which
have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
Company: As defined in the introduction to
this Warrant, such term to include any corporation which
shall succeed to or assume the obligations of the Company
hereunder in compliance with section 3.
Convertible Securities: Any evidences of
indebtedness, shares of stock (other than Common Stock)
or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common
Stock.
Current Market Price: On any date specified
herein, the average daily Market Price during the period
of the most recent 20 days, ending on such date, on which
the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted
to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of
1934, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Market Price: On any date specified herein,
the amount per share of the Common Stock, equal to (a)
the last sale price of such Common Stock, regular way, on
such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the
principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or
(b) if such Common Stock is not then listed or admitted
to trading on any national securities exchange but is
designated as a national market system security by the
NASD, the last trading price of the Common Stock on such
date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the value as
determined by a firm of independent public accountants of
recognized standing selected by the Board of Directors of
the Company, and approved by Wand/Nestor Investments
L.P., as of the last day of any month ending within 30
days preceding the date as of which the determination is
to be made.
NASD: The National Association of Securities
Dealers, Inc.
Options: Rights, options or warrants to
subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common
Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the holders of the
Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Person: A corporation, an association, a
partnership, an organization, a business, an individual,
a government or political subdivision thereof or a
governmental agency.
Purchase and Exchange Agreement: The
Securities Purchase and Exchange Agreement, dated as of
January 31, 1996, by and among the Company, Wand and
certain affiliates of Wand.
Registrable Securities: As defined in Section
3 of the Registration Rights Agreement.
Registration Rights Agreement: The Amended and
Restated Registration Rights Agreement dated as of
January 31, 1996, substantially in the form of Exhibit IX
to the Purchase and Exchange Agreement.
Securities Act: The Securities Act of 1933, or
any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Transfer: Any sale, assignment, pledge or
other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is
defined in section 2(3) of the Securities Act.
Wand: As defined in section 1, and its
successors and assigns.
Warrant Price: As defined in section 2.1.
Warrants: (a) Those certain Common Stock
Purchase Warrants, initially providing for the
acquisition of an aggregate of 400,000 shares of Common
Stock, originally issued pursuant to the Letter of
Engagement, dated April 26, 1994, among the Company, Hill
& Partners and Wand Partners Inc. (and any warrants
issued in substitution therefor), (b) those certain
Common Stock Purchase Warrants, initially providing for
the acquisition of 1,700,000 shares of Common Stock,
originally issued to Wand/Nestor Investments L.P. and
Wand/Nestor Investments II L.P. as the "New Warrant" and
the "Fee Warrant" pursuant to the Revised Standby
Agreement (and any warrants issued in substitution
therefor) and (c) those certain Common Stock Purchase
Warrants, initially providing for the acquisition of
290,000 shares of Common Stock, originally issued in
connection with sale of the Series F Convertible
Preferred Stock and Series G Convertible Preferred Stock
of the Company pursuant to the Purchase and Exchange
Agreement (and any warrants issued in substitution
therefor).
15. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the
event of any default or threatened default by the Company
in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof
or otherwise.
16. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing
any liabilities on such holder as a stockholder of the
Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
17. Notices. All notices and other
communications under this Warrant shall be in writing and
shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed
(a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept
at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its
principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in
section 1.
18. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought.
19. Expiration. The Company will give the
holder of this Warrant not less than six weeks nor more
than two months notice of the expiration of the right to
exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 p.m., New York City time, on
August 1, 2004, unless the Company shall fail to give
such notice as aforesaid, in which event the right to
exercise this Warrant shall not expire until a date six
weeks after the date on which the Company shall give the
holder hereof notice of the expiration of the right to
exercise this Warrant.
20. Descriptive Headings. The headings in
this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
22. Judicial Proceedings; Waiver of Jury. Any
judicial proceeding brought against the Company with
respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the
United States of America for the Southern District of New
York and, by execution and delivery of this Agreement,
the Company (a) accepts, generally and unconditionally,
the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with
this Warrant, subject to any rights of appeal, and (b)
irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court
is an inconvenient forum. The Company hereby waives
personal service of process and consents, that service of
process upon it may be made by certified or registered
mail, return receipt requested, at its address specified
or determined in accordance with the provisions of
section 17, and service so made shall be deemed completed
on the third Business Day after such service is deposited
in the mail or, if earlier, when delivered. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of
any holder of any Warrant to bring proceedings
against the Company in the courts of any other
jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
CURRENTLY OUTSTANDING WARRANTS
The Company has currently outstanding: (a) warrants to
Purchase 689,375 shares of the Common Stock of the
Company at $3.00 per share expiring at various times in
1996, (b) other warrants to purchase 105,275 shares of
Common Stock of the Company at $2.00 per share expiring
in 1998, and (c) other warrants and non-qualified options
to purchase 206,000 shares of the Common Stock of the
Company at prices between $1.00 per share and $4.625 per
share expiring in 1996, 1997 and 1999. These warrants
are issued as follows:
Underlying Exercise
Shares of Price per
Common Share of
Warrant Holders Stock Common Stock Expiration
Purchasers of Series 689,375 $3.00 February 21, 1996
B Convertible Preferred Stock and August 31, 1996
Purchasers of Series 105,275 2.00 September 28,1998
D Convertible Preferred Stock
Assignees of Reich & Co., Inc.:
James Gerson 38,667 $1.20 June 30, 1997
Rodd Macklin 5,800 $1.20 June 30, 1997
One Hundred Pearl Ltd. 71,533 $1.20 June 30, 1997
Hampshire Securities Corp. 2,000 $1.20 June 30, 1997
Officers and Directors of Nestor,
Inc.:
Sam Albert 10,000 $4.625 April 30, 1996
Sam Albert 10,000 $1.30 February 23, 1997
David Fox 68,000 $1.00 April 12, 1999
TOTAL 1,000,650
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To NESTOR, INC.;
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and
purchases thereunder, ______(*) shares of Common Stock of
Nestor, Inc. and herewith makes payment of $
therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to
, whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
(Street Address)
(City)(State)(Zip Code)
* Insert here the number of shares called for on the
face of this Warrant (or, in the case of a partial
exercise, the portion thereof as to which this
Warrant is being exercised), in either case without
making any adjustment for Additional Shares of
Common Stock or any other stock or other securities
or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of partial
exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the
Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of
the within Warrant hereby sells, assigns and transfers
unto the right represented by such Warrant
to purchase shares of Common Stock of Nestor,
Inc. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of
Nestor, Inc. maintained for such purpose, 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
Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
WAND I REGULAR WARRANT
________________________________________________________
NESTOR, INC.
Common Stock Purchase Warrant
Dated as of January 31, 1996
_________________________________________________________
[THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER
SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS WARRANT.]
Wand II Regular Warrant
NESTOR, INC.
Common Stock Purchase Warrant
New York, New York
No. W-V January 31, 1996
Nestor, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that
Wand/Nestor Investments II L.P. ("Wand"), or registered
assigns, is entitled to purchase from the Company 20,880
duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company at the
purchase price per share of $1.25 (provided, however, if
the Company has not on or before July 31, 1996 entered
into a definitive agreement with a party with which it is
currently negotiating, such agreement to contemplate an
ongoing revenue stream to the Company, based on
commercial exploitation of the Company's technology, and
to require a payment to the Company upon execution of at
least $1.25 million, such payment to be not primarily in
consideration of any requirement that the Company render
services, then the purchase price shall automatically be
reduced to $.75), at any time or from time to time prior
to 5:00 P.M., New York City time, on August 1, 2004 (or
such later date as may be determined pursuant to section
19), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is being issued by the Company in
consideration of Wand's performance of its obligations
pursuant to the Securities Purchase and Exchange
Agreement dated as of January 31, 1996 by and between the
Company and Wand (the "Purchase and Exchange Agreement").
Certain capitalized terms used in this Warrant are
defined in section 14; references to an "Exhibit" are,
unless otherwise specified, to one of the Exhibits
attached to this Warrant and references to a "section"
are, unless otherwise specified, to one of the sections
of this Warrant.
1. Exercise of Warrant.
1.1. Manner of Exercise. This Warrant may be
exercised after June 30, 1996 by the holder hereof, in
whole or in part, during normal business hours on any
Business Day, by surrender of this Warrant to the Company
at its principal office, accompanied by a subscription
substantially in the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such
holder and accompanied by payment, in cash, by certified
or official bank check payable to the order of the
Company, or in the manner provided in Section 1.5, in the
amount obtained by multiplying (a) the number of shares
of Common Stock (without giving effect to any adjustment
thereof) designated in such subscription by (b) $1.25
(provided, however, if the Company has not on or before
July 31, 1996 entered into a definitive agreement with a
party with which it is currently negotiating, such
agreement to contemplate an ongoing revenue stream to the
Company, based on commercial exploitation of the
Company's technology, and to require a payment to the
Company upon execution of at least $1.25 million, such
payment to be not primarily in consideration of any
requirement that the Company render services, then the
purchase price shall automatically be reduced to $.75),
and such holder shall thereupon be entitled to receive
the number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock (or Other
Securities) determined as provided in sections 2 through
4.
1.2. When Exercise Effective. Each exercise
of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the
Business Day on which this Warrant shall have been
surrendered to the Company as provided in section 1.1,
and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon
such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As
soon as practicable after each exercise of this Warrant,
in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9,
as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the
number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any
fractional share to which such holder would
otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per share on
the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in
the aggregate on the face or faces thereof for the
number of shares of Common Stock equal (without
giving effect to any adjustment thereof) to the
number of such shares called for on the face of this
Warrant minus the number of such shares designated
by the holder upon such exercise as provided in
section 1.1.
1.4. Company to Reaffirm Obligations. The
Company will, at the time of each exercise of this
Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without
limitation, any rights to registration, pursuant to the
Registration Rights Agreement referred to in section 8,
of the shares of Common Stock or Other Securities issued
upon such exercise) to which such holder shall continue
to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of
this Warrant shall fail to make any such request, such
failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Shares
Otherwise Issuable. Upon any exercise of this Warrant,
the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of
this Warrant at the time of such exercise, to apply to
the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder
upon such exercise as shall be specified in such notice,
in which case an amount equal to the excess of the
aggregate Current Market Price of such specified number
of shares on the date of exercise over the portion of the
payment required by section 1.1 attributable to such
shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise
shall be reduced by such specified number.
2. Adjustment of Common Stock Issuable Upon
Exercise.
2.1. General; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant
shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares
of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator
is the price then applicable pursuant to section 1.1(b)
of this Warrant and (b) the denominator is the Warrant
Price in effect on the date of such exercise. The
"Warrant Price" shall initially be $1.25 per share,
provided, however, if the Company has not on or before
July 31, 1996 entered into a definitive agreement with a
party with which it is currently negotiating, such
agreement to contemplate an ongoing revenue stream to the
Company, based on commercial exploitation of the
Company's technology, and to require a payment to the
Company upon execution of at least $1.25 million, such
payment to be not primarily in consideration of any
requirement that the Company render services, then the
Warrant Price shall automatically be reduced to $.75.
The Warrant Price shall be adjusted and readjusted from
time to time as further provided in this section 2 and,
as so adjusted or readjusted, shall remain in effect
until a further adjustment or readjustment thereof is
required by this section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3
or 2.4) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) equal to the
consideration per share paid for such Additional Shares
of Common Stock.
2.2.2 Extraordinary Dividends and
Distributions. In case the Company at any time or from
time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including,
without limitation, any distribution of other or
additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on
the Common Stock, other than a dividend payable in (a)
Additional Shares of Common Stock or (b) cash dividends
during any fiscal year of the Company that do not exceed
twenty percent (20%) of the after tax earnings per share
of the Common Stock for the immediately preceding fiscal
year of the Company, then, and in each such case, subject
to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed
for the determination of holders of any class of
securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(x) the numerator of which shall be the
Current Market Price in effect on such record date
or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-
dividend trading, less the amount of such dividend
or distribution (as determined in good faith by the
Board of Directors of the Company, subject to
confirmation by a firm of independent certified
public accountants of recognized national standing
approved by Wand/Nestor Investments L.P.) applicable
to one share of Common Stock, and
(y) the denominator of which shall be such
Current Market Price.
2.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less
than the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price
shall be made upon the subsequent issue or sale of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which (or
purchase by the Company and cancellation or
retirement of any such Convertible Securities the
rights of conversion or exchange under which) shall
not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as
if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities
with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of increasing
the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of
such Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than 30 days after
the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be
made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the
purposes of this section 2,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.);
(b) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.3,
relating to Options and Convertible Securities,
shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.4,
relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Warrant Price in effect immediately prior to
such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in section 3) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this section 2, the purchase
rights granted by this Warrant, then, and in each such
case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the
Warrant Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If
the amount of any adjustment of the Warrant Price
required pursuant to this section 2 would be less than
one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent (1%) of such Warrant
Price.
3. Consolidation, Merger, etc.
3.1. Adjustments for Consolidation, Merger,
Sale of Assets, Reorganization, etc. In case the Company
after the date hereof (a) shall consolidate with or merge
into any other Person and shall not be the continuing or
surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or
merge into the Company and the Company shall be the
continuing or surviving Person but, in connection with
such consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the
holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the
Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount
of securities, cash or other property to which such
holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the
rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations.
Notwithstanding anything contained in the Warrants or in
the Purchase Agreement to the contrary, the Company will
not effect any of the transactions described in clauses
(a) through (d) of section 3.1 unless, prior to the
consummation thereof, each Person (other than the
Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to,
the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c)
the obligation to deliver to such holder such shares of
stock, securities, cash or property as, in accordance
with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without
limitation, all of the provisions of this section 3)
shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
4. Other Dilutive Events. In case any event
shall occur as to which the provisions of section 2 or
section 3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the
essential intent and principles of such sections, then,
in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized
national standing (such firm to be subject to the
approval of Wand/Nestor Investments L.P.), which shall
give their opinion regarding the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the
total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such
exercise.
6. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause
independent certified public accountants of recognized
standing (such firm to be subject to the approval of
Wand/Nestor Investments L.P.) selected by the Company to
verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and
the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration
received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by section 2) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the
holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of
earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such
period) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least 45 days prior to the date
therein specified.
8. Registration of Common Stock. If any
shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any
federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The
shares of Common Stock (and Other Securities) issuable
upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is
defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and
such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions
of the Registration Rights Agreement applicable to such
holder as a holder of such Registrable Securities. At
any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on
each such exchange, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also
list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of,
any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer.
9.1. Restrictive Legends. Except as otherwise
permitted by this section 9, each Warrant (including each
Warrant issued upon the transfer of any Warrant) shall be
stamped or otherwise imprinted with a legend in
substantially the following form:
"THE WARRANT REPRESENTED BY THIS
CERTIFICATE (AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH
WARRANT) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH WARRANT (AND OF SUCH
SHARES OF COMMON STOCK OR OTHER SECURITIES) IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN SECURITIES PURCHASE AND EXCHANGE
AGREEMENT AND RELATED AGREEMENTS DATED AS OF
JANUARY 31, 1996. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE PURCHASE AGREEMENT IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
Except as otherwise permitted by this section 9, each
certificate for Common Stock (or Other Securities) issued
upon the exercise of any Warrant, and each certificate
issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH SHARES IS SUBJECT TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND
REGULATIONS AND CERTAIN RESTRICTIONS AND
CONDITIONS CONTAINED IN A CERTAIN SECURITIES
PURCHASE AND EXCHANGE AGREEMENT DATED AS OF
JANUARY 31, 1996. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE SECURITIES PURCHASE AND EXCHANGE
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
10. Availability of Information. The Company
shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly
available other information) and will take such further
action as any holder of Registrable Securities may
reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement
as to whether it has complied with the requirements of
this section 10.
11. Reservation of Stock, etc. The Company
will at all times reserve and keep available, solely for
issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities)
from time to time issuable upon exercise of all Warrants
at the time outstanding. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants
shall be duly authorized and, when issued upon such
exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on
the part of the holders thereof.
12. Registration and Transfer of Warrants,
etc.
12.1. Warrant Register; Ownership of Warrants.
The Company will keep at its principal office a register
in which the Company will provide for the registration of
Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any
Warrant is registered on such register as the owner
thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon
surrender of any Warrant for registration of transfer or
for exchange to the Company at its principal office, the
Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange
therefor a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction
of any Warrant, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine or,
in the case of any such mutilation, upon the surrender of
such Warrant for cancellation to the Company at its
principal office, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Registration Rights. The Purchaser or any
assignee of this Warrant shall be entitled to all rights
and benefits regarding the registration of Common Stock
and Registrable Securities set forth in the Registration
Rights Agreement.
14. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Additional Shares of Common Stock: All shares
(including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be
issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company,
other than
(a) the issuance of shares upon conversion of
the Company's Series A, Series B, Series D, Series
E, Series F, Series G and Series H Convertible
Preferred Stock,
(b) Shares issued upon the exercise of the
common stock purchase warrants and non-qualified
options listed in Exhibit A hereto, providing for
the purchase of an aggregate of 1,000,650 shares of
Common Stock (based on the current capitalization of
the Company);
(c) shares issued upon the exercise of the
Warrants,
(d) not to exceed 2,000,000 shares (subject to
equitable adjustment in the event of any
combination, reclassification, stock split, dividend
or recapitalization of the Company) issued upon the
exercise of options granted or to be granted under
the Company's stock option plans as in effect on the
date hereof or under any other employee stock
option, compensation or purchase plan or plans
adopted or assumed after such date,
(e) such additional number of shares as may
become issuable upon the exercise of any of the
securities referred to in the foregoing clauses (a)
through (d) by reason of adjustments required
pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are
required as the result of the original issuance of
the Warrants, and
(f) such additional number of shares as may
become issuable upon the exercise or conversion of
any of the securities referred to in the foregoing
clauses (a) through (d) by reason of adjustments
required pursuant to anti-dilution provisions
applicable to such securities as in effect on the
date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable
in Common Stock.
Business Day: Any day other than a Saturday or
a Sunday or a day on which commercial banking
institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
Common Stock: As defined in the introduction
to this Warrant, such term to include any stock into
which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes
(however designated) of the Company the holders of which
have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
Company: As defined in the introduction to
this Warrant, such term to include any corporation which
shall succeed to or assume the obligations of the Company
hereunder in compliance with section 3.
Convertible Securities: Any evidences of
indebtedness, shares of stock (other than Common Stock)
or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common
Stock.
Current Market Price: On any date specified
herein, the average daily Market Price during the period
of the most recent 20 days, ending on such date, on which
the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted
to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of
1934, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Market Price: On any date specified herein,
the amount per share of the Common Stock, equal to (a)
the last sale price of such Common Stock, regular way, on
such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the
principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or
(b) if such Common Stock is not then listed or admitted
to trading on any national securities exchange but is
designated as a national market system security by the
NASD, the last trading price of the Common Stock on such
date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the value as
determined by a firm of independent public accountants of
recognized standing selected by the Board of Directors of
the Company, and approved by Wand/Nestor Investments
L.P., as of the last day of any month ending within 30
days preceding the date as of which the determination is
to be made.
NASD: The National Association of Securities
Dealers, Inc.
Options: Rights, options or warrants to
subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common
Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the holders of the
Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Person: A corporation, an association, a
partnership, an organization, a business, an individual,
a government or political subdivision thereof or a
governmental agency.
Purchase and Exchange Agreement: The
Securities Purchase and Exchange Agreement, dated as of
January 31, 1996, by and among the Company, Wand and
certain affiliates of Wand.
Registrable Securities: As defined in Section
3 of the Registration Rights Agreement.
Registration Rights Agreement: The Amended and
Restated Registration Rights Agreement dated as of
January 31, 1996, substantially in the form of Exhibit IX
to the Purchase and Exchange Agreement.
Securities Act: The Securities Act of 1933, or
any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Transfer: Any sale, assignment, pledge or
other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is
defined in section 2(3) of the Securities Act.
Wand: As defined in section 1, and its
successors and assigns.
Warrant Price: As defined in section 2.1.
Warrants: (a) Those certain Common Stock
Purchase Warrants, initially providing for the
acquisition of an aggregate of 400,000 shares of Common
Stock, originally issued pursuant to the Letter of
Engagement, dated April 26, 1994, among the Company, Hill
& Partners and Wand Partners Inc. (and any warrants
issued in substitution therefor), (b) those certain
Common Stock Purchase Warrants, initially providing for
the acquisition of 1,700,000 shares of Common Stock,
originally issued to Wand/Nestor Investments L.P. and
Wand/Nestor Investments II L.P. as the "New Warrant" and
the "Fee Warrant" pursuant to the Revised Standby
Agreement (and any warrants issued in substitution
therefor) and (c) those certain Common Stock Purchase
Warrants, initially providing for the acquisition of
290,000 shares of Common Stock, originally issued in
connection with sale of the Series F Convertible
Preferred Stock and Series G Convertible Preferred Stock
of the Company pursuant to the Purchase and Exchange
Agreement (and any warrants issued in substitution
therefor).
15. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the
event of any default or threatened default by the Company
in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof
or otherwise.
16. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing
any liabilities on such holder as a stockholder of the
Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
17. Notices. All notices and other
communications under this Warrant shall be in writing and
shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed
(a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept
at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its
principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in
section 1.
18. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought.
19. Expiration. The Company will give the
holder of this Warrant not less than six weeks nor more
than two months notice of the expiration of the right to
exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 p.m., New York City time, on
August 1, 2004, unless the Company shall fail to give
such notice as aforesaid, in which event the right to
exercise this Warrant shall not expire until a date six
weeks after the date on which the Company shall give the
holder hereof notice of the expiration of the right to
exercise this Warrant.
20. Descriptive Headings. The headings in
this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
22. Judicial Proceedings; Waiver of Jury. Any
judicial proceeding brought against the Company with
respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the
United States of America for the Southern District of New
York and, by execution and delivery of this Agreement,
the Company (a) accepts, generally and unconditionally,
the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with
this Warrant, subject to any rights of appeal, and (b)
irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court
is an inconvenient forum. The Company hereby waives
personal service of process and consents, that service of
process upon it may be made by certified or registered
mail, return receipt requested, at its address specified
or determined in accordance with the provisions of
section 17, and service so made shall be deemed completed
on the third Business Day after such service is deposited
in the mail or, if earlier, when delivered. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of
any holder of any Warrant to bring proceedings
against the Company in the courts of any other
jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
CURRENTLY OUTSTANDING WARRANTS
The Company has currently outstanding: (a) warrants to
Purchase 689,375 shares of the Common Stock of the
Company at $3.00 per share expiring at various times in
1996, (b) other warrants to purchase 105,275 shares of
Common Stock of the Company at $2.00 per share expiring
in 1998, and (c) other warrants and non-qualified options
to purchase 206,000 shares of the Common Stock of the
Company at prices between $1.00 per share and $4.625 per
share expiring in 1996, 1997 and 1999. These warrants
are issued as follows:
Underlying Exercise
Shares of Price per
Common Share of
Warrant Holders Stock Common Stock Expiration
Purchasers of Series 689,375 $3.00 February 21, 1996
B Convertible Preferred Stock and August 31, 1996
Purchasers of Series 105,275 2.00 September 28,1998
D Convertible Preferred Stock
Assignees of Reich & Co., Inc.:
James Gerson 38,667 $1.20 June 30, 1997
Rodd Macklin 5,800 $1.20 June 30, 1997
One Hundred Pearl Ltd. 71,533 $1.20 June 30, 1997
Hampshire Securities Corp. 2,000 $1.20 June 30, 1997
Officers and Directors of Nestor,
Inc.:
Sam Albert 10,000 $4.625 April 30, 1996
Sam Albert 10,000 $1.30 February 23, 1997
David Fox 68,000 $1.00 April 12, 1999
TOTAL 1,000,650
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To NESTOR, INC.;
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and
purchases thereunder, ______* shares of Common Stock of
Nestor, Inc. and herewith makes payment of $
therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to
, whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
(Street Address)
(City)(State)(Zip Code)
* Insert here the number of shares called for on the
face of this Warrant (or, in the case of a partial
exercise, the portion thereof as to which this
Warrant is being exercised), in either case without
making any adjustment for Additional Shares of
Common Stock or any other stock or other securities
or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of partial
exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the
Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of
the within Warrant hereby sells, assigns and transfers
unto the right represented by such Warrant
to purchase shares of Common Stock of Nestor,
Inc. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of
Nestor, Inc. maintained for such purpose, 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
Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
WAND II REGULAR WARRANT
________________________________________________________
NESTOR, INC.
Common Stock Purchase Warrant
Dated as of January 31, 1996
_________________________________________________________
[THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER
SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS WARRANT.]
NESTOR, INC.
Common Stock Purchase Warrant
New York, New York
No. W-W January 31, 1996
Nestor, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that
Wand/Nestor Investments III L.P. ("Wand"), or registered
assigns, is entitled to purchase from the Company 416,115
duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock par value $.01 per
share (the "Common Stock"), of the Company at the
purchase price per share of $.65, at any time or from
time to time prior to 5:00 P.M., New York City time, on
August 1, 2004 (or such later date as may be determined
pursuant to section 19), all subject to the terms,
conditions and adjustments set forth below in this
Warrant.
This Warrant is issued in exchange for a
warrant issued on October 5, 1995 pursuant to the First
Amended and Restated Standby Financing and Purchase
Agreement, dated as of June 30, 1995 (the "Revised
Standby Agreement"), by and between the Company and
Wand/Nestor Investments L.P., a Delaware limited
partnership ("Wand I") in exchange for the Common Stock
Purchase Warrants originally issued in connection with
the issue and private sale by the Company of Series C
Preferred Stock, pursuant to the Securities Purchase
Agreement (the "Purchase Agreement"), dated as of August
1, 1994, between the Company and Wand I. This Warrant is
being issued in connection with the exchange of the
outstanding Series C Preferred Stock for Series E
Convertible Preferred Stock (the "Series E Preferred
Stock") and Series H Convertible Preferred Stock (the
"Series H Preferred Stock") of the Company pursuant to
the Securities Purchase and Exchange Agreement, dated as
of January 31, 1996, among the Company, Wand and certain
affiliates of Wand. Certain capitalized terms used in
this Warrant are defined in section 14; references to an
"Exhibit" are, unless otherwise specified, to one of the
Exhibits attached to this Warrant and references to a
"section" are, unless otherwise specified, to one of the
sections of this Warrant.
1. Exercise of Warrant. 1.1. Manner of
Exercise. Subject to the instructions set forth in
Section 1.6, this Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours
on any Business Day, by surrender of this Warrant to the
Company at its principal office, accompanied by a
subscription substantially in the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed
by such holder and accompanied by payment, in cash, by
certified or official bank check payable to the order of
the Company, or in the manner provided in Section 1.5, in
the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by
(b) $.65, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or
Other Securities) determined as provided in sections 2
through 4.
1.2. When Exercise Effective. Each exercise
of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the
Business Day on which this Warrant shall have been
surrendered to the Company as provided in section 1.1,
and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon
such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As
soon as practicable after each exercise of this Warrant,
in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9,
as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the
number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any
fractional share to which such holder would
otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per share on
the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in
the aggregate on the face or faces thereof for the
number of shares of Common Stock equal (without
giving effect to any adjustment thereof) to the
number of such shares called for on the face of this
Warrant minus the number of such shares designated
by the holder upon such exercise as provided in
section 1.1.
1.4. Company to Reaffirm Obligations. The
Company will, at the time of each exercise of this
Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without
limitation, any rights to registration, pursuant to the
Registration Rights Agreement referred to in section 8,
of the shares of Common Stock or Other Securities issued
upon such exercise) to which such holder shall continue
to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of
this Warrant shall fail to make any such request, such
failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Shares
Otherwise Issuable. Upon any exercise of this Warrant,
the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of
this Warrant at the time of such exercise, to apply to
the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder
upon such exercise as shall be specified in such notice,
in which case an amount equal to the excess of the
aggregate Current Market Price of such specified number
of shares on the date of exercise over the portion of the
payment required by section 1.1 attributable to such
shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise
shall be reduced by such specified number.
1.6. Restrictions Upon Exercise by BHCA
Holder. A BHCA Holder may only exercise this Warrant, in
whole or in part, in connection with the sale of the
Common Stock issuable upon the exercise of the Warrant to
an unaffiliated third party (a) in a widely dispersed
public offering, (b) to one or more investors, in one or
more transactions, none of whom, after such purchase
would hold more than 2% of the voting securities of the
Company then outstanding, (c) to any Person that already
controls the Company prior to such transfer, (d) in a
transaction that complies with Rule 144 (or any successor
thereto) of the Securities Act of 1933, as amended, or
(e) in any other transaction approved in advance by the
Federal Reserve System.
2. Adjustment of Common Stock Issuable Upon
Exercise. 2.1. General; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant
shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares
of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator
is $.65 and (b) the denominator is the Warrant Price in
effect on the date of such exercise. The "Warrant Price"
shall initially be $.65 per share, shall be adjusted and
readjusted from time to time as provided in this section
2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof
is required by this section 2. In addition to the other
adjustments herein provided, the "Warrant Price" shall be
subject to the following special adjustments:
(i) If the Series E Preferred Stock and Series
H Preferred are redeemed by the Company on
or prior to August 1, 2000 then the
"Warrant Price" shall
(A) be reduced by 25%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs prior to August 1, 1996;
(B) be reduced by 20%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1996 and
prior to August 1, 1997;
(C) be reduced by 15%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1997 and
prior to August 1, 1998;
(D) be reduced by 10%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1998 and
prior to August 1, 1999; and
(E) be reduced by 5%, after all other
adjustments required by this section
2 have been made, if the redemption
occurs on or after August 1, 1999 and
prior to August 1, 2000.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3
or 2.4) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(a) the numerator of which shall be (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the
aggregate consideration received by the Company for
the total number of such Additional Shares of Common
Stock so issued or sold would purchase at such
Warrant Price, and
(b) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1,
(x) immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to section
2.3 or 2.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed
to be outstanding.
2.2.2 Extraordinary Dividends and
Distributions. In case the Company at any time or from
time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including,
without limitation, any distribution of other or
additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on
the Common Stock, other than (a) a dividend payable in
Additional Shares of Common Stock or (b) cash dividends
during any fiscal year of the Company that do not exceed
twenty percent (20%) of the after tax earnings per share
of the Common Stock for the immediately preceding fiscal
year of the Company, then, and in each such case, subject
to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed
for the determination of holders of any class of
securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(x) the numerator of which shall be the
Current Market Price in effect on such record date
or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-
dividend trading, less the amount of such dividend
or distribution (as determined in good faith by the
Board of Directors of the Company, subject to
confirmation by a firm of independent certified
public accountants of recognized national standing
approved by Wand/Nestor Investments L.P.) applicable
to one share of Common Stock, and
(y) the denominator of which shall be such
Current Market Price.
2.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less
than the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price
shall be made upon the subsequent issue or sale of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which (or
purchase by the Company and cancellation or
retirement of any such Convertible Securities the
rights of conversion or exchange under which) shall
not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as
if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities
with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of increasing
the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of
such Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than 30 days after
the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be
made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the
purposes of this section 2,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.);
(b) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.3,
relating to Options and Convertible Securities,
shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.4,
relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Warrant Price in effect immediately prior to
such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in section 3) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this section 2, the purchase
rights granted by this Warrant, then, and in each such
case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the
Warrant Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If
the amount of any adjustment of the Warrant Price
required pursuant to this section 2 would be less than
one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent (1%) of such Warrant
Price.
3. Consolidation, Merger, etc. 3.1.
Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall
permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or
surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the
holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the
Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount
of securities, cash or other property to which such
holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the
rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations.
Notwithstanding anything contained in the Warrants or in
the Purchase Agreement to the contrary, the Company will
not effect any of the transactions described in clauses
(a) through (d) of section 3.1 unless, prior to the
consummation thereof, each Person (other than the
Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to,
the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c)
the obligation to deliver to such holder such shares of
stock, securities, cash or property as, in accordance
with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without
limitation, all of the provisions of this section 3)
shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any
rights pursuant hereto. Nothing in this section 3 shall
be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Purchase
Agreement.
4. Other Dilutive Events. In case any event
shall occur as to which the provisions of section 2 or
section 3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the
essential intent and principles of such sections, then,
in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized
national standing (such firm to be subject to the
approval of Wand/Nestor Investments L.P.), which shall
give their opinion regarding the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the
total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such
exercise.
6. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause
independent certified public accountants of recognized
standing (such firm to be subject to the approval of
Wand/Nestor Investments L.P.) selected by the Company to
verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and
the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration
received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by section 2) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the
holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of
earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such
period) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least 45 days prior to the date
therein specified.
8. Registration of Common Stock. If any
shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any
federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The
shares of Common Stock (and Other Securities) issuable
upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is
defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and
such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions
of the Registration Rights Agreement applicable to such
holder as a holder of such Registrable Securities. At
any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on
each such exchange, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also
list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of,
any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer. 9.1.
Restrictive Legends. Except as otherwise permitted by
this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped
or otherwise imprinted with a legend in substantially the
following form:
"THE WARRANT REPRESENTED BY THIS
CERTIFICATE (AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH
WARRANT) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH WARRANT (AND OF SUCH
SHARES OF COMMON STOCK OR OTHER SECURITIES) IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN SECURITIES PURCHASE AGREEMENT AND
RELATED AGREEMENTS DATED AS OF AUGUST 1, 1994.
THE HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
HEREOF AGREES TO BE BOUND BY SUCH RESTRICTIONS
AND CONDITIONS. A COPY OF THE PURCHASE
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
Except as otherwise permitted by this section 9, each
certificate for Common Stock (or Other Securities) issued
upon the exercise of any Warrant, and each certificate
issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH SHARES IS SUBJECT TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND
REGULATIONS AND CERTAIN RESTRICTIONS AND
CONDITIONS CONTAINED IN A CERTAIN SECURITIES
PURCHASE AGREEMENT AND RELATED AGREEMENTS DATED
AS OF AUGUST 1, 1994. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRICTIONS AND CONDITIONS. A
COPY OF THE PURCHASE AGREEMENT IS ON FILE WITH
THE SECRETARY OF THE COMPANY."
9.2. Restrictions on Transfer By BHCA Holders.
A BHCA Holder may only transfer this Warrant, in whole
or in part, to an unaffiliated third party (a) in a
widely dispersed public offering, (b) to one or more
investors, in one or more transactions, none of whom,
after such purchase would hold more than 2% of the voting
securities of the Company then outstanding assuming that
the Warrants being transferred to such investor have been
fully exercised by such investor, (c) to any Person that
already controls the Company prior to such transfer, (d)
in a transaction that complies with Rule 144 (or any
successor thereto) of the Securities Act of 1933, as
amended, or (e) in any other transaction approved in
advance by the Federal Reserve System.
10. Availability of Information. The Company
shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly
available other information) and will take such further
action as any holder of Registrable Securities may
reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement
as to whether it has complied with the requirements of
this section 10.
11. Reservation of Stock, etc. The Company
will at all times reserve and keep available, solely for
issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities)
from time to time issuable upon exercise of all Warrants
at the time outstanding. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants
shall be duly authorized and, when issued upon such
exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on
the part of the holders thereof.
12. Registration and Transfer of Warrants,
etc.
12.1. Warrant Register; Ownership of Warrants.
The Company will keep at its principal office a register
in which the Company will provide for the registration of
Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any
Warrant is registered on such register as the owner
thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon
surrender of any Warrant for registration of transfer or
for exchange to the Company at its principal office, the
Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange
therefor a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction
of any Warrant, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine or,
in the case of any such mutilation, upon the surrender of
such Warrant for cancellation to the Company at its
principal office, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Registration Rights. Wand or any assignee
of this Warrant shall be entitled to all rights and
benefits regarding the registration of Common Stock and
Registrable Securities set forth in the Registration
Rights Agreement.
14. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Additional Shares of Common Stock: All shares
(including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be
issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company,
other than
(a) the issuance of shares upon conversion of
the Company's Series A, Series B and Series C and
Series D Convertible Preferred Stock,
(b) Shares issued upon the exercise of the
common stock purchase warrants and non-qualified
options listed in Exhibit A hereto, providing for
the purchase of an aggregate of 849,875 shares of
Common Stock (based on the current capitalization of
the Company);
(c) shares issued upon the exercise of the
Warrants,
(d) not to exceed 2,000,000 shares (subject to
equitable adjustment in the event of any
combination, reclassification, stocksplit, dividend
or recapitalization of the Company) issued upon the
exercise of options granted or to be granted under
the Company's stock option plans as in effect on the
date hereof or under any other employee stock
option, compensation or purchase plan or plans
adopted or assumed after such date,
(e) such additional number of shares as may
become issuable upon the exercise of any of the
securities referred to in the foregoing clauses (a)
through (d) by reason of adjustments required
pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are
required as the result of the original issuance of
the Warrants, and
(f) such additional number of shares as may
become issuable upon the exercise or conversion of
any of the securities referred to in the foregoing
clauses (a) through (d) by reason of adjustments
required pursuant to anti-dilution provisions
applicable to such securities as in effect on the
date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable
in Common Stock.
BHCA Holder: Wand and any other original
holder of this Warrant that at the time of its
acquisition of this Warrant from the Company is subject
to the Bank Holding Company Act of 1956, as amended.
Business Day: Any day other than a Saturday or
a Sunday or a day on which commercial banking
institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
Common Stock: As defined in the introduction
to this Warrant, such term to include any stock into
which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes
(however designated) of the Company the holders of which
have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
Company: As defined in the introduction to
this Warrant, such term to include any corporation which
shall succeed to or assume the obligations of the Company
hereunder in compliance with section 3.
Convertible Securities: Any evidences of
indebtedness, shares of stock (other than Common Stock)
or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common
Stock.
Current Market Price: On any date specified
herein, the average daily Market Price during the period
of the most recent 20 days, ending on such date, on which
the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted
to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of
1934, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Market Price: On any date specified herein,
the amount per share of the Common Stock, equal to (a)
the last sale price of such Common Stock, regular way, on
such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the
principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or
(b) if such Common Stock is not then listed or admitted
to trading on any national securities exchange but is
designated as a national market system security by the
NASD, the last trading price of the Common Stock on such
date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the value as
determined by a firm of independent public accountants of
recognized standing selected by the Board of Directors of
the Company, and approved by Wand/Nestor Investments
L.P., as of the last day of any month ending within 30
days preceding the date as of which the determination is
to be made.
NASD: The National Association of Securities
Dealers, Inc.
Options: Rights, options or warrants to
subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common
Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the holders of the
Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Person: A corporation, an association, a
partnership, an organization, a business, an individual,
a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the
introduction to this Warrant.
Registrable Securities: As defined in Section
3 of the Registration Rights Agreement.
Registration Rights Agreement: The Amended and
Restated Registration Rights Agreement substantially in
the form of Exhibit F to the Standby Agreement, as
subsequently amended as of January __, 1996.
Revised Standby Agreement: The First Amended
and Restated Standby Financing and Purchase Agreement,
dated as of June 30, 1995, by and between the Company and
Wand.
Securities Act: The Securities Act of 1933, or
any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Transfer: Any sale, assignment, pledge or
other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is
defined in section 2(3) of the Securities Act.
Wand: As defined in Section 1, including its
successors and assigns.
Wand I: As defined in Section 1, including its
successors and assigns.
Warrant Price: As defined in section 2.1.
Warrants: (a) Those certain Common Stock
Purchase Warrants, initially providing for the
acquisition of an aggregate of 400,000 shares of Common
Stock, originally issued pursuant to the Letter of
Engagement, dated April 26, 1994, among the Company, Hill
& Partners and Wand Partners Inc. (and any warrants
issued in substitution therefor), and (b) those certain
Common Stock Purchase Warrants, initially providing for
the acquisition of an aggregate of 1,700,000 shares of
Common Stock, originally issued to Wand/Nestor
Investments L.P. and Wand Nestor Investments II L.P. as
the "New Warrant" and the "Fee Warrant" pursuant to the
Revised Standby Agreement (and any warrants issued in
substitution therefor).
15. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the
event of any default or threatened default by the Company
in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof
or otherwise.
16. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing
any liabilities on such holder as a stockholder of the
Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
17. Notices. All notices and other
communications under this Warrant shall be in writing and
shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed
(a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept
at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its
principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in
section 1.
18. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought.
19. Expiration. The Company will give the
holder of this Warrant not less than six weeks nor more
than two months notice of the expiration of the right to
exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 p.m., New York City time, on
August 1, 2004, unless the Company shall fail to give
such notice as aforesaid, in which event the right to
exercise this Warrant shall not expire until a date six
weeks after the date on which the Company shall give the
holder hereof notice of the expiration of the right to
exercise this Warrant.
20. Descriptive Headings. The headings in
this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
22. Judicial Proceedings; Waiver of Jury. Any
judicial proceeding brought against the Company with
respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the
United States of America for the Southern District of New
York and, by execution and delivery of this Agreement,
the Company (a) accepts, generally and unconditionally,
the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with
this Warrant, subject to any rights of appeal, and (b)
irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court
is an inconvenient forum. The Company hereby waives
personal service of process and consents, that service of
process upon it may be made by certified or registered
mail, return receipt requested, at its address specified
or determined in accordance with the provisions of
section 17, and service so made shall be deemed completed
on the third Business Day after such service is deposited
in the mail or, if earlier, when delivered. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of
any holder of any Warrant to bring proceedings against
the Company in the courts of any other jurisdiction. THE
COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
NESTOR, INC.
By:/s/ Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
The Company has currently outstanding: (a) warrants to
Purchase 646,875 shares of the Common Stock of the
Company at $3.00 per share expiring at various times in
1995 and 1996, and (b) other warrants and non-qualified
options to purchase 293,000 shares of the Common Stock of
the Company at prices between $1.20 per share and $2.56
per share expiring in 1995 and 1997. These warrants are
issued as follows:
Underlying Exercise
Shares of Price per
Common Share of
Warrant Holders Stock Common Stock Expiration
Purchasers of Series 646,875 $3.00 February 21, 1996
B Convertible Preferred Stock and August 31,
1996
Assignees of Reich & Co., Inc.:
James Gerson 38,667 $1.20 June 30, 1997
Rodd Macklin 5,800 $1.20 June 30, 1997
One Hundred Pearl Ltd. 71,533 $1.20 June 30, 1997
Hampshire Securities Corp. 2,000 $1.20 June 30, 1997
Officers and Directors of Nestor,
Inc.:
Sam Albert 10,000 $4.20 April 30, 1996
Sam Albert 10,000 $1.30 February 23, 1997
David Fox 68,000 $2.56 April 12, 1999
TOTAL 849,875
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To NESTOR, INC.;
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and
purchases thereunder, ______(*) shares of Common Stock of
Nestor, Inc. and herewith makes payment of $
therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to
, whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
(Street Address)
(City)(State)(Zip Code)
* Insert here the number of shares called for on the
face of this Warrant (or, in the case of a partial
exercise, the portion thereof as to which this
Warrant is being exercised), in either case without
making any adjustment for Additional Shares of
Common Stock or any other stock or other securities
or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of partial
exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the
Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of
the within Warrant hereby sells, assigns and transfers
unto the right represented by such Warrant
to purchase shares of Common Stock of Nestor,
Inc. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of
Nestor, Inc. maintained for such purpose, 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
Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
REVISED WAND III
$.65 WARRANT
________________________________________________________
NESTOR, INC.
Common Stock Purchase Warrant
Dated as of January 31, 1996
_________________________________________________________
[THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER
SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS WARRANT.]
NESTOR, INC.
Common Stock Purchase Warrant
New York, New York
No. W-X January 31, 1996
Nestor, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that
Wand/Nestor Investments III L.P. ("Wand"), or registered
assigns, is entitled to purchase from the Company 291,281
duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per
share (the "Common Stock"), of the Company at the
purchase price per share of $1.00, at any time or from
time to time prior to 5:00 P.M., New York City time, on
October 5, 2005 (or such later date as may be determined
pursuant to section 19), all subject to the terms,
conditions and adjustments set forth below in this
Warrant.
This Warrant was originally issued to
Wand/Nestor Investments L.P., a Delaware limited
Partnership ("Wand I") by the Company on October 5, 1995
in consideration of Wand I's performance of its
obligations pursuant to the First Amended and Restated
Standby Financing and Purchase Agreement dated as of June
30, 1995 by and between the Company and Wand I (the
"Revised Standby Agreement"). Certain capitalized terms
used in this Warrant are defined in section 14;
references to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to this
Warrant and references to a "section" are, unless
otherwise specified, to one of the sections of this
Warrant.
1. Exercise of Warrant. 1.1. Manner of
Exercise. Subject to the Restrictions set forth in
Section 1.6, this Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours
on any Business Day, by surrender of this Warrant to the
Company at its principal office, accompanied by a
subscription substantially in the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed
by such holder and accompanied by payment, in cash, by
certified or official bank check payable to the order of
the Company, or in the manner provided in Section 1.5, in
the amount obtained by multiplying (a) the number of
shares of Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by
(b) $1.00, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or
Other Securities) determined as provided in sections 2
through 4.
1.2. When Exercise Effective. Each exercise
of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the
Business Day on which this Warrant shall have been
surrendered to the Company as provided in section 1.1,
and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon
such exercise as provided in section 1.3 shall be deemed
to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As
soon as practicable after each exercise of this Warrant,
in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9,
as such holder (upon payment by such holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the
number of duly authorized, validly issued, fully
paid and nonassessable shares of Common Stock (or
Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any
fractional share to which such holder would
otherwise be entitled, cash in an amount equal to
the same fraction of the Market Price per share on
the Business Day next preceding the date of such
exercise, and
(b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in
the aggregate on the face or faces thereof for the
number of shares of Common Stock equal (without
giving effect to any adjustment thereof) to the
number of such shares called for on the face of this
Warrant minus the number of such shares designated
by the holder upon such exercise as provided in
section 1.1.
1.4. Company to Reaffirm Obligations. The
Company will, at the time of each exercise of this
Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to
afford to such holder all rights (including, without
limitation, any rights to registration, pursuant to the
Registration Rights Agreement referred to in section 8,
of the shares of Common Stock or Other Securities issued
upon such exercise) to which such holder shall continue
to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of
this Warrant shall fail to make any such request, such
failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Shares
Otherwise Issuable. Upon any exercise of this Warrant,
the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of
this Warrant at the time of such exercise, to apply to
the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder
upon such exercise as shall be specified in such notice,
in which case an amount equal to the excess of the
aggregate Current Market Price of such specified number
of shares on the date of exercise over the portion of the
payment required by section 1.1 attributable to such
shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise
shall be reduced by such specified number.
1.6. Restrictions Upon Exercise by BHCA
Holders. A BHCA Holder may only exercise this Warrant,
in whole or in part, in connection with the sale of the
Common Stock issuable upon the exercise of the Warrant to
an unaffiliated third party (a) in a widely dispersed
public offering, (b) to one or more investors, in one or
more transactions, none of whom, after such purchase
would hold more than 2% of the voting securities of the
Company then outstanding, (c) to any Person that already
controls the Company prior to such transfer, (d) in a
transaction that complies with Rule 144 (or any successor
thereto) of the Securities Act of 1933, as amended, or
(e) in any other transaction approved in advance by the
Federal Reserve System.
2. Adjustment of Common Stock Issuable Upon
Exercise. 2.1. General; Warrant Price. The number of
shares of Common Stock which the holder of this Warrant
shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares
of Common Stock which would otherwise (but for the
provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to
section 1.1, by the fraction of which (a) the numerator
is $1.00 and (b) the denominator is the Warrant Price in
effect on the date of such exercise. The "Warrant Price"
shall initially be $1.00 per share, shall be adjusted and
readjusted from time to time as provided in this section
2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof
is required by this section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common
Stock. In case the Company at any time or from time to
time after the date hereof shall issue or sell Additional
Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to section 2.3
or 2.4) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to such issue or sale, then, and in each such case,
subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price
(calculated to the nearest .001 of a cent) determined by
multiplying such Warrant Price by a fraction
(a) the numerator of which shall be (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale plus (ii)
the number of shares of Common Stock which the
aggregate consideration received by the Company for
the total number of such Additional Shares of Common
Stock so issued or sold would purchase at such
Warrant Price, and
(b) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1,
(x) immediately after any Additional Shares of Common
Stock are deemed to have been issued pursuant to section
2.3 or 2.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed
to be outstanding.
2.2.2 Extraordinary Dividends and
Distributions. In case the Company at any time or from
time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including,
without limitation, any distribution of other or
additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on
the Common Stock, other than a dividend payable in (a)
Additional Shares of Common Stock or (b) cash dividends
during any fiscal year of the Company that do not exceed
twenty percent (20%) of the after tax earnings per share
of the Common Stock for the immediately preceding fiscal
year of the Company, then, and in each such case, subject
to section 2.8, the Warrant Price in effect immediately
prior to the close of business on the record date fixed
for the determination of holders of any class of
securities entitled to receive such dividend or
distribution shall be reduced, effective as of the close
of business on such record date, to a price (calculated
to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction
(x) the numerator of which shall be the
Current Market Price in effect on such record date
or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-
dividend trading, less the amount of such dividend
or distribution (as determined in good faith by the
Board of Directors of the Company, subject to
confirmation by a firm of independent certified
public accountants of recognized national standing
approved by Wand/Nestor Investments L.P.) applicable
to one share of Common Stock, and
(y) the denominator of which shall be such
Current Market Price.
2.3. Treatment of Options and Convertible
Securities. In case the Company at any time or from time
to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination
of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and
in each such case, the maximum number of Additional
Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall
have been fixed, as of the close of business on such
record date (or, if the Common Stock trades on an ex-
dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional
Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less
than the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement
of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price
shall be made upon the subsequent issue or sale of
Convertible Securities or shares of Common Stock
upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities
by their terms provide, with the passage of time or
otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change
of rate or otherwise), the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the
rights of conversion or exchange under such
Convertible Securities, which are outstanding at
such time;
(c) upon the expiration (or purchase by the
Company and cancellation or retirement) of any such
Options which shall not have been exercised or the
expiration of any rights of conversion or exchange
under any such Convertible Securities which (or
purchase by the Company and cancellation or
retirement of any such Convertible Securities the
rights of conversion or exchange under which) shall
not have been exercised, the Warrant Price computed
upon the original issue, sale, grant or assumption
thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend
trading, as the case may be, with respect thereto),
and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as
if:
(i) in the case of Options for Common
Stock or Convertible Securities, the only
Additional Shares of Common Stock issued or
sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities and the
consideration received therefor was the
consideration actually received by the Company
for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus
the consideration actually received by the
Company upon such exercise, or for the issue or
sale of all such Convertible Securities which
were actually converted or exchanged, plus the
additional consideration, if any, actually
received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for
Convertible Securities, only the Convertible
Securities, if any, actually issued or sold
upon the exercise of such Options were issued
at the time of the issue, sale, grant or
assumption of such Options, and the
consideration received by the Company for the
Additional Shares of Common Stock deemed to
have then been issued was the consideration
actually received by the Company for the issue,
sale, grant or assumption of all such Options,
whether or not exercised, plus the
consideration deemed to have been received by
the Company (pursuant to section 2.5) upon the
issue or sale of such Convertible Securities
with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of increasing
the Warrant Price by an amount in excess of the
amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of
such Options or Convertible Securities; and
(e) in the case of any such Options which
expire by their terms not more than 30 days after
the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be
made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in
the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock
Splits, etc. In case the Company at any time or from
time to time after the date hereof shall declare or pay
any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares
of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment
of a dividend in Common Stock), then, and in each such
case, Additional Shares of Common Stock shall be deemed
to have been issued (a) in the case of any such dividend,
immediately after the close of business on the record
date for the determination of holders of any class of
securities entitled to receive such dividend, or (b) in
the case of any such subdivision, at the close of
business on the day immediately prior to the day upon
which such corporate action becomes effective.
2.5. Computation of Consideration. For the
purposes of this section 2,
(a) the consideration for the issue or sale of
any Additional Shares of Common Stock shall,
irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be
computed at the net amount of cash received by
the Company, without deducting any expenses
paid or incurred by the Company or any
commissions or compensation paid or concessions
or discounts allowed to underwriters, dealers
or others performing similar services in
connection with such issue or sale,
(ii) insofar as it consists of property
(including securities) other than cash, be
computed at the fair value thereof at the time
of such issue or sale, as determined in good
faith by the Board of Directors of the Company
(subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.), and
(iii) in case Additional Shares of Common
Stock are issued or sold together with other
stock or securities or other assets of the
Company for a consideration which covers both,
be the portion of such consideration so
received, computed as provided in clauses (i)
and (ii) above, allocable to such Additional
Shares of Common Stock, all as determined in
good faith by the Board of Directors of the
Company (subject to confirmation by a firm of
independent certified public accountants of
recognized standing approved by Wand/Nestor
Investments L.P.);
(b) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.3,
relating to Options and Convertible Securities,
shall be deemed to have been issued for a
consideration per share determined by dividing
(i) the total amount, if any, received
and receivable by the Company as consideration
for the issue, sale, grant or assumption of the
Options or Convertible Securities in question,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such consideration to protect
against dilution) payable to the Company upon
the exercise in full of such Options or the
conversion or exchange of such Convertible
Securities or, in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, in each case computing such
consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of
Common Stock (as set forth in the instruments
relating thereto, without regard to any
provision contained therein for a subsequent
adjustment of such number to protect against
dilution) issuable upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed
to have been issued pursuant to section 2.4,
relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In
case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common
Stock, the Warrant Price in effect immediately prior to
such combination or consolidation shall, concurrently
with the effectiveness of such combination or
consolidation, be proportionately increased.
2.7. Dilution in Case of Other Securities. In
case any Other Securities shall be issued or sold or
shall become subject to issue or sale upon the conversion
or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other
Person referred to in section 3) or to subscription,
purchase or other acquisition pursuant to any Options
issued or granted by the Company (or any such other
issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in
the other provisions of this section 2, the purchase
rights granted by this Warrant, then, and in each such
case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the
Warrant Price shall be made as nearly as possible in the
manner so provided and applied to determine the amount of
Other Securities from time to time receivable upon the
exercise of the Warrants, so as to protect the holders of
the Warrants against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Price. If
the amount of any adjustment of the Warrant Price
required pursuant to this section 2 would be less than
one percent (1%) of the Warrant Price in effect at the
time such adjustment is otherwise so required to be made,
such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount
and any other amount or amounts so carried forward, shall
aggregate at least one percent (1%) of such Warrant
Price.
3. Consolidation, Merger, etc. 3.1.
Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other
Person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall
permit any other Person to consolidate with or merge into
the Company and the Company shall be the continuing or
surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other
Securities shall be changed into or exchanged for stock
or other securities of any other Person or cash or any
other property, or (c) shall transfer all or
substantially all of its properties or assets to any
other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or
Other Securities (other than a capital reorganization or
reclassification resulting in the issue of Additional
Shares of Common Stock for which adjustment in the
Warrant Price is provided in section 2.2.1 or 2.2.2),
then, and in the case of each such transaction, proper
provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the
holder of this Warrant, upon the exercise hereof at any
time after the consummation of such transaction, shall be
entitled to receive (at the aggregate Warrant Price in
effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise
immediately prior to such consummation), in lieu of the
Common Stock or Other Securities issuable upon such
exercise prior to such consummation, the highest amount
of securities, cash or other property to which such
holder would actually have been entitled as a shareholder
upon such consummation if such holder had exercised the
rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the
adjustments provided for in sections 2 through 4.
3.2. Assumption of Obligations.
Notwithstanding anything contained in the Warrants or in
the Purchase Agreement to the contrary, the Company will
not effect any of the transactions described in clauses
(a) through (d) of section 3.1 unless, prior to the
consummation thereof, each Person (other than the
Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this
Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to,
the holder of this Warrant, (a) the obligations of the
Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the
Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c)
the obligation to deliver to such holder such shares of
stock, securities, cash or property as, in accordance
with the foregoing provisions of this section 3, such
holder may be entitled to receive, and such Person shall
have similarly delivered to such holder an opinion of
counsel for such Person, which counsel shall be
reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and
effect and the terms hereof (including, without
limitation, all of the provisions of this section 3)
shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver
upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
4. Other Dilutive Events. In case any event
shall occur as to which the provisions of section 2 or
section 3 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the
essential intent and principles of such sections, then,
in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized
national standing (such firm to be subject to the
approval of Wand/Nestor Investments L.P.), which shall
give their opinion regarding the adjustment, if any, on a
basis consistent with the essential intent and principles
established in sections 2 and 3, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company
will not, by amendment of its certificate of
incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or
sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder
of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the
Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to
exceed the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time
outstanding, and (c) will not take any action which
results in any adjustment of the Warrant Price if the
total number of shares of Common Stock (or Other
Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then
authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such
exercise.
6. Accountants' Report as to Adjustments. In
each case of any adjustment or readjustment in the shares
of Common Stock (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in
accordance with the terms of this Warrant and cause
independent certified public accountants of recognized
standing (such firm to be subject to the approval of
Wand/Nestor Investments L.P.) selected by the Company to
verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in
reasonable detail the method of calculation thereof and
the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration
received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of
Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required
by section 2) on account thereof. The Company will
forthwith mail a copy of each such report to each holder
of a Warrant and will, upon the written request at any
time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price at the time
in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all
such reports at its principal office and will cause the
same to be available for inspection at such office during
normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the
holder thereof.
7. Notices of Corporate Action. In the event
of
(a) any taking by the Company of a record of
the holders of any class of securities for the
purpose of determining the holders thereof who are
entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of
earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such
period) or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of the
capital stock of the Company or any consolidation or
merger involving the Company and any other Person or
any transfer of all or substantially all the assets
of the Company to any other Person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will mail to each holder of a Warrant a
notice specifying (i) the date or expected date on which
any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and
character of such dividend, distribution or right, and
(ii) the date or expected date on which any such
reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation
or winding-up is to take place and the time, if any such
time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other
Securities) for the securities or other property
deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least 45 days prior to the date
therein specified.
8. Registration of Common Stock. If any
shares of Common Stock required to be reserved for
purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any
federal or state law (other than the Securities Act)
before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The
shares of Common Stock (and Other Securities) issuable
upon exercise of this Warrant (or upon conversion of any
shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is
defined in the Registration Rights Agreement). Each
holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and
such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions
of the Registration Rights Agreement applicable to such
holder as a holder of such Registrable Securities. At
any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense,
obtain promptly and maintain the approval for listing on
each such exchange, upon official notice of issuance, the
shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company will also
list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of,
any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer. 9.1.
Restrictive Legends. Except as otherwise permitted by
this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped
or otherwise imprinted with a legend in substantially the
following form:
"THE WARRANT REPRESENTED BY THIS
CERTIFICATE (AND THE SHARES OF COMMON STOCK OR
OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH
WARRANT) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH WARRANT (AND OF SUCH
SHARES OF COMMON STOCK OR OTHER SECURITIES) IS
SUBJECT TO COMPLIANCE WITH APPLICABLE
SECURITIES LAWS AND REGULATIONS AND CERTAIN
RESTRICTIONS AND CONDITIONS CONTAINED IN A
CERTAIN REVISED STANDBY FINANCING AND PURCHASE
AGREEMENT AND RELATED AGREEMENTS DATED AS OF
JUNE 30, 1995. THE HOLDER OF THIS CERTIFICATE
BY ACCEPTANCE HEREOF AGREES TO BE BOUND BY SUCH
RESTRICTIONS AND CONDITIONS. A COPY OF THE
PURCHASE AGREEMENT IS ON FILE WITH THE
SECRETARY OF THE COMPANY."
Except as otherwise permitted by this section 9, each
certificate for Common Stock (or Other Securities) issued
upon the exercise of any Warrant, and each certificate
issued upon the transfer of any such Common Stock (or
Other Securities), shall be stamped or otherwise
imprinted with a legend in substantially the following
form:
"THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE ON
CERTAIN EXEMPTIONS FROM REGISTRATION
THEREUNDER. THE SALE, PLEDGE, HYPOTHECATION OR
OTHER TRANSFER OF SUCH SHARES IS SUBJECT TO
COMPLIANCE WITH APPLICABLE SECURITIES LAWS AND
REGULATIONS AND CERTAIN RESTRICTIONS AND
CONDITIONS CONTAINED IN A CERTAIN REVISED
STANDBY FINANCING AND PURCHASE AGREEMENT DATED
AS OF JUNE 30, 1995. THE HOLDER OF THIS
CERTIFICATE BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY SUCH RESTRI30IONS AND CONDITIONS. A
COPY OF THE STANDBY FINANCING AND PURCHASE
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
9.2. Restrictions on Transfer By BHCA Holders.
A BHCA Holder may only transfer this Warrant, in whole or
in part, to an unaffiliated third party (a) in a widely
dispersed public offering, (b) to one or more investors,
in one or more transactions, none of whom, after such
purchase would hold more than 2% of the voting securities
of the Company then outstanding assuming that the
Warrants being transferred to such investor have been
fully exercised by such investor, (c) to any Person that
already controls the Company prior to such transfer, (d)
in a transaction that complies with Rule 144 (or any
successor thereto) of the Securities Act of 1933, as
amended, or (e) in any other transaction approved in
advance by the Federal Reserve System.
10. Availability of Information. The Company
shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including
but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of
any holder of Registrable Securities, make publicly
available other information) and will take such further
action as any holder of Registrable Securities may
reasonably request, all to the extent required from time
to time to enable such holder to sell Registrable
Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement
as to whether it has complied with the requirements of
this section 10.
11. Reservation of Stock, etc. The Company
will at all times reserve and keep available, solely for
issuance and delivery upon exercise of the Warrants, the
number of shares of Common Stock (or Other Securities)
from time to time issuable upon exercise of all Warrants
at the time outstanding. All shares of Common Stock (or
Other Securities) issuable upon exercise of any Warrants
shall be duly authorized and, when issued upon such
exercise, shall be validly issued and, in the case of
shares, fully paid and nonassessable with no liability on
the part of the holders thereof.
12. Registration and Transfer of Warrants,
etc.
12.1. Warrant Register; Ownership of Warrants.
The Company will keep at its principal office a register
in which the Company will provide for the registration of
Warrants and the registration of transfers of Warrants.
The Company may treat the Person in whose name any
Warrant is registered on such register as the owner
thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that,
if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly
assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon
surrender of any Warrant for registration of transfer or
for exchange to the Company at its principal office, the
Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange
therefor a new Warrant or Warrants of like tenor, in the
name of such holder or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction
of any Warrant, upon delivery of an indemnity bond in
such reasonable amount as the Company may determine or,
in the case of any such mutilation, upon the surrender of
such Warrant for cancellation to the Company at its
principal office, the Company at its expense will execute
and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Registration Rights. The Purchaser or any
assignee of this Warrant shall be entitled to all rights
and benefits regarding the registration of Common Stock
and Registrable Securities set forth in the Registration
Rights Agreement.
14. Definitions. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
Additional Shares of Common Stock: All shares
(including treasury shares) of Common Stock issued or
sold (or, pursuant to section 2.3 or 2.4, deemed to be
issued) by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company,
other than
(a) the issuance of shares upon conversion of
the Company's Series A, Series B, Series C and
Series D Convertible Preferred Stock,
(b) Shares issued upon the exercise of the
common stock purchase warrants and non-qualified
options listed in Exhibit A hereto, providing for
the purchase of an aggregate of 849,875 shares of
Common Stock (based on the current capitalization of
the Company);
(c) shares issued upon the exercise of the
Warrants,
(d) not to exceed 2,000,000 shares (subject to
equitable adjustment in the event of any
combination, reclassification, stock split, dividend
or recapitalization of the Company) issued upon the
exercise of options granted or to be granted under
the Company's stock option plans as in effect on the
date hereof or under any other employee stock
option, compensation or purchase plan or plans
adopted or assumed after such date,
(e) such additional number of shares as may
become issuable upon the exercise of any of the
securities referred to in the foregoing clauses (a)
through (d) by reason of adjustments required
pursuant to anti-dilution provisions applicable to
such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are
required as the result of the original issuance of
the Warrants, and
(f) such additional number of shares as may
become issuable upon the exercise or conversion of
any of the securities referred to in the foregoing
clauses (a) through (d) by reason of adjustments
required pursuant to anti-dilution provisions
applicable to such securities as in effect on the
date hereof, in order to reflect any subdivision or
combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable
in Common Stock.
BHCA Holder: Wand and any other original
holder of this Warrant that at the time of its
acquisition of this Warrant from the Company is subject
to the Bank Holding Company Act of 1956, as amended.
Business Day: Any day other than a Saturday or
a Sunday or a day on which commercial banking
institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange
Commission or any other federal agency at the time
administering the Securities Act.
Common Stock: As defined in the introduction
to this Warrant, such term to include any stock into
which such Common Stock shall have been changed or any
stock resulting from any reclassification of such Common
Stock, and all other stock of any class or classes
(however designated) of the Company the holders of which
have the right, without limitation as to amount, either
to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
Company: As defined in the introduction to
this Warrant, such term to include any corporation which
shall succeed to or assume the obligations of the Company
hereunder in compliance with section 3.
Convertible Securities: Any evidences of
indebtedness, shares of stock (other than Common Stock)
or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common
Stock.
Current Market Price: On any date specified
herein, the average daily Market Price during the period
of the most recent 20 days, ending on such date, on which
the national securities exchanges were open for trading,
except that if no Common Stock is then listed or admitted
to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of
1934, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Market Price: On any date specified herein,
the amount per share of the Common Stock, equal to (a)
the last sale price of such Common Stock, regular way, on
such date or, if no such sale takes place on such date,
the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the
principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or
(b) if such Common Stock is not then listed or admitted
to trading on any national securities exchange but is
designated as a national market system security by the
NASD, the last trading price of the Common Stock on such
date, or (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated
quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the value as
determined by a firm of independent public accountants of
recognized standing selected by the Board of Directors of
the Company, and approved by Wand/Nestor Investments
L.P., as of the last day of any month ending within 30
days preceding the date as of which the determination is
to be made.
NASD: The National Association of Securities
Dealers, Inc.
Options: Rights, options or warrants to
subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common
Stock) and other securities of the Company or any other
Person (corporate or otherwise) which the holders of the
Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants,
in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other
Securities pursuant to section 3 or otherwise.
Person: A corporation, an association, a
partnership, an organization, a business, an individual,
a government or political subdivision thereof or a
governmental agency.
Registrable Securities: As defined in Section
3 of the Registration Rights Agreement.
Registration Rights Agreement: The Amended and
Restated Registration Rights Agreement dated as of
October 5, 1995, substantially in the form of Exhibit F
to the Revised Standby Agreement, as subsequently amended
as of January 31, 1996.
Revised Standby Agreement: The First Amended
and Restated Standby Financing and Purchase Agreement,
dated as of June 30, 1995, by and between the Company and
Wand.
Securities Act: The Securities Act of 1933, or
any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same
shall be in effect at the time.
Transfer: Any sale, assignment, pledge or
other disposition of any security, or of any interest
therein, which could constitute a "sale" as that term is
defined in section 2(3) of the Securities Act.
Wand: As defined in Section 1, and including
its successors and assigns.
Warrant Price: As defined in section 2.1.
Warrants: (a) Those certain Common Stock
Purchase Warrants, initially providing for the
acquisition of an aggregate of 400,000 shares of Common
Stock, originally issued pursuant to the Letter of
Engagement, dated April 26, 1994, among the Company, Hill
& Partners and Wand Partners Inc. (and any warrants
issued in substitution therefor), and (b) those certain
Common Stock Purchase Warrants, initially providing for
the acquisition of 1,700,000 shares of Common Stock,
originally issued to Wand/Nestor Investments L.P. and
Wand/Nestor Investments II L.P. as the "New Warrant" and
the "Fee Warrant" pursuant to the Revised Standby
Agreement (and any warrants issued in substitution
therefor).
15. Remedies. The Company stipulates that the
remedies at law of the holder of this Warrant in the
event of any default or threatened default by the Company
in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and
that, to the fullest extent permitted by law, such terms
may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof
or otherwise.
16. No Rights or Liabilities as Stockholder.
Nothing contained in this Warrant shall be construed as
conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation
on such holder to purchase any securities or as imposing
any liabilities on such holder as a stockholder of the
Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
17. Notices. All notices and other
communications under this Warrant shall be in writing and
shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed
(a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept
at the principal office of the Company, or (b) if to the
Company, to the attention of its President at its
principal office, provided that the exercise of any
Warrant shall be effective in the manner provided in
section 1.
18. Amendments. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought.
19. Expiration. The Company will give the
holder of this Warrant not less than six weeks nor more
than two months notice of the expiration of the right to
exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 p.m., New York City time, on
October 5, 2005, unless the Company shall fail to give
such notice as aforesaid, in which event the right to
exercise this Warrant shall not expire until a date six
weeks after the date on which the Company shall give the
holder hereof notice of the expiration of the right to
exercise this Warrant.
20. Descriptive Headings. The headings in
this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
22. Judicial Proceedings; Waiver of Jury. Any
judicial proceeding brought against the Company with
respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the
United States of America for the Southern District of New
York and, by execution and delivery of this Agreement,
the Company (a) accepts, generally and unconditionally,
the nonexclusive jurisdiction of such courts and any
related appellate court, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with
this Warrant, subject to any rights of appeal, and (b)
irrevocably waives any objection the Company may now or
hereafter have as to the venue of any such suit, action
or proceeding brought in such a court or that such court
is an inconvenient forum. The Company hereby waives
personal service of process and consents, that service of
process upon it may be made by certified or registered
mail, return receipt requested, at its address specified
or determined in accordance with the provisions of
section 17, and service so made shall be deemed completed
on the third Business Day after such service is deposited
in the mail or, if earlier, when delivered. Nothing
herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of
any holder of any Warrant to bring proceedings against
the Company in the courts of any other jurisdiction. THE
COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
NESTOR, INC.
By:Simon N. Heifetz
Title: Vice Chairman
EXHIBIT A
CURRENTLY OUTSTANDING WARRANTS
The Company has currently outstanding: (a) warrants to
Purchase 646,875 shares of the Common Stock of the
Company at $3.00 per share expiring at various times in
1995 and 1996, (b) warrants to purchase 105,275 shares of
Common Stock of the Company at $2.00 per share expiring
in 1998, and (c) other warrants and non-qualified options
to purchase 293,000 shares of the Common Stock of the
Company at prices between $1.20 per share and $4.20 per
share expiring in 1995 and 1997. These warrants are
issued as follows:
Underlying Exercise
Shares of Price per
Common Share of
Warrant Holders Stock Common Stock Expiration
Purchasers of Series 646,875 $3.00 February 21, 1996
B Convertible Preferred Stock and August 31, 1996
Purchasers of Series 105,275 $2.00 September 28, 1998
D Convertible Preferred Stock
Assignees of Reich & Co., Inc.:
James Gerson 38,667 $1.20 June 30, 1997
Rodd Macklin 5,800 $1.20 June 30, 1997
One Hundred Pearl Ltd. 71,533 $1.20 June 30, 1997
Hampshire Securities Corp. 2,000 $1.20 June 30, 1997
Officers and Directors of Nestor,
Inc.:
Sam Albert 10,000 $4.20 April 30, 1996
Sam Albert 10,000 $1.30 February 23, 1997
David Fox 68,000 $2.56 April 12, 1999
TOTAL 958,150
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To NESTOR, INC.;
The undersigned registered holder of the within Warrant
hereby irrevocably exercises such Warrant for, and
purchases thereunder, ______(*) shares of Common Stock of
Nestor, Inc. and herewith makes payment of $
therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to
, whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of
Warrant)
(Street Address)
(City)(State)(Zip Code)
* Insert here the number of shares called for on the
face of this Warrant (or, in the case of a partial
exercise, the portion thereof as to which this
Warrant is being exercised), in either case without
making any adjustment for Additional Shares of
Common Stock or any other stock or other securities
or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be
delivered upon exercise. In the case of partial
exercise, a new Warrant or Warrants will be issued
and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the
Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of
the within Warrant hereby sells, assigns and transfers
unto the right represented by such Warrant
to purchase shares of Common Stock of Nestor,
Inc. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of
Nestor, Inc. maintained for such purpose, 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
Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
REVISED WAND III $1.00 WARRANT
________________________________________________________
NESTOR, INC.
Common Stock Purchase Warrant
Dated as of January 31, 1996
_________________________________________________________
[THIS WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS IN
EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER
SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THIS WARRANT.]
JOINT FILING AGREEMENT
The undersigned, and each of them, do hereby agree
and consent to the filing of a single statement on behalf of
all of them on Schedule 13D and amendments thereto, in
accordance with the provisions of Rule 13d-1(f)(1) of the
Securities Exchange Act of 1934.
Dated: February 13, 1996
By: /s/ Bruce W. Schnitzer
__________________________
Name: Bruce W. Schnitzer
WAND (NESTOR) INC.
By: /s/ Bruce W. Schnitzer
__________________________
Name: Bruce W. Schnitzer
Title: Chairman
WAND/NESTOR INVESTMENTS L.P.
By: Wand (Nestor) Inc., as
General Partner
By: /s/ Bruce W. Schnitzer
__________________________
Name: Bruce W. Schnitzer
Title: Chairman
WAND/NESTOR INVESTMENTS II L.P.
By: Wand (Nestor) Inc., as
General Partner
By: /s/ Bruce W. Schnitzer
__________________________
Name: Bruce W. Schnitzer
Title: Chairman
WAND/NESTOR INVESTMENTS III L.P.
By: Wand (Nestor) Inc., as
General Partner
By: /s/ Bruce W. Schnitzer
__________________________
Name: Bruce W. Schnitzer
Title: Chairman
