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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
August 5, 1997
Date of Report (Date of earliest event reported)
ACCENT SOFTWARE INTERNATIONAL LTD.
(Exact name of registrant as specified in charter)
Israel 0-26394 N/A
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation or
Organization)
28 Pierre Koenig Street, Jerusalem 91530, Israel
(Address of principal executive offices) (Zip Code)
011-972-2-679-3723
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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ITEM 5. Other Events
On August 5, 1997, the Company completed a financing arrangement with CC
Investments LDC (the "Investor"), pursuant to Rule 505 of Regulation D of the
Securities Act of 1933. Rule 505 was available because the issuance was to
fewer than 35 nonaccredited investors. The Company received $2,000,000 in
cash before expenses (approximately $1,850,000 net of expenses) and, in
return, issued the Investor an unsecured debenture carrying 6% annual
interest and convertible into the Company's Ordinary Shares at the lesser of
135% of the average closing bid price for the five-day period preceding the
closing date or 75% of the average closing bid price of the Ordinary Shares
for the five-day period preceding the date of conversion. The debenture
automatically converts into Ordinary Shares on August 5, 1999, and may be
converted anytime after November 2, 1997. The Company, at its option, may
require the Investor to convert the debenture into Preferred Shares of the
Company at any time prior to November 3, 1997. Terms of the Preferred Shares
will be identical to the debentures. Conversion of the debentures (or
Preferred Shares) will result in dilution to the Company's current
shareholders. Assuming the Company's share price remains at its August 5,
1997, level of $1.62 per share, the debentures (or Preferred Shares) will be
convertible into approximately 1,646,000 Ordinary Shares and the percentage
dilution will amount to approximately 12%. If the share price increases from
its August 5 level, the conversion price will increase and there would be a
corresponding decrease in the number of shares into which the debentures
would be converted and in the amount of dilution which would be experienced
by the shareholders. If the share price decreases from its August 5 level,
the conversion price will decrease and there would be a corresponding
increase in the number of shares into which the debentures would be converted
and in the amount of dilution which would be experienced by the shareholders.
There can be no assurance that the share price will either increase or
decrease.
The Investor was also granted warrants to purchase 250,000 Ordinary Shares
of the Company at an exercise price of $2.80 and additional warrants to purchase
50,000 Ordinary Shares at an exercise price of $3.20. The placement agents for
the transaction were The Shemano Group, Inc., San Francisco, California, and
Equity Management Partners, Atlanta, Georgia. The placement agents were granted
warrants to purchase 300,000 Ordinary Shares at an exercise price equal to 115%
of the closing bid price on the day of closing. The warrants are valid for five
years. Exercise of all 600,000 warrants granted to the Investor and to the
placement agents will result in a percentage dilution to existing shareholders
of approximately 5%.
Pursuant to the terms of the registration rights agreement which was part
of the financing arrangement, the Company is required to file a registration
statement on Form S-3 for the Ordinary Shares reserved for issuance upon
conversion of the debenture (or Preferred Shares) and exercise of the warrants
within 15 days of the closing which took place on August 5, 1997.
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EXHIBITS
10. Securities Purchase Agreement, dated August 5, 1997, between CC
Investments LDC and Accent Software International Ltd., which includes a
Convertible Debenture, two Warrants and a Registration Rights Agreement, all
dated August 5, 1997, as exhibits thereto.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCENT SOFTWARE INTERNATIONAL LTD.
DATE: August 19, 1997 By: /s/ Robert J. Behr
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Robert J. Behr
Chief Financial Officer
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EXHIBIT 10
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of July 31,
1997, by and among ACCENT SOFTWARE INTERNATIONAL LTD., a corporation
organized under the laws of Israel (the "COMPANY"), with headquarters located
at 28 Pierre Koenig Street, P.O. Box 53063, Jerusalem 91530 Israel and the
purchaser (the "PURCHASER") set forth on the execution page hereof (the
"EXECUTION PAGE").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("REGULATION D"), as promulgated
by the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT");
B. The Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, (i) 6% Convertible Debentures of the Company in the
aggregate principal amount of $2,000,000, in the form attached hereto as
EXHIBIT A (the "DEBENTURES"), convertible into the Company's ordinary shares,
nominal value NIS .01 per share (the "COMMON STOCK"), (ii) a warrant, in the
form attached hereto as EXHIBIT B, to acquire 250,000 shares of Common Stock
and (iii) a warrant, in the form attached hereto as EXHIBIT C, to acquire
50,000 shares of Common Stock (the warrants referred to in clauses (ii) and
(iii) of this sentence shall be referred to as the "WARRANTS"). The shares of
Common Stock issuable upon conversion of the Debentures or otherwise pursuant
to the Debentures are referred to herein as the "CONVERSION SHARES", the
shares of Common Stock issuable upon exercise of the Warrants or otherwise
pursuant to the Warrants are referred to herein as the "WARRANT SHARES" and
the Debentures, Warrants, Conversion Shares and Warrant Shares are
collectively referred to herein as the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
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1. PURCHASE AND SALE OF THE DEBENTURES AND WARRANTS.
a. PURCHASE OF DEBENTURES AND WARRANTS. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Section 6 and Section 7 below, the Company shall issue and sell to the Purchaser
and the Purchaser agrees to purchase from the Company, the Debentures and
Warrants. The purchase price (the "PURCHASE PRICE") of the Debentures and
Warrants shall be equal to Two Million Dollars ($2,000,000.00).
b. FORM OF PAYMENT. On the Closing Date, the Purchaser shall pay the
aggregate Purchase Price for the Debentures and Warrants being purchased by the
Purchaser on the Closing Date by wire transfer to the Company, in accordance
with the Company's written wiring instructions, against delivery of duly
executed Debentures and Warrants being purchased by such Purchaser and the
Company shall deliver such Debentures and Warrants against delivery of such
aggregate Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Debentures and Warrants pursuant to this
Agreement shall be 12:00 noon Eastern Daylight Savings Time on August 4, 1997
(subject to a two (2) business day grace period at either party's option, but in
any event not later than August 8, 1997), or such other time as may be mutually
agreed upon by the Company and the Purchaser (the "CLOSING DATE"). The closing
shall occur at the offices of Klehr, Harrison, Harvey, Branzburg & Ellers, 1401
Walnut Street, Philadelphia, Pennsylvania 19102.
d. EXCHANGE OF DEBENTURES FOR PREFERRED STOCK. In accordance with and
subject to satisfaction of the terms and conditions of Article X.O of the
Debenture, the Company may on or prior to that date which is ninety days
after the date hereof, require the Purchaser to exchange all but not less
than all of the Debentures then held thereby for shares of Preferred Stock of
the Company (the "Preferred Shares") having the rights, preferences and
privileges set forth in the Certificate of Designation attached hereto as
EXHIBIT E (the "CERTIFICATE OF DESIGNATION"). In the event the Company
exercises its rights pursuant to this Section 1(d), for purposes of Sections
3, 4 and 5 hereof, the term (i) "DEBENTURES" shall also include the Preferred
Shares and (ii) "CONVERSION SHARES" shall also include the shares of Common
Stock issuable upon conversion of the Preferred Shares. The Company shall,
by virtue of exchanging Preferred Shares for Debentures, make to the
Purchaser as of the date of such exchange, all representations and warranties
contained in Section 3 hereof.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company as set forth in this
Section 2. Purchaser makes no other representations or warranties, express or
implied, to the Company in connection with the transactions contemplated hereby
and any and all prior representations and warranties, if any, which may have
been made by Purchaser to the Company in connection with the transactions
contemplated hereby shall be deemed to have been merged in this Agreement and
any
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such prior representations and warranties, if any, shall not survive the
execution and delivery of this Agreement:
a. INVESTMENT PURPOSE. Purchaser is purchasing the Debentures and
Warrants for Purchaser's own account for investment only and not with a
present view towards the public sale or distribution thereof, except pursuant
to sales that are exempt from the registration requirements of the Securities
Act and/or sales registered under the Securities Act. Purchaser understands
that Purchaser must bear the economic risk of this investment indefinitely,
unless the Securities are registered pursuant to the Securities Act and any
applicable state securities or blue sky laws or an exemption from such
registration is available, and that the Company has no present intention of
registering any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2(a)
to the contrary, by making the representations herein, the Purchaser does not
agree to hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the
Securities Act.
b. ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED INVESTOR"
as that term is defined in Rule 501(a) of Regulation D.
c. RELIANCE ON EXEMPTIONS. Purchaser understands that the Debentures
and Warrants are being offered and sold to Purchaser in reliance upon
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of Purchaser set
forth herein in order to determine the availability of such exemptions and
the eligibility of Purchaser to acquire the Debentures and Warrants.
d. INFORMATION. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Debentures and Warrants
which have been specifically requested by Purchaser or its counsel.
Purchaser and its counsel, if any, have been afforded the opportunity to ask
questions of the Company and have received what Purchaser believes to be
satisfactory answers to any such inquiries. Neither such inquiries nor any
other due diligence investigation conducted by Purchaser or its counsel or
any of its representatives shall modify, amend or affect Purchaser's right to
rely on the Company's representations and warranties contained in Section 3
below. Purchaser understands that Purchaser's investment in the Securities
involves a high degree of risk.
e. GOVERNMENTAL REVIEW. Purchaser understands that no United States
United States or Israeli federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or endorsement
of the Securities.
f. TRANSFER OR RESALE. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the
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Securities Act or any state securities laws, and may not be transferred
unless (a) subsequently registered thereunder, or (b) an exemption from such
registration is available, or (c) Purchaser shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or (d) sold
pursuant to Rule 144 promulgated under the Securities Act (or a successor
rule) ("RULE 144") or (e) sold or transferred to an affiliate of Purchaser;
(ii) any sale of such Securities made in reliance on Rule 144 may be made
only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be
an underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and regulations of the SEC thereunder; and (iii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
the Registration Rights Agreement).
g. LEGENDS. Purchaser understands that the Debentures and Warrants
and, until such time as the Conversion Shares and the Warrant Shares have
been registered under the Securities Act as contemplated by the Registration
Rights Agreement or otherwise may be sold by Purchaser pursuant to Rule 144,
the certificates for the Conversion Shares and Warrants Shares may bear a
restrictive legend in substantially the following form:
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 of the United States. The securities
represented hereby may not be offered or sold, in the absence of an
effective registration statement for the securities under applicable
securities laws or unless offered, sold or transferred pursuant to an
available exemption from the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it
is stamped, if, unless otherwise required by state securities laws, (a) the
sale of such Security is registered under the Securities Act, or (b) such
holder provides the Company with an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions to the
effect that a public sale or transfer of such Security may be made without
registration under the Securities Act or (c) such holder provides the Company
with reasonable assurances that such Security can be sold pursuant to Rule
144. Purchaser agrees to sell all Securities, including those represented by
a certificate(s) from which the legend has been removed, pursuant to an
effective registration statement or in compliance with an exemption from the
registration requirements of the Securities Act. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance notice to Purchaser the Company
may require that the above legend be placed on any such Security that cannot
then be sold pursuant to an
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effective registration statement or Rule 144 or with respect to which the
opinion referred to in clause (b) above has not been rendered and Purchaser
shall cooperate in the prompt replacement of such legend. Such legend shall
be removed when such Security may be sold pursuant to an effective
registration statement or Rule 144 or such holder provides the opinion with
respect thereto described in clause (b) above..
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and
delivered on behalf of Purchaser and are valid and binding agreements of
Purchaser enforceable in accordance with their terms.
i. RESIDENCY. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing
under the laws of the jurisdiction in which it is incorporated, and has the
requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the Securities; (ii) the ability of the Company to
perform its obligations hereunder, the Debentures, the Warrants or the
Registration Rights Agreement or (iii) the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, taken
as a whole.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and
the Registration Rights Agreement, to issue and sell the Debentures and
Warrants in accordance with the terms hereof, and to issue the Conversion
Shares in accordance with the terms of the Debentures and the Warrant Shares
in accordance with the terms of the Warrants; (ii) the execution, delivery
and performance of this Agreement and the Registration Rights Agreement by
the Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation the issuance of the
Debentures, the Warrants and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) have been duly authorized by the
Company's Board of Directors and, no further consent or authorization of the
Company, its Board or Directors, or its shareholders is required (under Rule
4460(i) promulgated by the National Association of Securities Dealers or
otherwise); (iii) this Agreement has been duly executed and delivered by the
Company; and (iv) this Agreement constitutes, and, upon execution and
delivery by the Company of the Registration Rights Agreement,
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such agreement will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms.
c. CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable
and reserved for issuance pursuant to securities (other than the Debentures
or Warrants) exercisable for, or convertible into or exchangeable for any
shares of Common Stock and the number of shares to be reserved for issuance
upon conversion of the Debentures and Warrants is set forth on SCHEDULE 3(c).
All of such outstanding shares of capital stock have been, or upon issuance
will be, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company (including the Conversion Shares and Warrant Shares) are
subject to preemptive rights or any other similar rights of the shareholders
of the Company or any liens or encumbrances. Except for the Securities and
as set forth on SCHEDULE 3(c), as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital
stock of the Company or any of its subsidiaries, or arrangements by which the
Company or any of its subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its subsidiaries, and (ii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights
Agreement). Except as set forth on SCHEDULE 3(c), there are no securities or
instruments containing antidilution or similar provisions that will be
triggered by the issuance of the Securities in accordance with the terms of
this Agreement or the Debentures or Warrants. The Company has furnished to
each Purchaser true and correct copies of the Company's Memorandum of
Association as in effect on the date hereof (the "MEMORANDUM"), the Company's
Articles of Association as in effect on the date hereof (the "ARTICLES" and
collectively with the Memorandum the "ORGANIZATIONAL DOCUMENTS") and all
other instruments and agreements governing securities convertible into or
exercisable or exchangeable for Common Stock of the Company.
d. ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares are,
and the Preferred Shares, if issued, will be, duly authorized and reserved
for issuance. Upon such issuance of the Preferred Shares, conversion of the
Debentures in accordance with the terms thereof and the exercise of the
Warrants in accordance with the terms thereof, as the case may be, the
Preferred Shares, Conversion Shares and Warrant Shares will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other
similar rights of shareholders of the Company and will not impose personal
liability upon the holder thereof.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, the performance
by the Company of its obligations under the Debentures and Warrants, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
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issuance, as applicable, of the Debentures, the Conversion Shares and the
Warrant Shares) will not (i) result in a violation of the Organizational
Documents or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (except, with respect to clause (ii), for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Organizational Documents or other
organizational documents and neither the Company nor any of its subsidiaries
is in default (and no event has occurred which, with notice or lapse of time
or both, would put the Company or any of its subsidiaries in default) under,
nor has there occurred any event giving others (with notice or lapse of time
or both) any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, except for possible defaults or rights as would not,
individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be conducted so long as Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity,
except for possible violations the sanctions for which either singly or in
the aggregate would not have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and the Registration Rights
Agreement or as set forth on SCHEDULE 3(e) hereto, the Company is not
required to obtain any consent, approval, authorization or order of, or make
any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency or other party in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Debentures or the Warrants, in each case
in accordance with the terms hereof or thereof. The Company has not received
notification that it is in violation of the listing requirements of The
Nasdaq Stock Market ("NASDAQ").
f. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since December 31, 1993, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") (all of the foregoing, filed prior to the date hereof and after December
31, 1993, and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to the Purchaser true and complete copies of the SEC Documents, except
for such exhibits, schedules and incorporated documents. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such
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SEC Documents is, or has been, required to be updated or amended under
applicable law. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto,
or (ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to immaterial year-end
audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents filed prior to the date hereof, the
Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the
date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such
financial statements, which liabilities and obligations referred to in
clauses (i) and (ii) individually or in the aggregate, are not material to
the financial condition or operating results of the Company. The SEC
Documents contain a complete and accurate list of all material undischarged
written or oral contracts, agreements, leases or other instruments to which
the Company or any subsidiary is a party or by which the Company or any
subsidiary is bound or to which any of the properties or assets of the
Company or any subsidiary is subject (each a "CONTRACT"). None of the
Company, its subsidiaries or, to the best knowledge of the Company, any of
the other parties thereto, is in breach or violation of any Contract, which
breach or violation would have a Material Adverse Effect. No event,
occurrence or condition exists which, with the lapse of time, the giving of
notice, or both, or the happening of any further event or condition, would
become a default by the Company or its subsidiaries thereunder which would
have a Material Adverse Effect.
g. ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company except as disclosed in SCHEDULE 3(g) or in the SEC Documents
filed prior to the date hereof.
h. ABSENCE OF LITIGATION. Except as disclosed in the SEC Documents filed
prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency, self-
regulatory organization or body pending or, to the knowledge of the Company or
any of its subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such wherein an unfavorable decision, ruling or finding would have
a Material Adverse Effect or would adversely affect the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under this Agreement or any
of such other documents. There are no facts which, if known by a potential
claimant or governmental authority, could give rise to a
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claim or proceeding which, if asserted or conducted with results unfavorable
to the Company or any of its subsidiaries, could have a Material Adverse
Effect.
i. INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. To the best knowledge of the Company, neither the Company
nor any subsidiary of the Company infringes or is in conflict with any right of
any other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
has received written notice of any pending conflict with or infringement upon
such third party Intangibles. Neither the Company nor any of its subsidiaries
has entered into any consent, indemnification, forbearance to sue or settlement
agreements with respect to the validity of the Company's or its subsidiaries'
ownership or right to use its Intangibles and, to the best knowledge of the
Company, there is no reasonable basis for any such claim to be successful. The
Intangibles are valid and enforceable and no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
or other adversarial proceedings, and all applications therefor are pending and
are in good standing. The Company and its subsidiaries have complied, in all
material respects, with its respective contractual obligations relating to the
protection of the Intangibles used pursuant to licenses. To the best knowledge
of the Company, no person is infringing on or violating the Intangibles owned or
used by the Company or its subsidiaries.
j. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
k. DISCLOSURE. All information relating to or concerning the Company set
forth in this Agreement or provided to the Purchaser pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the
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Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to the primary issuance of the
Company's securities.
l. ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE DEBENTURES AND
WARRANTS. The Company acknowledges and agrees that the Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the transactions contemplated
hereby, that this Agreement and the transactions contemplated hereby and the
relationship between the Company and the Purchaser are "arms length" and that
any statement made by the Purchaser, or any of its representatives or agents,
in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Purchaser's
purchase of the Debentures and Warrants and has not been relied upon by the
Company, its officers or directors in any way. The Company further
represents to the Purchaser that the Company's decision to enter into this
Agreement has been based solely on an independent evaluation by the Company
and its representatives.
m. FORM S-3 ELIGIBILITY. The Company is currently eligible to register
the resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act.
n. NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "GENERAL SOLICITATION," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
o. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offerers
to buy any security under circumstances that would require registration of
the Securities being offered hereby under the Securities Act or cause this
offering of Securities to be integrated with any prior offering of the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions.
p. NO BROKERS. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Purchaser relating to this Agreement or the
transactions contemplated hereby, except for dealings with Cardinal Capital
Management, Inc. whose commissions and fees will be paid for by the Company.
q. ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares issuable
upon conversion of the Debentures and Warrant Shares issuable upon exercise of
the Warrants may increase substantially in certain circumstances, including the
circumstance wherein the trading price of the Common Stock declines. The
Company's executives have studied and fully understand the nature of the
securities being sold hereunder. The Company acknowledges that its obligation
to issue Conversion Shares in accordance with the terms of the Debentures and
Warrant Shares in accordance with the terms of the Warrants is absolute and
unconditional, regardless of the dilution that such issuance may have on the
ownership interests of other shareholders. Taking the foregoing into
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account, the Company's Board of Directors has determined in its good faith
business judgment that the issuance of the Debentures and Warrants hereunder
and the consummation of the other transactions contemplated hereby are in the
best interests of the Company and its shareholders.
r. TITLE. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(r) or
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and
facilities held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.
s. TAX STATUS. Except as set forth on SCHEDULE 3(s), the Company and
each of its subsidiaries has made or filed all foreign, federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set
aside on its books provision reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of
the Company know of no basis for any such claim.
t. KEY EMPLOYEES. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in SCHEDULE 3(t). No Key
Employee, to the best of the knowledge of the Company and its subsidiaries,
is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each Key Employee
does not subject the Company or any of its subsidiaries to any liability with
respect to any of the foregoing matters. Except as set forth on SCHEDULE
3(t), no Key Employee has, to the best of the knowledge of the Company and
its subsidiaries, any intention to terminate his employment with, or services
to, the Company or any of its subsidiaries. "Key Employee" means each of the
employees set forth on SCHEDULE 3(t) hereto.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this
Agreement, including without limitation, obtaining the consents, approvals,
authorizations and orders set forth on SCHEDULE 3(e) hereto.
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b. SECURITIES LAW. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
the Purchaser on or prior to the date of the Closing. The Company agrees to
file a Form 8-K disclosing this Agreement and the transactions contemplated
hereby with the SEC within fifteen (15) days of the date of the Closing. The
Company shall, on or before the Closing Date take such action as the Company
shall reasonably determine is necessary to sell the Securities to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
c. REPORTING STATUS. So long as the Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
d. USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the UNIT as set forth in SCHEDULE 4(d).
e. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. The Company agrees
that the Company will not, other than a Permitted Transaction (as defined
below), without the prior written consent of the Purchaser (or its designated
agent) offer or contract with any party to obtain additional equity financing
(including any debt financing with an equity component) ("FUTURE OFFERINGS") in
any form which provide for registration rights or public resale rights during
the period beginning on the date hereof and ending 180 days after the date
hereof (the "LOCK-UP PERIOD"). In addition, the Company will not, other than a
Permitted Transaction, conduct any offering or sale or enter into any agreement
to conduct a sale of any of its Common Stock or securities which are convertible
into or exchangeable or exercisable for Common Stock based on a sales,
conversion, exchange or exercise price calculated as a discount of greater than
fifteen percent (15%) to the trading price of the Common Stock during a
specified period (a "DISCOUNT OFFERING"), unless it shall have first delivered
to the Purchaser at least five (5) business days prior to the closing of such
Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing each Purchaser and its
affiliates, an option during the five (5) business day period following delivery
of such notice to purchase the securities being offered in the Discount Offering
on the same terms as contemplated by such Discount Offering; PROVIDED, HOWEVER,
such limitations shall not apply to the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof and set forth on Schedule 3(c) hereto.
"PERMITTED TRANSACTION" shall mean the offer or sale or entering into an
agreement to conduct a sale of Common Stock based on a sales price calculated as
a discount of not more than twenty-five percent (25%) to the trading price of
the Common Stock (or without such a discount) during a specified period for a
purchase price of not more than Two Million Dollars ($2,000,000)
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f. EXPENSES. The Company shall pay to the Purchaser, or at its
direction, at the Closing reimbursement for the expenses reasonably incurred by
it and its affiliates and advisors in connection with the negotiation,
preparation, execution, and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, such
Purchaser's and its affiliates' and advisors' reasonable due diligence and
attorneys' fees and expenses (the "EXPENSES"). In addition, from time to time
thereafter, upon any Purchaser's written request, the Company shall pay to the
Purchaser such additional Expenses, if any, not covered by such payment, in each
case to the extent reasonably incurred by the Purchaser.
g. FINANCIAL INFORMATION. The Company agrees to send the following
reports to Purchaser until such Purchaser transfers, assigns or sells all of its
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one (1) day
after release, copies of all press releases issued by the Company or any of its
subsidiaries.
h. RESERVATION OF SHARES. The Company shall at all times have authorized
and reserved for the purpose of issuance a sufficient number of shares of Common
Stock to provide for the full conversion of the outstanding Debentures and
exercise of the Warrants and issuance of the Conversion Shares and Warrant
Shares in connection therewith and as otherwise required by the Debentures or
the Warrants. The Company shall not reduce the number of shares reserved for
issuance upon conversion of the Debentures and exercise of the Warrants without
the consent of the holders holding a majority of the Debentures then
outstanding; PROVIDED, HOWEVER, the Company may reduce the number of shares so
reserved without obtaining such consent in the event of a reverse stock split or
similar transaction, in an amount so that the number of shares so reserved after
such transaction divided by the number of shares issued and outstanding equals
the number of shares reserved prior to such transaction divided by the number of
shares issued and outstanding.
i. LISTING. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and Warrant Shares from time to time issuable upon conversion
of the Debentures and exercise of the Warrants. The Company will use its best
efforts to continue the listing and trading of its Common Stock on the NASDAQ,
the New York Stock Exchange ("NYSE") or the American Stock Exchange ("AMEX") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. In the event the Common
Stock is delisted from trading on the NASDAQ, the NYSE or the AMEX and the
Common Stock is not eligible for listing on any such exchange or system, the
Company shall, with the written consent of the Purchaser, use its best efforts
to cause the Common Stock to be eligible for trading on the over-the-counter
bulletin board at the earliest practicable date and remain eligible for trading
while any Debentures or Warrants are outstanding. The Company shall promptly
provide to each holder of Debentures copies of any notices it receives regarding
the continued eligibility of the Common Stock for trading in the over-
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the-counter market or, if applicable, any securities exchange (including the
NASDAQ) on which securities of the same class or series issued by the Company
are then listed or quoted, if any.
j. CORPORATE EXISTENCE. So long as the Purchaser beneficially owns any
Debentures or Warrants, the Company shall maintain its corporate existence, and
in the event of a merger, consolidation or sale of all or substantially all of
the Company's assets, the Corporation shall ensure that the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the Debentures, Warrants and the agreements and instruments
entered into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized and
available for issuance in order to effect the conversion of all Debentures and
exercise of all Warrants outstanding as of the date of such transaction and (ii)
is a publicly traded corporation whose common stock is listed for trading on the
NASDAQ, NYSE or AMEX.
k. NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of Securities to be integrated with any
other offering of securities by the Company for purposes of NASDAQ Rule 4460(i).
l. INTENTIONAL ACTS OR OMISSIONS. The Company shall not intentionally
perform any act which if performed, or intentionally omit to perform any act
which if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the transactions contemplated hereby.
m. HEDGING TRANSACTIONS. The Company understands that the Purchaser is a
so-called "hedge" fund and the Company hereby expressly agrees that the
Purchaser shall not (except to the extent expressly provided herein to the
contrary) in any way be prohibited or restricted from any purchases or sales of
any securities of, or related to, the Company, including, without limitation,
short sales and hedging and arbitrage transactions.
n. LOCK-UP LETTERS. The Company shall cause Todd Oseth to execute and
deliver to the Purchaser at the Closing a Lock-Up Letter in the form attached
hereto as EXHIBIT F.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Debentures and exercise of the
Warrants, as the case may be. To the extent and during the periods provided in
Section 2(f) and 2(g) of this Agreement, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement.
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b. The Company warrants that no instruction other than such instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof in the case of the Conversion Shares or Warrant Shares prior
to registration thereof under the Securities Act, will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section shall affect in any way each Purchaser's obligations and agreement
set forth in Section 2(g) hereof to resell the Securities pursuant to an
effective registration statement or in compliance with an exemption from the
registration requirements of applicable securities law.
c. If (a) the Purchaser provides the Company with an opinion of counsel,
which opinion of counsel shall be in form, substance and scope customary for
opinions of counsel in comparable transactions (the reasonable costs of which
shall be borne by Company), to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from
registration, or (b) the Purchaser provides the Company with reasonable
assurances that such Securities may be sold pursuant to Rule 144 or the
Purchaser transfers Securities to an affiliate, the Company shall permit the
transfer, and, in the case of the Conversion Shares and the Warrant Shares
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by the Purchaser.
d. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Purchaser by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Debentures
and Warrants to the Purchaser hereunder is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
a. The Purchaser shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.
b. The Purchaser shall have delivered the Purchase Price for the
Debentures and Warrants in accordance with Section 1(b) above.
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c. The representations and warranties of the Purchaser shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date), and the Purchaser shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Purchaser at or
prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
e. The Company shall have received all consents, authorizations,
approvals and orders necessary to enter into this Agreement and consummate the
transactions contemplated hereby, all of which are set forth on SCHEDULE 3(e)
hereto.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of the Purchaser hereunder to purchase the Debentures and
Warrants to be purchased by it at the closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to the Purchaser.
b. The Company shall have delivered to the Purchaser duly executed
Debentures and Warrants (in such denominations as the Purchaser shall request)
being so purchased by the Purchaser in accordance with Section 1(b) above.
c. The Common Stock shall be authorized for quotation on NASDAQ and
trading in the Common Stock (or NASDAQ generally) shall not have been suspended
by the SEC or NASDAQ.
d. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. The Purchaser shall have received a certificate, executed
by the Chief Executive Officer of the Company, dated as of the Closing Date to
the foregoing effect and as to such other matters as may be reasonably requested
by the Purchaser.
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e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
f. The Purchaser shall have received an opinion of the Company's counsel,
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of EXHIBIT G
attached hereto.
g. The Company shall have delivered evidence reasonably satisfactory to
the Purchaser that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as EXHIBIT H.
h. The Company shall have received all consents, approvals,
authorizations and orders necessary to enter into this Agreement and consummate
the transactions contemplated hereby.
i. The Company shall have delivered the Lock-Up Letter referred to in
Section 4(n) hereof.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed in the State of Illinois. The Company and
the Purchasers irrevocably consent to the exclusive jurisdiction of the United
States federal courts located in the State of Illinois in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Service of process on the Company mailed
by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the right of any Purchaser to serve process in any other manner permitted
by law. The Company agrees that a final non-appealable judgment in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
b. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
to be physically delivered to the other party within five (5) days of the
execution hereof.
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c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchaser make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchaser.
f. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Accent Software International Ltd.
100 S. Fifth Street
Suite 2500
Minneapolis, Minnesota 55402
Telecopy: (612) 337-1931
Attn: Chief Financial Officer
with a copies to:
Accent Software International Ltd.
28 Pierre Koenig Street
Jerusalem 91530 Israel
Telecopy: (972) 26798177
Attn: Bob Trachtenberg
and
Rothgerber, Appel, Powers & Johnson LLP
1200 17th Street
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Suite 3000
Denver, Colorado 80202-5839
Telecopy: (303) 623-9222
Attn: Herbert H. Davis, III
If to the Purchaser, to such address set forth under the Purchaser's name
on the Execution Page hereto executed by the Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor the Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Purchaser may assign its rights hereunder to
any of its "AFFILIATES," as that term is defined under the Exchange Act, without
the consent of the Company. This provision shall not limit the Purchaser's
right to transfer the Securities pursuant to the terms thereof and this
Agreement or to assign the Purchaser's rights hereunder to any such transferee.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
i. SURVIVAL. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Purchaser. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies the Purchaser may have under applicable federal or state securities
laws. The Company agrees to indemnify and hold harmless the Purchaser and each
of the Purchaser's officers, directors, employees, partners, members, agents and
affiliates for loss or damage arising as a result of or related to (i) any
breach or alleged breach by the Company of any of its representations or
covenants set forth herein or (ii) the matters disclosed in paragraph 2 of
SCHEDULE 3(h), including advancement of expenses as they are incurred. The
Purchaser agrees to indemnify and hold harmless the Company and each of the
Company's officers, directors, employees, partners, members, agents and
affiliates for loss or damage arising as a result of or related to any breach by
the Purchaser of any of its representations or covenants set forth herein.
j. PUBLICITY. The Company and the Purchaser shall have the right to
approve before issuance any press releases, SEC, NASDAQ or NASD filings, or any
other public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Purchaser, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
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k. FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Closing Date shall not have
occurred on or before August 4, 1997, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to the termination
hereof.
m. JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement. As such, the
language used herein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-20-
<PAGE>
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
ACCESS SOFTWARE INTERNATIONAL LTD.
By:
-------------------------
Name:
------------------------
Title:
-----------------------
PURCHASER:
CC INVESTMENTS, LDC
By: CSS Corporation Ltd., Corporate Secretary
By:
-------------------------
Name:
------------------------
Title:
-----------------------
RESIDENCE: Cayman Islands
ADDRESS: CC Investments, LDC
c/o Citco Fund Services (Cayman Islands) Ltd.
Corporate Center, West Bay Road
P.O. Box 31106
SMB Grand Cayman, Cayman Islands
AGGREGATE SUBSCRIPTION AMOUNT
Purchase Price: $2,000,000.00
-------------
<PAGE>
EXHIBIT B
TO
SECURITIES
PURCHASE
AGREEMENT
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON AUGUST 5, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND
TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 250,000
Ordinary Shares, nominal value
NIS .01 per share
Date: August 5, 1997
ACCENT SOFTWARE INTERNATIONAL LTD.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CC Investments, LDC or its
registered assigns, is entitled to purchase from ACCENT SOFTWARE INTERNATIONAL
LTD., an Israeli corporation (the "COMPANY"), at any time or from time to time
during the period specified in Section 2 hereof, Two Hundred Fifty Thousand
(250,000) fully paid and nonassessable shares of the Company's Ordinary Shares,
nominal value NIS .01 per share (the "COMMON STOCK"), at an exercise price per
share (the "EXERCISE PRICE") equal to $2.80. The number of shares of Common
Stock purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are
subject to adjustment as provided in Section 4 hereof. The term "WARRANTS"
means this Warrant and the other warrants of the Company issued pursuant to that
certain Securities Purchase Agreement, dated as as of July 31, 1997, by and
among the Company and the other signatories thereto (the "SECURITIES PURCHASE
AGREEMENT").
<PAGE>
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, clearance of a certified or official bank check
or by wire transfer for the account of the Company, of the Exercise Price for
the Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), delivery to the Company of a written notice of an election to
effect a Cashless Exercise (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company does not
have sufficient authorized but unissued shares of Common Stock available to
effect such exercise in accordance with the provisions of this Section 1 (an
"EXERCISE DEFAULT"), the Company shall issue to the holder all of the shares of
Common Stock which are available to effect such exercise and, within five (5)
business days of the attempted exercise of this Warrant, refund to the holder
that portion of the holder's payment of the Exercise Price allocable to the
number of shares of Common Stock included in the Exercise Agreement which
exceeds the amount which is then issuable by the Company (the "EXCESS AMOUNT").
The Excess Amount shall, notwithstanding anything to the contrary contained
herein, not be exercisable for Common Stock in accordance with the terms hereof
until (and at the holder's option on or at any time after) the date additional
shares of Common Stock are authorized by the Company to permit such exercise.
The Company shall pay to the holder payments ("EXERCISE DEFAULT PAYMENTS") for
an Exercise Default in the amount of (a) (N/365), multiplied by (b) the Market
Price (as defined in Section 4(1) below) on the Exercise Default Date (as
defined below) less the Exercise Price,
2
<PAGE>
multiplied by (c) the Excess Amount on the date the Exercise Agreement giving
rise to the Exercise Default is transmitted in accordance with this Section 1
(the "EXERCISE DEFAULT DATE"), multiplied by (d) .24, where N = the number of
days from the Exercise Default Date to the date (the "AUTHORIZATION DATE")
that the Company authorizes a sufficient number of shares of Common Stock to
effect exercise of this Warrant in full. The Company shall send notice to
the holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of holder's accrued Exercise Default
Payments. The accrued Exercise Default Payment for each calendar month shall
be paid in cash or shall be convertible into Common Stock at the Exercise
Price, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock (in
accordance with the terms contained in Article VI of the Debentures) at the
Market Price (as in effect at the time of conversion) at any time after the
fifth (5th) day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(h) of the
Securities Purchase Agreement or to otherwise issue shares of Common Stock upon
exercise of this Warrant in accordance with the terms hereof, and each holder
shall have the right to pursue all remedies available at law or in equity
(including a decree of specific performance and/or injunctive relief).
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the Issue Date and before 5:00 p.m., New York City time
on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or
3
<PAGE>
automated quotation system, if any, upon which shares of Common Stock are
then listed or become listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other
shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on
such national securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as hereinafter defined) on
the date of issuance (a "DILUTIVE ISSUANCE"), then effective immediately upon
the Dilutive Issuance, the Exercise Price will be adjusted in accordance with
the following formula:
P
---
E' = E x O + M
----------
CSDO
4
<PAGE>
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(l)) immediately after
the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
5
<PAGE>
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Section 4(b)(ii)(B) if applicable) is
less than the Market Price on the date of issuance, then the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities will, as of the date of the
issuance of such Convertible Securities, be deemed to be outstanding and to
have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon such exercise, conversion or exchange" is determined
by dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange thereof
at the time such Convertible Securities first become exercisable, convertible
or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon exercise, conversion or
exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which is issuable upon such exercise, conversion or exchange for
purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be
deemed to be the lowest price per share which would be applicable (assuming
all holding period and other conditions to any discounts contained in such
Convertible Security have been satisfied) if the Market Price on the date of
issuance of such Convertible Security was 75% of the Market Price on such
date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Market Price at
any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment under this Section 4 with
respect to any Variable Rate Convertible Security, the Exercise Price in
effect at such time shall be readjusted to equal the Exercise Price which
would have resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been 75% of the Market
Price existing at the time of the adjustment required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there
is a change at any time in (i) the amount of additional consideration payable
to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange of any Convertible Securities; or (iii) the rate at
which any Convertible Securities are convertible into or exchangeable for
Common Stock (other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such change
will be readjusted to the Exercise Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding
provided for such changed additional
6
<PAGE>
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or
exchange of any Convertible Securities is not, in fact, issued and the rights
to exercise such Option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Exercise Price then in
effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of
shares of Common Stock issued upon exercise or conversion thereof), never
been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will
be the amount received by the Company therefor, before deduction of
reasonable commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by the Company in connection with such
issuance, grant or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall
be other than cash, the amount of the consideration other than cash received
by the Company will be the fair market value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any merger or consolidation in which
the Company is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair market value of such portion of the
net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the case may be.
The fair market value of any consideration other than cash or securities will
be determined in good faith by an investment banker or other appropriate
expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne
by the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding as of the
date hereof as set forth on Schedule 3(c) of the Securities Purchase
Agreement in accordance with the terms of such securities as of such date,
including those securities with respect to which vesting or the exercise
period therefore has not yet occurred; (ii) upon the issuance of any
debentures (the "Debentures") or Warrants issued or issuable in accordance
with terms of the Securities Purchase Agreement; (iii) upon conversion of the
Debentures or exercise of the Warrants; (iv) upon the issuance or exercise of
Warrants which are issued by the Company in exchange for currently
outstanding Warrants with an exercise price of $11.50 per share provided the
holder of such Warrants exercises its purchase rights thereunder
substantially contemporaneous with such exchange; or (v) upon the issuance or
exercise of options to purchase not more than 500,000 shares of Common Stock
in connection with bona fide services provided to the Company.
7
<PAGE>
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company,
at any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a greater number of shares, then, after the
date of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If
the Company, at any time during the Exercise Period, combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
its shares of Common Stock into a smaller number of shares, then, after the
date of record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation
of the Company with, or merger of the Company into any other corporation, or
in case of any sale or conveyance of all or substantially all of the assets
of the Company other than in connection with a plan of complete liquidation
of the Company at any time during the Exercise Period, then as a condition of
such consolidation, merger or sale or conveyance, adequate provision will be
made whereby the holder of this Warrant will have the right to acquire and
receive upon exercise of this Warrant in lieu of the shares of Common Stock
immediately theretofore acquirable upon the exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this
Warrant had such consolidation, merger or sale or conveyance not taken place.
In any such case, the Company will make appropriate provision to insure that
the provisions of this Section 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect
any consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor corporation (if other than the Company)
assumes by written instrument the obligations under this Section 4 and the
obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a partial liquidating dividend, by way of return
of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "DISTRIBUTION"), at any time during the
Exercise Period, then the holder of this Warrant shall be entitled upon
exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets (or rights)
which would have been payable
8
<PAGE>
to the holder had such holder been the holder of such shares of Common Stock
on the record date for the determination of shareholders entitled to such
Distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such
price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such
calculation shall be certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less than 1% of
such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay
a cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained
earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all of its
assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case
9
<PAGE>
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, notice of the date (or, if not then
known, a reasonable approximation thereof by the Company) when the same shall
take place. Such notice shall also specify the date on which the holders of
Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed
in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If, at any time during the Exercise Period,
any event occurs of the type contemplated by the adjustment provisions of
this Section 4 but not expressly provided for by such provisions, the Company
will give notice of such event as provided in Section 4(g) hereof, and the
Company's Board of Directors will make an appropriate adjustment in the
Exercise Price and the number of shares of Common Stock acquirable upon
exercise of this Warrant so that the rights of the holder shall be neither
enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number
of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) in the case of
any adjustment required by Section 4(a) resulting from the issuance of any
Options, the maximum total number of shares of Common Stock issuable upon the
exercise of the Options for which the adjustment is required (including any
Common Stock issuable upon the conversion of Convertible Securities issuable
upon the exercise of such Options), and (y) in the case of any adjustment
required by Section 4(a) resulting from the issuance of any Convertible
Securities, the maximum total number of shares of Common Stock issuable upon
the exercise, conversion or exchange of the Convertible Securities for which
the adjustment is required, as of the date of issuance of such Convertible
Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the
Nasdaq Small Cap Market for the five (5) trading days immediately preceding
such date, or (ii) if the Nasdaq Small Cap Market is not the principal
trading market for the shares of Common Stock, the average of the last
reported bid prices on the principal trading market for the Common Stock for
the five (5) trading days immediately preceding such date or, if there is no
bid price for such period, the last reported sales price for such period, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the holder, with the costs of the appraisal to
be borne by the Company. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply with respect
to any other security in respect of which a determination as to market value
must be made hereunder.
10
<PAGE>
(iii) "COMMON STOCK," for purposes of this Section 4,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation,
provided that the shares purchasable pursuant to this Warrant shall include
only Common Stock, in respect of which this Warrant is exercisable, or shares
resulting from any subdivision or combination of such Common Stock, or in the
case of any reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Section 4(e) hereof, the stock or other
securities or property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no
mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as
a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in
Section 7(e) below, provided, however, that any transfer or assignment shall
be subject to the conditions set forth in Section 7(f) and (g) hereof and to
the provisions of Sections 2(f) and 2(g) of the Securities Purchase
Agreement. Until due presentment for registration of transfer on the books
of the Company, the Company may treat the registered holder hereof as the
owner and holder hereof for all purposes, and the Company shall not be
affected by any notice to the contrary. Notwithstanding anything to the
contrary contained herein, the registration rights described in Section 8
hereof are assignable only in accordance with the provisions of that certain
Registration Rights Agreement, dated as of the date hereof, by and among the
Company and the other signatories thereto (the "REGISTRATION RIGHTS
AGREEMENT").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Section 7(e) below, for
new Warrants of like tenor of different denominations representing in the
aggregate the right to purchase the number of shares of Common Stock which
may be purchased hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by the holder hereof
at the time of such surrender.
11
<PAGE>
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided
in this Section 7, this Warrant shall be promptly canceled by the Company.
The Company shall pay all taxes (other than securities transfer taxes and any
tax measured by income or asset value) and all other expenses (other than
legal expenses, if any, incurred by the Holder or transferees) and charges
payable in connection with the preparation, execution, and delivery of
Warrants pursuant to this Section 7.
(e) WARRANT REGISTER. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof), a register for this
Warrant, in which the Company shall record the name and address of the person
in whose name this Warrant has been issued, as well as the name and address
of each transferee and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the
Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such exercise, transfer, or
exchange, (i) that the holder or transferee of this Warrant, as the case may
be, furnish to the Company a written opinion of counsel (which opinion shall
be in form, substance and scope reasonably satisfactory to the Company) to
the effect that such exercise, transfer, or exchange may be made without
registration under the Securities Act and under applicable state securities
or blue sky laws, (ii) that the holder or transferee execute and deliver to
the Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined
in Rule 501(a) promulgated under the Securities Act; provided that no such
opinion, letter, status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER.
Notwithstanding anything contained herein to the contrary, in no event shall
the holder hereof exercise Warrants to the extent that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein) and (b) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portion thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than
12
<PAGE>
4.99% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in
clause (a) hereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement.
9. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Accent Software International Ltd.
100 S. Fifth Street
Suite 2500
Minneapolis, Minnesota 55402
Telecopy: (612) 337-1931
Attn: Chief Financial Officer
with a copies to:
Accent Software International Ltd.
28 Pierre Koenig Street
Jerusalem 91530 Israel
Telecopy: (972) 26798177
Attn: Bob Trachtenberg
and
Rothgerber, Appel, Powers & Johnson LLP
1200 17th Street
Suite 3000
Denver, Colorado 80202-5839
Telecopy: (303) 623-9222
If to the holder, at such address as such holder shall have provided in
writing to the Company, or at such other address as such holder furnishes by
notice given in accordance with this Section 9
13
<PAGE>
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Barry J. Siegel, Esquire
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed in the Illinois. The Company irrevocably
consents to the jurisdiction of the United States federal courts located in
the State of Illinois, in any suit or proceeding based on or arising under
this Warrant and irrevocably agrees that all claims in respect of such suit
or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit
or proceeding. The Company agrees that service of process upon the Company
mailed by first class mail shall be deemed in every respect effective service
of process upon the Company in any such suit or proceeding. Nothing herein
shall affect the holder's right to serve process in any other manner
permitted by law. The Company agrees that a final non-appealable judgment in
any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder
hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder
is not then registered pursuant to an effective registration statement under
the Securities Act, this Warrant may be exercised at any time after August __,
1998 until the end of the Exercise Period, by presentation and surrender
of this Warrant to the Company at its principal executive offices with a
written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "CASHLESS
EXERCISE"). In the event of a Cashless Exercise, in lieu of paying the
Exercise Price in cash, the holder shall surrender this Warrant for that
number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market
Price per share of the Common Stock
14
<PAGE>
and the Exercise Price, and the denominator of which shall be the then
current Market Price per share of Common Stock.
(d) BUSINESS DAY. For purposes of this Warrant, the term
"business day" means any day, other than a Saturday or Sunday or a day on
which banking institutions in the State of Illinois are authorized or
obligated by law, regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
ACCENT SOFTWARE
INTERNATIONAL LTD.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: Accent Software International Ltd.
100 S. Fifth Street
Suite 2500
Minneapolis, Minnesota 55402
Telecopy: (612) 337-1931
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ Ordinary Shares of Accent Software International Ltd., an
Israeli corporation (the "COMPANY"), evidenced by the attached Warrant, and
herewith makes payment of the Exercise Price with respect to such shares in
full, all in accordance with the conditions and provisions of said Warrant.
i. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of
1933, as amended, or any state securities laws, and agrees that the following
legend may be affixed to the stock certificate for the Common Stock hereby
subscribed for if resale of such Common Stock is not registered or if Rule
144(k) is unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND
SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD
PURSUANT TO RULE 144(K) UNDER SAID ACT.
ii. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
----------------- ------------------------------------------
Signature of Holder
------------------------------------------
Name of Holder (Print)
Address:
------------------------------------------
------------------------------------------
------------------------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow,
to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said
Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: , ,
--------------------- ----
In the presence of
- ------------------
Name:
-------------------------------------------
Signature:
--------------------------------
Title of Signing Officer or Agent (if any):
--------------------------------
Address:
--------------------------------
--------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
<PAGE>
EXHIBIT C
TO
SECURITIES
PURCHASE
AGREEMENT
VOID AFTER 5:00 P.M. NEW YORK CITY
TIME ON AUGUST 5, 2002
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES REPRESENTED HEREBY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,
SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 50,000
Ordinary Shares, nominal value
NIS .01 per share
Date: August 5, 1997
ACCENT SOFTWARE INTERNATIONAL LTD.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, CC Investments, LDC or its
registered assigns, is entitled to purchase from ACCENT SOFTWARE INTERNATIONAL
LTD., an Israeli corporation (the "COMPANY"), at any time or from time to time
during the period specified in Section 2 hereof, Fifty Thousand (50,000) fully
paid and nonassessable shares of the Company's Ordinary Shares, nominal value
NIS .01 per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE PRICE") equal to $3.20. The number of shares of Common Stock
purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this
Warrant and the other warrants of the Company issued pursuant to that certain
Securities Purchase Agreement, dated as of July 31, 1997 by and among the
Company and the other signatories thereto (the "SECURITIES PURCHASE
AGREEMENT").
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<PAGE>
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "EXERCISE
AGREEMENT"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, clearance of a certified or official bank check
or by wire transfer for the account of the Company, of the Exercise Price for
the Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), delivery to the Company of a written notice of an election to
effect a Cashless Exercise (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two (2)
business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name as shall be designated by such holder. If this Warrant shall have
been exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the holder a new Warrant representing the number of shares with respect to which
this Warrant shall not then have been exercised.
If, at any time, a holder of this Warrant submits this Warrant, an Exercise
Agreement and payment to the Company of the Exercise Price for each of the
Warrant Shares specified in the Exercise Agreement, and the Company does not
have sufficient authorized but unissued shares of Common Stock available to
effect such exercise in accordance with the provisions of this Section 1 (an
"EXERCISE DEFAULT"), the Company shall issue to the holder all of the shares of
Common Stock which are available to effect such exercise and, within five (5)
business days of the attempted exercise of this Warrant, refund to the holder
that portion of the holder's payment of the Exercise Price allocable to the
number of shares of Common Stock included in the Exercise Agreement which
exceeds the amount which is then issuable by the Company (the "EXCESS AMOUNT").
The Excess Amount shall, notwithstanding anything to the contrary contained
herein, not be exercisable for Common Stock in accordance with the terms hereof
until (and at the holder's option on or at any time after) the date additional
shares of Common Stock are authorized by the Company to permit such exercise.
The Company shall pay to the holder payments ("EXERCISE DEFAULT PAYMENTS") for
an Exercise Default in the amount of (a) (N/365), multiplied by (b) the Market
Price (as defined in Section 4(1) below) on the Exercise Default Date (as
defined below) less the Exercise Price,
2
<PAGE>
multiplied by (c) the Excess Amount on the date the Exercise Agreement giving
rise to the Exercise Default is transmitted in accordance with this Section 1
(the "EXERCISE DEFAULT DATE"), multiplied by (d) .24, where N = the number of
days from the Exercise Default Date to the date (the "AUTHORIZATION DATE")
that the Company authorizes a sufficient number of shares of Common Stock to
effect exercise of this Warrant in full. The Company shall send notice to
the holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of holder's accrued Exercise Default
Payments. The accrued Exercise Default Payment for each calendar month shall
be paid in cash or shall be convertible into Common Stock at the Exercise
Price, at the holder's option, as follows:
(a) In the event holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth (5th) day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock (in
accordance with the terms contained in Article VI of the Debentures) at the
Market Price (as in effect at the time of conversion) at any time after the
fifth (5th) day of the month following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 4(h) of the
Securities Purchase Agreement or to otherwise issue shares of Common Stock upon
exercise of this Warrant in accordance with the terms hereof, and each holder
shall have the right to pursue all remedies available at law or in equity
(including a decree of specific performance and/or injunctive relief).
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the Issue Date and before 5:00 p.m., New York City time
on the fifth (5th) anniversary of the date hereof (the "EXERCISE PERIOD").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become
3
<PAGE>
listed (subject to official notice of issuance upon exercise of this Warrant)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock from time to time issuable
upon the exercise of this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may
be, and shall maintain such listing of, any other shares of capital stock of
the Company issuable upon the exercise of this Warrant if and so long as any
shares of the same class shall be listed on such national securities exchange
or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, 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 to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Market Price (as hereinafter defined) on
the date of issuance (a "DILUTIVE ISSUANCE"), then effective immediately upon
the Dilutive Issuance, the Exercise Price will be adjusted in accordance with
the following formula:
P
---
E' = E x O + M
----------
CSDO
where:
4
<PAGE>
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section 4(1));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(l)) immediately after
the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance ("BELOW MARKET OPTIONS"),
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Below Market Options (assuming full exercise, conversion or
exchange of Convertible Securities, if applicable) will, as of the date of the
issuance or grant of such Below Market Options, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Market Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Below Market Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Below Market Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Below Market
Options, the minimum aggregate amount of additional consideration payable upon
the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Exercise Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise,
5
<PAGE>
conversion or exchange (as determined pursuant to Section 4(b)(ii)(B) if
applicable) is less than the Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by the Company for such price
per share. For the purposes of the preceding sentence, the "price per share
for which Common Stock is issuable upon such exercise, conversion or
exchange" is determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of all
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise, conversion
or exchange thereof at the time such Convertible Securities first become
exercisable, convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of
all such Convertible Securities. No further adjustment to the Exercise Price
will be made upon the actual issuance of such Common Stock upon exercise,
conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the price per
share for which is issuable upon such exercise, conversion or exchange for
purposes of the calculation contemplated by Section 4(b)(ii)(A) shall be deemed
to be the lowest price per share which would be applicable (assuming all holding
period and other conditions to any discounts contained in such Convertible
Security have been satisfied) if the Market Price on the date of issuance of
such Convertible Security was 75% of the Market Price on such date (the "ASSUMED
VARIABLE MARKET PRICE"). Further, if the Market Price at any time or times
thereafter is less than or equal to the Assumed Variable Market Price last used
for making any adjustment under this Section 4 with respect to any Variable Rate
Convertible Security, the Exercise Price in effect at such time shall be
readjusted to equal the Exercise Price which would have resulted if the Assumed
Variable Market Price at the time of issuance of the Variable Rate Convertible
Security had been 75% of the Market Price existing at the time of the adjustment
required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock
issuable upon exercise of any Option or upon exercise, conversion or exchange
of any Convertible Securities is not, in fact, issued and the
6
<PAGE>
rights to exercise such Option or to exercise, convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price
then in effect will be readjusted to the Exercise Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of
shares of Common Stock issued upon exercise or conversion thereof), never
been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair market
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment to the
Exercise Price will be made (i) upon the exercise of any warrants, options or
convertible securities issued and outstanding as of the date hereof as set forth
on Schedule 3(c) of the Securities Purchase Agreement in accordance with the
terms of such securities as of such date, including those securities with
respect to which vesting or the exercise period therefore has not yet occurred;
(ii) upon the issuance of any debentures (the "Debentures") or Warrants issued
or issuable in accordance with terms of the Securities Purchase Agreement; (iii)
upon conversion of the Debentures or exercise of the Warrants; (iv) upon the
issuance or exercise of Warrants which are issued by the Company in exchange for
currently outstanding Warrants with an exercise price of $11.50 per share
provided the holder of such Warrants exercises its purchase rights thereunder
substantially contemporaneous with such exchange; or (v) upon the issuance or
exercise of options to purchase not more than 500,000 shares of Common Stock in
connection with bona fide services provided to the Company.
(C) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization,
7
<PAGE>
reclassification or otherwise) its shares of Common Stock into a smaller
number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(D) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(E) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation, merger or sale
or conveyance not taken place. In any such case, the Company will make
appropriate provision to insure that the provisions of this Section 4 hereof
will thereafter be applicable as nearly as may be in relation to any shares of
stock or securities thereafter deliverable upon the exercise of this Warrant.
The Company will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if other
than the Company) assumes by written instrument the obligations under this
Section 4 and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(F) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Company's
shareholders of cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "DISTRIBUTION"), at any time during the Exercise Period, then
the holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets (or rights) which would have been payable to
the holder had such holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such Distribution.
(G) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price
8
<PAGE>
upon exercise, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based. Such calculation shall
be certified by the chief financial officer of the Company.
(H) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(I) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(J) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any
9
<PAGE>
defect therein shall not affect the validity of the proceedings referred to
in clauses (i), (ii), (iii) and (iv) above.
(K) CERTAIN EVENTS. If, at any time during the Exercise Period, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(L) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on the
Nasdaq Small Cap Market for the five (5) trading days immediately preceding
such date, or (ii) if the Nasdaq Small Cap Market is not the principal
trading market for the shares of Common Stock, the average of the last
reported bid prices on the principal trading market for the Common Stock for
the five (5) trading days immediately preceding such date or, if there is no
bid price for such period, the last reported sales price for such period, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the average fair market value as
reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the holder, with the costs of the appraisal to
be borne by the Company. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply with respect
to any other security in respect of which a determination as to market value
must be made hereunder.
(iii) "COMMON STOCK," for purposes of this Section 4,
includes the Common Stock and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only Common
Stock, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
10
<PAGE>
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(A) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Section 7(f) and (g) hereof and to the provisions of
Sections 2(f) and 2(g) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 8 hereof are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of the date hereof, by and among the Company and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT").
11
<PAGE>
(B) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(C) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(D) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes and any tax
measured by income or asset value) and all other expenses (other than legal
expenses, if any, incurred by the Holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 7.
(E) WARRANT REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(F) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope reasonably satisfactory to the Company) to the effect that
such exercise, transfer, or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be an "ACCREDITED INVESTOR" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter, status as an "accredited
investor" shall be required in connection with a transfer pursuant to Rule 144
under the Securities Act.
(G) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER. Notwithstanding
anything contained herein to the contrary, in no event shall the holder hereof
exercise Warrants to the extent
12
<PAGE>
that (a) the number of shares of Common Stock beneficially owned by such
holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other
securities of the Company subject to a limitation on conversion or exercise
analogous to the limitation contained herein) and (b) the number of shares of
Common Stock issuable upon exercise of the Warrants (or portion thereof) with
respect to which the determination described herein is being made, would
result in beneficial ownership by such holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in
clause (a) hereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement.
9. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Accent Software International Ltd.
100 S. Fifth Street
Suite 2500
Minneapolis, Minnesota 55402
Telecopy: (612) 337-1931
Attn: Chief Financial Officer
with a copies to:
Accent Software International Ltd.
28 Pierre Koenig Street
Jerusalem 91530 Israel
Telecopy: (972) 26798177
Attn: Bob Trachtenberg
and
Rothgerber, Appel, Powers & Johnson LLP
1200 17th Street
Suite 3000
Denver, Colorado 80202-5839
13
<PAGE>
Telecopy: (303) 623-9222
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Barry J. Siegel, Esquire
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed in the Illinois. The Company irrevocably
consents to the jurisdiction of the United States federal courts located in the
State of Illinois, in any suit or proceeding based on or arising under this
Warrant and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company agrees that service of process upon the Company mailed by first
class mail shall be deemed in every respect effective service of process upon
the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
11. MISCELLANEOUS.
(A) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(B) DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
14
<PAGE>
(C) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time after August __, 1998
until the end of the Exercise Period, by presentation and surrender of this
Warrant to the Company at its principal executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a calculation
of the number of shares of Common Stock to be issued upon such exercise in
accordance with the terms hereof (a "CASHLESS EXERCISE"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder
shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
(D) BUSINESS DAY. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of Illinois are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
ACCENT SOFTWARE
INTERNATIONAL LTD.
By:
-----------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: Accent Software International, Ltd.
100 S. Fifth Street
Suite 2500
Minneapolis, Minnesota 55402
Telecopy: (612) 337-1931
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ Ordinary Shares of Accent Software International Ltd., an Israeli
corporation (the "COMPANY"), evidenced by the attached Warrant, and herewith
makes payment of the Exercise Price with respect to such shares in full, all in
accordance with the conditions and provisions of said Warrant.
a. The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws, and agrees that the following legend
may be affixed to the stock certificate for the Common Stock hereby subscribed
for if resale of such Common Stock is not registered or if Rule 144(k) is
unavailable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SAID ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144(K) UNDER SAID ACT.
b. The undersigned requests that stock certificates for such shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to the Warrant in the name of the Holder and delivered to the
undersigned at the address set forth below:
Dated:
-------------------------- -------------------------------------
Signature of Holder
-------------------------------------
Name of Holder (Print)
Address:
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow,
to:
Name of Assignee Address No of Shares
- ---------------- ------- ------------
, and hereby irrevocably constitutes and appoints ___________________________
___________ as agent and attorney-in-fact to transfer said Warrant on the
books of the within-named corporation, with full power of substitution in the
premises.
Dated: , ,
-------------------- ----
In the presence of
- ------------------------
Name:
-----------------------------------
Signature:
-------------------------
Title of Signing Officer or Agent (if any):
--------------------------
Address: --------------------------
--------------------------
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
<PAGE>
EXHIBIT D
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of August 5,
1997 by and among ACCENT SOFTWARE INTERNATIONAL LTD., a corporation organized
under the laws of the State of Israel, with headquarters located at 28 Pierre
Koenig Street, P.O. Box 53063, Jerusalem 91530 Israel (the "COMPANY"), and
the undersigned (together with affiliates, the "Initial Investors").
WHEREAS:
A. In connection with the Securities Purchase Agreement dated as of
July 31, 1997 between the Company and the Initial Investor (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to
the conditions contained therein, to issue and sell to the Initial Investors
(i) 6% Convertible Debentures ("Debentures") of the Company in the aggregate
principal amount of $2,000,000, convertible into shares of the Company's
Ordinary Shares, nominal value NIS .01 per share ("Common Stock"), (ii) a
warrant to purchase 250,000 shares of Common Stock and (iii) a warrant to
purchase 50,000 shares of Common Stock (the warrants referred to in clauses
(ii) and (iii) of this sentence shall be referred to as the "Warrants"). The
shares of Common Stock, issuable upon conversion of (i) the Debentures or
otherwise pursuant to the terms of the Debentures and (ii) the Preferred
Shares (as defined in the Securities Purchase Agreement) if the Company
exercises its rights contained in Section X.O of the Debentures shall
collectively be referred to as the "Conversion Shares" and the shares of
Common Stock issuable upon exercise of the Warrants or otherwise pursuant to
the terms of the Warrants shall be referred to herein as the "Warrant
Shares");
B. To induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "SECURITIES ACT"), and applicable state securities laws;
and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
<PAGE>
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investor and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares
issued or issuable with respect to the Debentures and the Preferred Shares
(including any Conversion Shares issuable with respect to Conversion Default
Payments under the Debentures and the Preferred Shares or in redemption of
any Debentures and the Preferred Shares), the Warrant Shares issued or
issuable with respect to the Warrants and any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a distribution on
or in exchange for or otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement
of the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as
soon as practicable after the date hereof (but not later than that date which
is fifteen (15) days after the date hereof), file with the SEC a Registration
Statement on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a registration of all
of the Registrable Securities, subject to the consent of the Initial
Investors (as determined pursuant to Section 11(j) hereof)) covering the
resale of at least 3,800,000 Registrable Securities, which Registration
Statement, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the
Debentures and the Preferred Shares and exercise of the Warrants (i) to
prevent dilution resulting from stock splits, stock dividends or similar
transactions or (ii) by reason of changes in the Conversion Price of the
Debentures and the Preferred Shares or the Exercise Price of the
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Warrants in accordance with the terms thereof. The Registrable Securities
included in the Registration Statement shall be allocated to the Investors as
set forth in Section 11(k) hereof. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the approval of)
the Initial Investors and their counsel prior to its filing or other
submission.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Investors who hold a majority in interest of the
Registrable Securities subject to such underwritten offering, with the
consent of the Initial Investors, shall have the right to select one legal
counsel to represent the Investors and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the
Company.
c. PAYMENTS BY THE COMPANY. The Company shall cause the
Registration Statement required to be filed pursuant to Section 2(a) hereof
to become effective as soon as practicable, but in no event later than
October 31, 1997. If (i) the Registration Statement(s) covering the
Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not declared effective by the SEC on or before October
31, 1997 (the "REGISTRATION DEADLINE") or if, after the Registration
Statement has been declared effective by the SEC, sales of all the
Registrable Securities (including any Registrable Securities required to be
registered pursuant to Section 3(b) hereof) cannot be made pursuant to the
Registration Statement (by reason of a stop order or the Company's failure to
update the Registration Statement or any other reason outside the control of
the Investors) or (ii) the Common Stock is not listed or included for
quotation on the Nasdaq National Stock Market ("NASDAQ"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at any time
after the Registration Deadline, then the Company will make payments to the
Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as partial relief for the damages to the Investors by
reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each
Investor an amount equal to the product of (i) the aggregate principal amount
of Debentures held by such Investor (including, without limitation,
Debentures that has been converted into Conversion Shares then held by such
Investor) (the "AGGREGATE PRICE") multiplied by (ii) (x) one hundredths
(.01), during that period beginning on that date which is ninety (90) days
after the date hereof and ending on that date which is one hundred nineteen
(119) after the date hereof, or (y) two hundredths (.02), during that period
beginning on that date which is one hundred twenty (120) days after the date
hereof, multiplied by (iii) the sum of: (y) the number of months (prorated
for partial months) after the Registration Deadline and prior to the date the
Registration Statement filed pursuant to Section 2(a) is declared effective
by the SEC and (z) the number of months (prorated for partial months) that
sales of any Registrable Securities cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective or the Common Stock is not listed or included for quotation on
Nasdaq, the NYSE or AMEX; provided, however that there shall be excluded
from each such period any delays which are solely attributable to changes
(other than corrections of Company mistakes with respect to information
previously provided by the Investors) required by the Investors
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in the Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of
distribution. (For example, if the Registration Statement is not effective by
the Registration Deadline, the Company would pay $10,000 per month for each
$1,000,000 of Aggregate Price during the first ninety days following the
Registration Deadline during which the Registration statement is not
effective and $20,000 per month for each $1,000,000 of Aggregate Price
thereafter until the Registration Statement becomes effective.) Such amounts
shall be paid in cash or, at each Investor's option, may be convertible into
Common Stock at the "CONVERSION PRICE" (as defined in the Debentures). Any
shares of Common Stock issued upon conversion of such amounts shall be
Registrable Securities. If the Investor desires to convert the amounts due
hereunder into Registrable Securities it shall so notify the Company in
writing within two (2) business days after the date on which such amounts are
first payable in cash and such amounts shall be so convertible (pursuant to
the mechanics set forth under Article IV of the Debentures) beginning on the
last day upon which the cash amount would otherwise be due in accordance with
the following sentence. Payments of cash pursuant hereto shall be made
within five (5) days after the end of each period that gives rise to such
obligation, provided that, if any such period extends for more than thirty
(30) days, interim payments shall be made for each such thirty (30) day
period.
d. PIGGY-BACK REGISTRATIONS. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
shall file with the SEC a Registration Statement relating to an offering for
its own account or the account of others under the Securities Act of any of
its equity securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable
in connection with stock option or other employee benefit plans), the Company
shall send to each Investor who is entitled to registration rights under this
Section 2(d) written notice of such determination and, if within fifteen (15)
days after the date of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Investor requests to be registered,
except that if, in connection with any underwritten public offering for the
account of the Company the managing underwriter(s) thereof shall impose a
limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion
hereunder as the underwriter shall permit. Any exclusion of Registrable
Securities shall be made pro rata among the Investors seeking to include
Registrable Securities, in proportion to the number of Registrable Securities
sought to be included by such Investors; PROVIDED, HOWEVER, that the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not entitled to
inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and PROVIDED,
FURTHER, HOWEVER, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in
the Registration Statement other than holders of securities entitled to
inclusion of their securities in such Registration Statement by reason of
demand registration rights. No right to registration of
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Registrable Securities under this Section 2(d) shall be construed to limit
any registration required under Section 2(a) hereof. If an offering in
connection with which an Investor is entitled to registration under this
Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall,
unless otherwise agreed by the Company, offer and sell such Registrable
Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. ELIGIBILITY FOR FORM S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of
the sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility
for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC the
Registration Statement required by Section 2(a), and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement effective pursuant to Rule 415
at all times until such date as is the earlier of (i) the date on which all
of the Registrable Securities have been sold and (ii) the date on which all
of the Registrable Securities (in the reasonable opinion of counsel to the
Initial Investors) may be immediately sold to the public without registration
pursuant to Rule 144(k) under the Securities Act (the "REGISTRATION PERIOD"),
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein and all documents incorporated by
reference therein) shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary
to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such
period, comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof as set forth in the Registration Statement.
In the event the number of shares available under a Registration Statement
filed pursuant to this Agreement is, for any three (3) consecutive trading
days (the last of such three (3) trading days being the "REGISTRATION TRIGGER
DATE"), insufficient to cover one hundred thirty-five percent (135%) of the
Registrable Securities issued or issuable upon
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conversion (without giving effect to any limitations on conversion contained
in Article IV.C of the Debentures) of the Debentures and upon exercise of the
Warrants, the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable),
or both, so as to cover two hundred percent (200%) of the Registrable
Securities issued or issuable (without giving effect to any limitations on
conversion contained in Article IV.C of the Debentures) as of the
Registration Trigger Date, in each case, as soon as practicable, but in any
event within fifteen (15) days after the Registration Trigger Date (based on
the market price then in effect of the Common Stock and other relevant
factors on which the Company reasonably elects to rely). The Company shall
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. In the event the Company
fails to obtain the effectiveness of any such Registration Statement within
sixty (60) days after a Registration Trigger Date, each Investor shall
thereafter have the option, exercisable in whole or in part at any time and
from time to time by delivery of a written notice to the Company (a
"REDEMPTION NOTICE"), to require the Company to purchase for cash, at an
amount per share equal to the Redemption Amount (as defined in Article VIII.B
of the Debentures), a portion of the Investor's Debentures such that the
total number of Registrable Securities included on the Registration Statement
for resale by such Investor exceeds 135% of the Registrable Securities issued
or issuable upon conversion (without giving effect to any limitations on
conversion contained in Article IV.C of the Debentures) of such Investor's
Debentures and exercise of such Investor's Warrants). If the Corporation
fails to redeem any of such shares within five (5) business days after its
receipt of a Redemption Notice, then such Investor shall be entitled to the
remedies provided in Article VIII.C of the Debentures.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with
the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and
each amendment or supplement thereto, and, in the case of the Registration
Statement referred to in Section 2(a), each letter written by or on behalf of
the Company to the SEC or the staff of the SEC (including, without
limitation, any request to accelerate the effectiveness of any Registration
Statement or amendment thereto), and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion, if any, thereof which contains information for which
the Company has sought confidential treatment), (ii) on the date of
effectiveness of the Registration Statement or any amendment thereto, a
notice stating that the Registration Statement or amendment has been declared
effective, and (iii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary
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to maintain the effectiveness thereof during the Registration Period, (iii)
take such other actions as may be necessary to maintain such registrations
and qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED, HOWEVER,
that the Company shall not be required in connection therewith or as a
condition thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a
general consent to service of process in any such jurisdiction, (d) provide
any undertakings that cause the Company undue expense or burden, or (e) make
any change in its organizational documents, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of
the Company and its stockholders.
e. In the event the Investors who hold a majority in interest of
the Registrable Securities being offered in an offering select underwriters
for the offering, the Company shall enter into and perform its obligations
under an underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution obligations,
with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included
in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and use its best efforts promptly to prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest practicable moment (including in each case by amending
or supplementing such Registration Statement) and to notify each Investor who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof (and if such Registration Statement is supplemented or
amended, deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated
by the Initial Investor to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time prior to their
filing with the SEC, and not file any document in a form to which such
counsel reasonably objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
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twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration
Statement.
j. At the request of any Investor, the Company shall furnish, on
the date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors and in form, scope and substances as is customarily given in an
underwritten public offering and (ii) in the case of an underwriting, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to
the Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Investors, and (iv) one firm of
attorneys retained by all such underwriters (collectively, the "INSPECTORS")
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "RECORDS"), as shall be
reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; PROVIDED, HOWEVER,
that each Inspector shall hold in confidence and shall not make any
disclosure (except to an Investor) of any Record or other information which
the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of
such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (b) the release of such Records is ordered
pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of
this or any other agreement. The Company shall not be required to disclose
any confidential information in such Records to any Inspector until and
unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. Nothing
herein shall be deemed to limit the Investors' ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and
regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, (iv) such information has been made generally available
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to the public other than by disclosure in violation of this or any other
agreement, or (v) such Investor consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor prior to making such disclosure, and allow the
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts to promptly either (i)
cause all the Registrable Securities covered by the Registration Statement to
be listed on the NYSE or the AMEX or another national securities exchange and
on each additional national securities exchange on which securities of the
same class or series issued by the Company are then listed, if any, if the
listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure the designation and quotation, of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
and, without limiting the generality of the foregoing, to arrange for or
maintain at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than
the effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable
such certificates to be in such denominations or amounts, as the case may be,
as the managing underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing underwriter
or underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement) an
opinion of such counsel in the form attached hereto as EXHIBIT 1.
p. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the
plan of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the
SEC.)
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r. The Company shall take all such other actions as any Investor
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
s. From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in any Registration Statement
under Section 2.a hereof or any amendment or supplement thereto under
Section 3.b hereof without the consent of the holders of a majority of the
Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor
shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least five (5) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless such Investor has
notified the Company in writing of such Investor's election to exclude all of
such Investor's Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented
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or amended prospectus contemplated by Section 3(f) or 3(g) and, if so
directed by the Company, such Investor shall deliver to the Company (at the
expense of the Company) or destroy (and deliver to the Company a certificate
of destruction) all copies in such Investor's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
e. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual
and customary form entered into by the Company and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, the fees and disbursements of counsel for the Company, the
fees and disbursements contemplated by Section 3(j) hereof, and the
reasonable fees and disbursements of one counsel selected by the Investors
pursuant to Section 2(b) hereof shall be borne by the Company. In addition,
the Company shall pay all of the Investors' costs and expenses (including
legal fees) incurred in connection with the enforcement of the rights of the
Investors hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees,
agents and each person who controls any Investor within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED
PERSON"), against any joint or several losses, claims, damages, liabilities
or expenses (collectively, together with actions, proceedings or inquiries
by any regulatory or self-regulatory organization, whether commenced or
threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material
fact required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements
therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the
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Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Investors and each other Indemnified
Person, promptly as such expenses are incurred and are due and payable, for
any reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of
or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by such Indemnified
Person expressly for use in the Registration Statement or any such amendment
thereof or supplement thereto; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld; and (iii) with respect to any preliminary prospectus, shall not
inure to the benefit of any Indemnified Person if the untrue statement or
omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or
supplemented, if such corrected prospectus was timely made available by the
Company pursuant to Section 3(c) hereof, and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a Violation and such Indemnified Person, notwithstanding
such advice, used it. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, its employees,
agents and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, and
any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the Securities Act or the
Exchange Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement;
and subject to Section 6(c) such Investor will reimburse any legal or other
expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; PROVIDED, HOWEVER, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; PROVIDED,
FURTHER, HOWEVER, that the Investor shall be liable under this Agreement
(including this Section 6(b) and Section 7) for only that amount as does not
exceed the
12
<PAGE>
net proceeds actually received by such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party,
as the case may be; PROVIDED, HOWEVER, that such indemnifying party shall not
be entitled to assume such defense and an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential conflicts of interest
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding or the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person or the Indemnified Party and the indemnifying party and any such
Indemnified Person or Indemnified Party reasonably determines that there may
be legal defenses available to such Indemnified Person or Indemnified Party
which are different from or in addition to those available to such
indemnifying party. The indemnifying party shall pay for only one separate
legal counsel for the Indemnified Persons or the Indemnified Parties, as
applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates (with the approval of the
Initial Investors if they hold Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
13
<PAGE>
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns shares of
Preferred Stock, Warrants or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the shares of Debentures, the Warrants or the Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (a) the name
and address of such transferee or assignee, and (b)
14
<PAGE>
the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws,
(iv) the transferee or assignee agrees in writing for the benefit of the
Company to be bound by all of the provisions contained herein, and (v) such
transfer shall have been made in accordance with the applicable requirements
of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company and Investors who
hold a majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Accent Software International Ltd.
100 S. Fifth Street
Suite 2500
Minneapolis, Minnesota 55402
Telecopy: (612) 337-1931
Attn: Chief Financial Officer
15
<PAGE>
with a copy to:
Accent Software International Ltd.
28 Pierre Koenig Street
Jerusalem 91530 Israel
Telecopy: (972) 26798177
Attn: Bob Trachtenberg
and
Rothgerber, Appel, Powers & Johnson LLP
1200 17th Street
Suite 3000
Denver, Colorado 80202-5839
Telecopy: (303) 623-9222
Attn: Herbert H. Davis, III
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois applicable to contracts made and to be
performed in the State of Illinois. The Company irrevocably consents to the
exclusive jurisdiction of the United States federal courts located in the State
of Illinois in any suit or proceeding based on or arising under this Agreement
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company, mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the
Investors' right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement, the Securities Purchase Agreement, the Debentures
and the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Securities Purchase Agreement, the Debentures and the
Warrants supersede all
16
<PAGE>
prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
or the Initial Investor pursuant to this Agreement shall be made by the
Investors or the Initial Investors holding a majority of the Registrable
Securities (determined as if all Debentures and Warrants then outstanding had
been converted into or exercised for Registrable Securities) held by all
Investors or Initial Investors, as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included on a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Investors, pro rata based on the number of shares of
Registrable Securities then held by such Investors. For the avoidance of doubt,
the number of Registrable Securities held by any Investor shall be determined as
if all shares of Preferred Stock then outstanding or then issuable upon exercise
of the Warrants were converted into or exercised for Registrable Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ACCENT SOFTWARE INTERNATIONAL LTD.
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
INITIAL INVESTOR:
CC INVESTMENTS, LDC
By: CSS Corporation Ltd., Corporate Secretary
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
18
<PAGE>
EXHIBIT 1
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: ACCENT SOFTWARE INTERNATIONAL LTD.
Ladies and Gentlemen:
We are counsel to Accent Software International Ltd., a corporation
organized under the laws of the State of Israel (the "COMPANY"), and we
understand that CC Investments, LDC (the "HOLDER") has purchased from the
Company 6% Convertible Debentures (the "PREFERRED STOCK") that are
convertible into shares of the Company's Ordinary Shares, nominal value NIS
.01 per share (the "COMMON STOCK"). Pursuant to a Registration Rights
Agreement, dated as of July __, 1997, by and among the Company and the
signatories thereto (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed
with the Holder, among other things, to register the Registrable Securities
(as that term is defined in the Registration Rights Agreement) under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), upon the terms
provided in the Registration Rights Agreement. In connection with the
Company's obligations under the Registration Rights Agreement, on _____ __,
1997, the Company filed a Registration Statement on Form S-___ (File No. 333-
_____________) (the "REGISTRATION STATEMENT") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities, which
names the Holder as a selling stockholder thereunder.
[Other customary introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
Very truly yours,
cc: [Name of Investor]
<PAGE>
EXHIBIT G
TO
SECURITIES PURCHASE
AGREEMENT
[Date of Closing]
To: Names of Purchasers
Ladies and Gentlemen:
We have acted as counsel to Accent Software International Ltd. an
Israeli corporation (the "COMPANY"), in connection with the Securities
Purchase Agreement, dated as of July ___, 1997, between you and the Company
(the "AGREEMENT") and the transactions contemplated therein. Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings assigned to such terms in the Agreement. The Agreement and the
Registration Rights Agreement are hereinafter referred to collectively as the
"TRANSACTION AGREEMENTS."
In so acting, we have examined the Transaction Agreements and the
Company's Memorandum of Incorporation and Articles of Association as in
effect on the date hereof (collectively, the "ORGANIZATIONAL DOCUMENTS"), and
we have examined and considered such corporate records, certificates and
matters of law as we have deemed appropriate as a basis for our opinions set
forth below.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of
the date hereof:
(1) The Company and its subsidiaries are corporations duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, have all requisite corporate power
and authority to conduct their business as described in the Company's Annual
Report on Form 10-K for the Company's fiscal year ended December 31, 1996,
and are duly qualified as foreign corporations to do business in each
jurisdiction in which the nature of the business conducted by them makes such
qualification necessary and in which the failure to so qualify would have a
Material Adverse Effect.
(2) (i) The Company has the requisite corporate power and authority to
enter into and perform the Transaction Agreements and to issue the
Debentures, the Conversion Shares upon conversion of the Debentures in
accordance with the terms of the Debentures, the Warrants and the
<PAGE>
Warrant Shares upon exercise of the Warrants, (ii) the execution and delivery
of the Transaction Agreements by the Company and the consummation by it of
the transactions contemplated thereby have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board or Directors or its stockholders is required, (iii) the
Transaction Agreements have been duly executed and delivered by the Company
and (iv) the Transaction Agreements constitute valid and binding obligations
of the Company enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors' rights and remedies
or by other equitable principles of general application and subject to the
limitation that the indemnification and contribution provisions of the
Registration Rights Agreement may be unenforceable as a matter of public
policy.
(3) The Conversion Shares and the Warrant Shares will be validly
issued, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the issue thereof. A number of shares of Common
Stock sufficient to meet the Company's obligations to issue Common Stock upon
full conversion of the Debentures and upon full exercise of the Warrants has
been duly reserved.
(4) As of the date hereof, the authorized capital stock of the Company
consists of ______________ shares of Common Stock, nominal value NIS .01 per
share, of which______ shares are issued and outstanding, and ______ shares
are reserved for issuance as follows: ______________________. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of the Company's Common Stock or preferred stock
are subject to preemptive rights or any other similar rights of the
stockholders of the Company pursuant to the Organizational Documents or by
statute or pursuant to any agreement by which the Company is bound of which
we are aware, and to our knowledge are not subject to any liens or
encumbrances. To our knowledge, except as disclosed in Schedule 3(c) to the
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or
any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are
no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement).
(5) Based upon your representations, warranties and covenants set forth
in the Agreement, the Securities may be issued to you without registration
under the 1933 Act.
(6) Other than necessary approvals that have been obtained, no
authorization, approval or consent of any court, governmental body,
regulatory agency, self-regulatory organization or stock exchange or market,
or the stockholders of the Company, or, to our knowledge, any third party is
required to be obtained by the Company for the issuance and sale of the
Securities as contemplated by the Transaction Agreements, the Debentures and
the Warrants or the consummation of the other transactions contemplated
thereby.
2
<PAGE>
(7) To our knowledge, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any
governmental agency or self-regulatory organization pending or threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a material adverse effect
on the property, business, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries taken as a whole
or which would adversely affect the validity or enforceability of or the
authority or ability of the Company to perform its obligations under the
Transaction Agreements, the Debentures and the Warrants.
(8) The Company is not in violation of any term of its Organizational
Documents. The Organizational Documents of the Company are not in violation
of the any provisions of Israeli law. The execution, delivery and
performance of and compliance with the terms of the Transaction Agreements
and the issuance of the Debentures and the Warrants (and the Common Stock
issuable upon conversion or exercise thereof, as the case may be), do not
violate any provision of the Organizational Documents, or any provision of
any applicable foreign or United States federal or state law, rule or
regulation. The execution, delivery and performance of and compliance with
the Transaction Agreements and the issuance of the Debentures and the
Warrants (and the Common Stock issuable upon conversion or exercise thereof,
as the case may be) have not resulted and will not result in any violation
of, or constitute a default (or give rise to any right of termination,
cancellation or acceleration) under (or an event which with the passage of
time or the giving of notice or both would constitute a default under), or
result in the creation of any lien, security interest or encumbrance on the
assets or properties of the Company pursuant to any contract, agreement,
instrument, judgment or decree binding upon the Company which, individually
or in the aggregate, would have a Material Adverse Effect.
(9) All approvals necessary for you (or any other holder of Debentures
or Warrants) to acquire the Debentures, Warrants, the Conversion Shares and
Warrant Shares under the laws of the State of Israel have been obtained.
These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for
any other purpose or by an other person, except that the opinions expressed
in paragraphs (3) and (5) above may be relied upon by__________ as Transfer
Agent.
The opinions expressed herein are subject to the following assumptions,
limitations, qualifications and exceptions:
(a) We have assumed the genuineness of all signatures, the
authenticity of all Transaction Agreements submitted to us as originals, the
conformity with originals of all Transaction Agreements submitted to us as
copies, the authenticity of certificates of public officials and the due
authorization, execution and delivery of all Transaction Agreements (except
the due authorization, execution and delivery by the Company of the
Transaction Agreements).
(b) We have assumed that each of the parties to the Transaction
Agreements other than the Company (the "OTHER PARTIES") has the legal right,
capacity and power to enter into, enforce
3
<PAGE>
and perform all of its obligations under the Transaction Agreements.
Furthermore, we have assumed the due authorization by each of the Other
Parties of all requisite action and the due execution and delivery of the
Transaction Agreements by each of the Other Parties, and that the Transaction
Agreements are valid and binding upon each of the other Parties and are
enforceable against each Other Party in accordance with their terms.
[OTHER CUSTOMARY AND APPROPRIATE ASSUMPTIONS TO BE ADDED]
In the process of our review of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 (the "Form 10-K"), and any of the
other reports filed by the Company pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, since the date of the filing of
the Form 10-K, although we have not engaged in any independent investigation,
and do not assume any responsibility for the accuracy or completeness of the
information contained therein, nothing has come to our attention that would
lead us to believe that any of such reports contains any untrue statement of
a material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of circumstances under
which they were made, not misleading, as of its filing date.
Our examination of law relevant to the matters covered by this opinion
is limited to the laws of the State of ________, the federal United States
laws and the blue sky laws of the states comprising the United States, and we
express no opinion as to the effect on the matters covered by this opinion of
the laws of any other jurisdiction. In furnishing the opinion regarding the
valid existence and good standing of the Company and its subsidiaries, we
have relied solely upon good standing certificates issued by the
____________________ of the _________________ on ___________, 1997.
This opinion in given as of the date hereof and we assume no obligation,
to update or supplement this opinion to reflect any facts or circumstances
which may hereafter come to our attention or any changes in laws which may
hereafter occur.
Very truly yours,
4
<PAGE>
ACCENT SOFTWARE INTERNATIONAL, LTD.
July 31, 1997
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attn: Donna Ansbro
Dear Ms. Ansbro:
Reference is made to that certain Securities Purchase Agreement, dated July
__, 1997, by and among Accent Software International Ltd., an Israeli
corporation (the "Company") and the other signatories thereto (each, a "Holder")
pursuant to which the Company is issuing to the Holders 6% Convertible
Debentures in the aggregate principal amount of $2,000,000 ("Debentures") and
warrants to purchase an aggregate of 300,000 ordinary shares, nominal value NIS
.01 per share of the Company ("Common Stock"). The Debentures and shares of
Preferred Stock which may be issued in exchange for such Debentures are
convertible into shares of Common Stock of the Company (the "Conversion Shares")
and the Warrants are exercisable for shares of Common Stock (the "Warrant
Shares"). This letter shall serve as our irrevocable authorization and
direction to you (provided that you are the transfer agent of the Company at
such time) to issue Conversion Shares to or upon the order of the Holders from
time to time upon (i) surrender to you of a properly completed and duly executed
Conversion Notice, in the form attached hereto as Exhibit 1, which has been
properly agreed and acknowledged by the Company as indicated by the signature of
a duly authorized officer of the Company thereon and (ii) the Debenture or
Warrants, as the case may be, being converted or exercised (or an
indemnification undertaking with respect to such Debentures or Warrants in the
case of their loss, theft or destruction). So long as you have previously
received: (i) written confirmation from counsel to the Company (which counsel
may be in-house legal counsel) that a registration statement covering resales of
the Conversion Shares or Warrant Shares has been declared effective by the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
and (ii) a copy of such registration statement, certificates representing the
Conversion Shares or Warrant Shares shall not bear any legend restricting
transfer of the Conversion Shares or Warrant Shares and should not be subject to
any stop-transfer restriction. However, if you have not previously received (i)
written confirmation from counsel to the Company (which counsel may be in-house
legal counsel) that a registration statement covering resales of the Conversion
Shares or Warrant Shares has been declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as
<PAGE>
amended, and (ii) a copy of such registration statement, then the
certificates representing the Conversion Shares and Warrant Shares shall bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT."
provided, however, that the Company may from time to time notify you to place
stop-transfer restrictions on the certificates for the Conversion Shares and
Warrant Shares in the event a registration statement covering the Conversation
Shares and Warrant Shares is subject to amendment for events then current.
Please be advised that the Holders are relying upon this letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
each Holder is a third party beneficiary to these instructions.
2
<PAGE>
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (612) 337-1890.
Very truly yours,
ACCENT SOFTWARE INTERNATIONAL LTD.
By:
-----------------------------------
Name:
-------------------------------
Title:
------------------------------
Acknowledged:
[TRANSFER AGENT]
By:
-----------------------------------
Name:
-------------------------------
Title:
------------------------------
Date:
------------------------------
Enclosure
cc: [HOLDERS]
3
