Exhibit 10.10A
AMENDMENT NUMBER ONE
TO SECURITIES ISSUANCE AGREEMENT
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This AMENDMENT NUMBER ONE TO SECURITIES ISSUANCE AGREEMENT (the
"Amendment") is entered into as of January 29, 1999, between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of business
located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, and BANYAN SYSTEMS INCORPORATED, a Massachusetts corporation (the
"Company") with its chief executive office located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Recitals
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A. Foothill and the Company have entered into that certain Loan and Security
Agreement, dated as of September 4, 1997, (as amended, restated
supplemented, or otherwise modified from time to time, the "Loan
Agreement");
B. Foothill and the Company have entered into that certain Securities Issuance
Agreement, dated as of September 4, 1997 (as amended, restated supplemented,
or otherwise modified from time to time, the "Agreement");
C. Foothill and the Company desire to amend the Agreement as set forth in this
Amendment; and
D. All capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Amendments to the Agreement.
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Section 2 of the Agreement hereby is amended and restated in its
entirety to read as follows, effective as of September 3, 1998:
2. Issuance of Warrants.
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a. On September 4, 1997, the Company issued to Foothill a warrant to purchase
Seventy Five Thousand (75,000) shares of Common Stock (as adjusted from time to
time pursuant to Section 3 hereof, the 1997 Warrant Shares") at an exercise
price of $2.28 125 per share.
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b. As of September 4, 1998, the Company has issued to Foothill a warrant to
purchase Fifty Thousand (50,000) shares of Common Stock (as adjusted from time
to time pursuant to Section 3 hereof, the " 1998 Warrant Shares") at a per share
exercise price equal to the average of the closing sale prices of a share of the
Common Stock on the last twenty (20) trading days prior to September 4, 1998,
reported on NASDAQ (as defined in Section 3(g) hereof), as reported in The Wall
Street Journal.
c. On September 4, 1999, the Company shall issue to Foothill a warrant to
purchase Twenty-Five Thousand (25,000) shares of Common Stock (as adjusted from
time to time pursuant to Section 3 hereof, the " 1999 Warrant Shares") at a per
share exercise price equal to the average of the closing prices of a share of
the Common Stock of the Company on the last twenty (20) trading days prior to
September 4, 1999, reported on the Exchange (as defined in Section 3(g) hereof)
on which the Common Stock of the Company is then traded, as reported in The Wall
Street Journal, or if such Common Stock is not then traded on such an Exchange,
the fair market value (as defined in Section 3(g) hereof) of a share of the
Common Stock of the Company as of September 4, 1999, determined in accordance
with Section 3(g) hereof, treating September 4, 1999, as the "Determination
Date" for purposes of such determination.
The 1997 Warrant Shares, the 1998 Warrant Shares, the 1999 Warrant
Shares, each as adjusted from time to time pursuant to Section 3 herein, shall
be referred to, collectively, as "Warrant Shares" or "Shares". In each case
above, such exercise price may be adjusted from time to time pursuant to Section
3 hereof, (the "Warrant Price"), and such warrant shall be in the form of
Exhibit W-1 attached hereto and made a part hereof (each, a "Warrant" and
collectively, the "Warrants"). Any provisions to the contrary in this Section 2
notwithstanding, the Company is under no obligation to issue Warrants
exercisable for more than an aggregate of 150,000 Shares, as such number may be
adjusted from time to time pursuant to Section 3 hereof, pursuant to Warrants to
be issued on the date hereof and such other dates as above stated.
3. Representations and Warranties.
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The Company hereby represents and warrants to Foothill that (a) the
execution, delivery, and performance of this Amendment is within its corporate
powers, has been duly authorized by all necessary corporate action, and is not
in any material respect in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected, and (b) this Amendment constitutes the Company's valid
and binding obligation, enforceable against the Company in accordance with its
terms.
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4. Conditions Precedent to the Effectiveness of this Amendment.
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The effectiveness of this Amendment is subject to the fulfillment, to
the satisfaction of Foothill and its counsel, of each of the following
conditions:
a. Foothill shall have received a certificate from the Assistant Clerk of the
Company attesting to the incumbency and signatures of authorized officers of the
Company; and
b. No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against the Company, Foothill, or any of their
Affiliates.
5. Effect on Agreement.
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The Agreement, as amended hereby, shall be and remain in full force
and effect in accordance with its respective terms and hereby is ratified and
confirmed in such respects. The execution, delivery, and performance of this
Amendment shall not operate as a waiver of or, except as expressly set forth
herein, as an amendment, of any right, power, or remedy of Foothill under the
Agreement, as in effect prior to the date hereof.
6. Miscellaneous.
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a. Upon the effectiveness of this Amendment, each reference in the Agreement
to "this Agreement," "hereunder," "herein," "hereof," or words of like import
referring to the Agreement shall mean and refer to the Securities Issuance
Agreement referred to in Recital B to this Amendment as modified and amended by
this Amendment.
b. This Amendment shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
c. This Amendment may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment by signing any such counterpart.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title Vice President
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BANYAN SYSTEMS INCORPORATED,
a Massachusetts corporation
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Title V.P. & CFO
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
BANYAN SYSTEMS INCORPORATED
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WARRANT TO PURCHASE 50,000 SHARES (subject
to adjustment) OF COMMON STOCK (this "Warrant")
BANYAN SYSTEMS INCORPORATED, a Massachusetts corporation (the
"Company"), hereby certifies that, for value received, Foothill Capital
Corporation, a California corporation ("Foothill"), or registered assigns, is
the registered holder of warrants (the "Warrants") to subscribe for and purchase
Fifty Thousand (50,000) shares of the fully paid and nonassessable Common Stock
(as adjusted pursuant to Section 4 hereof, the `Shares") of the Company, at the
price of $5.0296875, or as adjusted under the Securities Issuance Agreement (as
defined below) per share (such price and such other price as shall result, from
time to time, from the adjustments specified in Section 4 hereof is herein
referred to as the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, (a) the term "Common
Stock' shall mean the Company's presently authorized Common Stock, $.01 par
value per share, and any stock into or for which such Common Stock may hereafter
be converted or exchanged, and (b) the term "Other Warrants" shall mean any
warrant issued upon transfer or partial exercise of this Warrant. The term
"Warrant" as used herein shall be deemed to include Other Warrants unless the
context hereof or thereof clearly requires otherwise. This Warrant is issued
pursuant to that certain Securities Issuance Agreement dated as of September 4,
1997 (as amended from time to time, the "Securities Issuance Agreement') between
the Company and Foothill, and this Warrant or the holder hereof is entitled to
the benefits and subject to the terms and conditions stated therein.
1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time--from the date of issuance
of this Warrant (the "Date of Grant") through September 4, 2008.
2. Method of Exercise, Payment--, Issuance-- of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
the surrender of this Warrant (with the notice of exercise form attached hereto
as Exhibit A duly executed) at the principal office of the Company and by the
payment to the Company of an amount equal
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to the then applicable Warrant Price multiplied by the number of Shares then
being purchased (in same-day funds, by certified bank check or wire transfer).
The person or persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the shares represented thereby (and such shares shall
be deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this Warrant is exercised. In the event of any exercise
of the rights represented by this Warrant, certificates for die shares of stock
so purchased shall be delivered to the holder hereof as soon as possible and in
any event within thirty (30) days after such exercise (upon payment of any
transfer tax required by law to be paid by the holder of this Warrant) and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible and in any event within such thirty (30) day period.
3. Stock Fully-Paid: Reservation of Shares. All Shares that may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens, charges, and pre-emptive rights with respect to
the issue thereof. The Company shall pay all transfer taxes, if any,
attributable to the issuance of Shares upon the exercise of the Warrants (other
than those required by law to be paid by the holder of this Warrant). During the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized, and reserved for the purpose of the
issue upon exercise of the purchase right]s evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows;
a. Reclassification or Merger. In case of any reclassification, change or
conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon
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exercise of this Warrant) (a "Merger"), or in case of any sale of all or
substantially all of the assets of the Company (an `Asset Sale"), the Company,
or such successor or purchasing corporation, as the case may be, shall duly
execute and deliver to the holder of this Warrant a new Warrant (in form and
substance reasonably satisfactory to the holder of this Warrant), so that the
holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Common Stock theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change or
merger by a holder of the number of shares of Common Stock then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassifications. changes, mergers and transfers. Notwithstanding
the foregoing, at the option of the Company, the holder hereof shall exercise
(or, in the sole discretion of the holder hereof, surrender) this Warrant upon
any Merger or Asset Sale which is entered into by the Company with an unrelated
third party on an arm's length basis.
b. Subdivision or Combination of Shares. If the Company at any time while
this Warrant remains outstanding and unexpired shall subdivide or combine its
outstanding shares of Common Stock, the Warrant Price shall be proportionately
decreased in the case of a subdivision or increased in the case of a
combination, effective at the close of business on the date the subdivision or
combination becomes effective.
c. Stock Dividends and Other Distributions. If the Company at any time while
this Warrant is outstanding and unexpired shall (i) pay a dividend with respect
to Common Stock payable in Common Stock, or ii) make any other distribution with
respect to Common Stock (except any distribution specifically provided for in
the foregoing sub-paragraphs (a) and (b)) of Common Stock, then the Warrant
Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to `such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, mid (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution.
d. Special Distributions. In case the Company shall fix a record date for the
making of a distribution to all holders of shares of Common Stock (including any
such distribution made in connection with a consolidation or merger in which
the Company is the surviving corporation) or evidences of indebtedness or assets
(other than dividends and distributions referred to in subparagraphs (b) and (c)
above and other than cash dividends) or of subscription rights, options,
warrants, or exchangeable or convertible securities containing the right to
subscribe for or purchase shares of any class of equity securities of the
Company, the Warrant Price to be in effect on and after such record date shall
be adjusted by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the fair market
value per share of Common Stock on such record date, less the fair value (as
determined by the Board of Directors of the Company in good faith as set forth
in a duly adopted board resolution certified by the Company's Clerk or Assistant
Clerk) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights, options, warrants, or exchangeable
or convertible securities applicable to one (1) share of the Common Stock
outstanding as of such record date, and (ii) the denominator of which
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shall be such fair market value per share of Common Stock. Such adjustment shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Warrant Price shall again be adjusted to
be the Warrant Price which would then be in effect if such record date had not
been fixed, but such subsequent adjustment shall not affect the number of Shares
issued upon any exercise of Warrants prior to the date such subsequent
adjustment was made.
e. Other Issuances of Securities. In case the Company or any subsidiary shall
issue shares of Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common. Stock (excluding (i) shares, rights, options, warrants, or
convertible or exchangeable securities described in subparagraphs (f) or (g) of
Section 8 of the Securities Issuance Agreement or issued in any of the
transactions described in subparagraphs (b), (c) or (d) above, (ii) shares
issued upon the exercise of such rights, options or warrants or upon conversion
or exchange of such convertible or exchangeable, securities, (iii) the Warrants
and any shares issued upon exercise thereof, (iv) shares of Common Stock, or
other securities convertible or exercisable therefor, issued to employees,
directors, consultants or advisors to the Company (for serving in such
capacities) under any plan or agreement, provided that the annual aggregate of
such shares or other securities issued at below fair market value does not
exceed 500,000 shares of Common Stock, on a fully converted and exercised basis
(it being understood that the limitation contained in this proviso does not
apply to shares or other securities issued at or above fair market value), and
(y) shares of Common Stock, or other securities convertible into or
exchangeable, or exercisable therefor, issued to employees, directors,
consultants, or advisors to the Company upon the exercise of any right, option,
warrant, or conversion or exchange feature of any security, to the extent that
such right, option, warrant, or convertible or exchangeable security was issued
prior to September 4, 1997 to any such employee, director, consultant, or
advisor (for serving in any such capacity) under any plan or agreement that
existed prior to September 4, 1997), at a price per share of Common Stock
(determined in the case of such rights, options, warrants, or convertible or
exchangeable securities by dividing (x) the total amount receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock covered by
such rights, options, warrants, or convertible or exchangeable securities) lower
than the fair market value per share of Common Stock on the date the Company
fixes the offering price of such shares, rights, options, warrants, or
convertible or exchangeable securities, then the Warrant Price shall be adjusted
so that it shall equal the price determined by multiplying the Warrant Price in
effect immediately prior thereto by a fraction (i) the numerator of which shall
be the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such sale and issuance plus (B) the number of shares of Common Stock
which the aggregate. consideration. received (determined as provided below) for
such sale or issuance would purchase at such fair market value per share, and
(ii) the denominator of which shall be the total number of shares of Common.
Stock outstanding immediately after such sale and issuance. Such adjustment
shall be made successively whenever such an issuance is made. For the purposes
of such adjustment, the maximum number of shares of Common,
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Stock which the holder of any such rights, options, warrants or convertible or
exchangeable securities shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of such sale and issuance and
the consideration received by the Company therefor shall be deemed to be the
aggregate consideration received by the Company for such rights, options,
warrants, or convertible or exchangeable securities, plus the minimum aggregate
consideration or premium stated in such rights, options, warrants, or
convertible or exchangeable securities to be paid for the shares of Common Stock
covered thereby (without regard to any provision contained therein for a
subsequent adjustment of such consideration or premium). In case the Company
shall sell and issue shares of Common Stock, or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then in determining the
price per share of Common Stock and the consideration received by the Company
for purposes of the first sentence, of this subparagraph (e), the 13oard of
Directors of the Company shall determine, in good faith, the fair value of said
property, and such determination shall be described in a duly adopted board
resolution certified by the Company's Clerk or Assistant Clerk. In case the
Company shall sell and issue rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock together with one or more other securities as a part of a unit
at a price per unit, then in determining the price per share of Common Stock and
the consideration received by the Company for purposes of the first sentence of
this subparagraph (e), the Board of Directors of the Company shall determine, in
good faith, which determination shall be described in a duly adopted board
resolution certified by the Company's Clerk or Assistant Clerk, the fair value.
of the rights, options, warrants, or convertible or exchangeable securities then
being sold as part of such unit. Such adjustment shall be made successively
whenever such an issuance occurs, and in the event that such rights, options,
warrants, or convertible or exchangeable securities expire or cease to be
convertible or exchangeable before they are exercised, converted, or exchanged
(as the case may be), then the Warrant Price shall again be adjusted to the
Warrant Price that would then be in effect if such sale and issuance had not
occurred, but such subsequent adjustment shall not affect the number of Shares
issued upon any exercise of Warrants prior to the date such subsequent
adjustment is made.
f. Adjustment of Number of Shares. Upon each adjustment in the Warrant Price,
the number of Shares of Common Stock purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Warrant Price by
a fraction, the numerator of which shall be the Warrant Price immediately prior
to such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter; provided that any adjustments pursuant to Section 4(a)
shall be made in accordance with the terms of such Section rather than the terms
of this Section 4(f).
g. Determination of Fair Market Value. For purposes of this Section 4, "fair
market value" of a share of Common Stock as of a particular date (the
"Determination Date") shall mean (i) if shares of Common Stock are traded on a
national securities exchange (an "Exchange"), the average of the closing prices
of a share of the
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Common Stock of the Company on the last twenty (20) trading days prior to the
Determination Date reported on such Exchange as reported in The Wall Street
Journal; or (ii) if shares of Common Stock are not traded on an Exchange but
trade in the over-the-counter market and such shares are quoted on the Nasdaq
National Market System or the NASDAQ Small-Cap Market (either, "NASDAQ"), (A)
the average of the last sale prices reported on NASDAQ or (B) if such shares are
an issue for which last sale prices are not reported on NASDAQ, the average of
the closing bid and ask prices, in each case on the last twenty (20) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date as reported
in The Wall Street Journal; or (iii) if no price can be determined on the basis
of the above methods of valuation, then the judgment of valuation shall be
determined in good faith by the Board of Directors of the Company, which
determination shall be described in a duly adopted board resolution certified by
the Company's Clerk or Assistant Clerk; provided, however, that solely for the
purpose of determining whether a below "air market value" issuance has occurred
that could result in adjustments to the Warrant Price pursuant to Section4(e)
(and expressly not with respect to calculating the adjustments as could result
therefrom), such fair market value shall be the lesser of (x) the fair market
value determined in accordance with the foregoing paragraph, and (y) the fair
market value as would be determined in accordance with the foregoing paragraph
if a standard of one (1) trading day rather than the average of twenty (20)
trading days were the basis for the calculations therein.
5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares
purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value
(as determined in accordance with Section 4(g) above) of a share of Common Stock
on the date of exercise.
7. Compliance with Securities Act, Disposition of Warrant or Shares of Common
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Stock.
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a. Compliance with Securities Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant, the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that such holder will not
offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock
to be issued upon exercise hereof except under circumstances which will not
result in a violation of the Securities Act of 1933,.as amended (die "Act").
Upon exercise of this
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Warrant, the holder hereof shall confirm in writing, by executing the form
attached as Schedule 1 to Exhibit A hereto, that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. This Warrant and all shares of Common Stock issued upon
exercise of this Warrant (unless registered under the Act) shall be stamped or
imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
NO SALE OR DISPOSITION MAYBE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM
THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH
THESE SECURITIES WERE ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to
reach an informed and knowledgeable decision to acquire this Warrant. The
holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with,
any "distribution" thereof for purposes of the Act.
(2) The holder understands that this Warrant and the Shares have not been
registered under the Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
the holder's investment intent as expressed herein. In this connection, the
holder understands that, in the view of the Securities and Exchange
Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the holder's representation was predicated solely upon a
present intention to hold the Warrant and the Shares for the minimum
capital gains period specified under applicable tax laws, for a deferred
sale, for or until an increase or decrease in the market price, of the
Warrant and the Shares, or for a period of one (1) year or any other fixed
period in the future.
(3) The holder further understands that this Warrant and the Shares must be
held' indefinitely unless subsequently registered under the Act and any
applicable state securities laws. or unless exemptions from registration
are otherwise available.
(4) The holder is aware of the provisions of Rule 144 and 144A, promulgated
under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an
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affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company,
the resale occurring not less than one (1) year after the party has
purchased and paid for the securities to be sold; the sale being made
through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under
the Securities Exchange Act of 1934, as amended) and the amount of
securities being sold during any three-month period not exceeding the
specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant and the Shares there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the
Company may not be satisfying the current public information requirements
of Rule 144 and 144A, and that, in such event, the holder may be precluded
from selling this Warrant and the Shares under Rule 144 and 144A even if
the one-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the requirements of
Rule 144 and 144A are not satisfied, registration under the Act, compliance
with Regulation A, or some other registration exemption will be required;
and that, notwithstanding the fact that Rule 144 and 144A is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden
of proof in establishing that an exemption from registration is available
for such offers or sales, and that such persons and their respective
brokers who participate in such transactions do so at their own risk.
b. Disposition of Warrant or Shares. With respect to any offer, sale or other
disposition of this Warrant, or any Shares acquired pursuant to the exercise of
this Warrant prior to registration of such Warrant or Shares, the holder hereof
and each subsequent holder of this Warrant agrees to give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a
written opinion of such holder's counsel (which shall be reasonably acceptable
to the Company and knowledgeable regarding securities matters, including without
limitation ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP), if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such Shares and
indicating whether or not under the Act certificates for this Warrant or such
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
applicable law. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such holder that such holder may sell or otherwise dispose of this
Warrant or such Shares, all in accordance with the terms of the notice delivered
to the Company. If a determination has been made pursuant to this subsection (b)
that the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made. The foregoing notwithstanding, this Warrant or such
Shares may, as to such federal laws, be offered, sold or otherwise disposed of
in
12
accordance with Rule 144 and 144A under the Act, provided that the Company shall
have been furnished with such information as the Company and its counsel may
reasonably request to provide a reasonable assurance that the provisions of Rule
144 and 144A have been satisfied. Each certificate representing this Warrant or
the Shares thus transferred (except a transfer pursuant to Rule 144) shall bear
a legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent or,
if acting as its own transfer agent, the Company may stop transfer on its
corporate books, in connection with such restrictions. Notwithstanding any other
provision herein to the contrary, this Warrant and/or any Shares acquired
pursuant to the exercise of this Warrant may be sold or otherwise transferred by
Foothill to any person or entity in compliance with applicable law, but if and
to the extent that any such sale or transfer of such Warrant or Shares is to a
person or entity that is not also a purchaser or transferee of all or part of
Foothill's rights and obligations under the Loan Agreement (as defined in
Section 10.4 below), such sale or transfer to such person or entity shall be
free of, and shall not carry with it, the put rights set forth in Section 10.4
hereof.
8. Rights as Shareholders: Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to shareholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein. The foregoing notwithstanding, the Company will use its reasonable best
efforts to transmit to the holder of this Warrant such information, documents
and reports as are generally distributed to the holders of any class or series
of the securities of the Company concurrently with the distribution thereof to
the shareholders.
9. Registration Rights. The holder of this Warrant shall be entitled to
registration rights as set forth in the Securities Issuance Agreement.
10. Additional Rights.
10.1 Mergers. In the event that the Company undertakes to (i) sell,
lease, exchange, convey or otherwise dispose of all or substantially all of its
property or business, or (ii) merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary of the Company), or effect any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of, the Company will use its reasonable best efforts to provide at
least thirty (30) days notice prior to the proposed effective date of the
transaction of the terms and conditions of the proposed transaction. The
foregoing notwithstanding, the provisions of this Section 10. 1 shall not
require the Company to take any action which would, in the good faith
determination of the Company after
13
consultation with counsel, constitute a violation of, or create liability for
the Company under, Federal or state securities laws or the rules of any
securities exchange or NASDAQ oil which the Company is then listed.
10.2 Right to Convert Warrant into Common Stock: Net Issuance.
a. Right to Convert. In addition to and without limiting the rights of the
holder under the terms of this Warrant, the holder shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 10.2 at any time or from time to
time during the term of this Warrant. Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the "Converted
Warrant Shares"), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that number
of shares of fully paid and non-assessable Common Stock equal to the quotient
obtained by dividing (i) the value of this Warrant (or the specified portion
hereof) on the Conversion Date (as defined in subsection (b) hereof), which
value shall be equal to (A) the aggregate fair market value of the Converted
Warrant Shares issuable upon exercise of this Warrant (or the specified portion
hereof) on the Conversion Date less (B) the aggregate Warrant Price of the
Converted Warrant Shares immediately prior to the exercise of the Conversion
Right by (ii) the fair market value of one share of Common Stock on the
Conversion Date.
Expressed as a formula, such conversion shall be computed as follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock that shall be
issued to holder
Y = the fair market value (FMV) of one share of Common
Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant
Shares)
B = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of Section 5 of the
Securit3es Issuance Agreement, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
14
b. Method of Exercise. The Conversion Right may be exercised by the holder by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date'). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shams remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date.
c. Determination of Fair Market Value. For purposes of this Section 10.2, "fair
market value" of a share of Common Stock shall have the meaning set forth in
Section 4(g) above.
10.4 Put Rights.
----------
a. Upon and after a Put Triggering Event (as defined below), each holder of
Warrants or Shares (the Warrants and the Shares are referred to herein,
collectively, as the "Securities") shall have the right, in such holder's sole
discretion, to require the Company to repurchase ("put") such holder's
Securities at a purchase price of $6.0296875 per share (the "Put Purchase
Price") of Common Stock purchased or purchasable by such holder upon exercise of
Warrant(s) (less any Warrant Price payable with respect to any then outstanding
Warrants). A "Put Triggering Event" means any of the following events: (i) an
Event of Default as defined under the Loan Agreement (to the extent any
applicable cure period has expired; and, provided that, to the extent that any
Event of Default is permanently waived by Foothill, any Put Triggering Event
premised on such permanently waived Event of Default shall cease, and, to the
extent that any Event of Default is temporarily waived by Foothill, any Put
Triggering Event premised on such temporarily waived Event of Default shall be
suspended and postponed for the duration of such waiver); (ii) the maturity of
the Obligations (whether scheduled, accelerated or otherwise); (iii) repayment
in full of the Obligations in connection with a refinancing of the Obligations
by the Company with any party other than Foothill; (iv) the sale or other
disposition of all or substantially all of the assets of the Company, or (y) the
consummation by the Company of any merger, consolidation or other reorganization
(other than as permitted under the Loan Agreement or as otherwise permitted by
Foothill pursuant to a written waiver). For the purposes of this Warrant, the
terms "Loan Agreement" and "Obligations' shall have the same meanings for such
terms as are defined (or incorporated by reference) in the Securities Issuance
Agreement.
b. Such put right shall be exercisable by written notice (the "Put Notice")
given to the Company. The Company shall effect the repurchase of the Securities
pursuant to the Put Notice by paying the purchase price therefor in cash to the
holder not more than thirty (30) days after receipt by the Company of the Put
Notice, but. only as and to the extent the Company has funds legally available
therefore; and at such
15
time the holder shall deliver to the Company the Securities to be repurchased,
properly endorsed for transfer. Anything herein to the contrary notwithstanding,
if the put right provided for herein has not been exercise by the date that is
two years after the earlier of (y) the date that the Loan Agreement is
terminated and Foothill has no further obligations thereunder, and (z) the date
that all Obligations of the Company to Foothill have become due and payable,
whether in accordance with their terms, by reason of acceleration, or otherwise,
and if Foothill has not been stayed or enjoined from exercising such put right
(whether by reason of the provisions of the United States Bankruptcy Code or
otherwise), then such put right shall expire at the close of business on such
date first referred to in this sentence.
c. Upon each adjustment in the Warrant Price pursuant to Section 4 hereof, (i)
with respect to the unexercised portion of this Warrant. the Put Purchase Price
shall be adjusted as if such Put Purchase Price were subject to adjustment by
the terms of Section 4 in the same manner as the Warrant Price, and (ii) with
respect to Shares after exercise of all or the applicable portion of the
Warrant, the Put Purchase Price shall be adjusted as if such Put Purchase Price
were subject to adjustment by the terms of Sections 4(a) and 4(b) (and not
Sections 4(c) though (e)) in the same manner as the Warrant Price.
10.5 Call Rights.
-----------
a. At any time, the Company shall have the right, in its sole discretion, to
repurchase ("call") the Shares, if and to the extent then owned by Foothill (and
not its assigns or transferees, except for a private assignee or transferee that
continues to have put rights and registration rights hereunder), and the
Warrant, regardless of ownership thereof, at a purchase price of $8.0296875 per
share (the "Call Purchase Price") of Common Stock purchased or purchasable upon
exercise of the Warrant (less any Warrant Price payable with respect to any
portion of the Warrant then outstanding). Such call right shall be exercisable
by written notice (the "Call Notice") given to Foothill (and any applicable
assigns). The Company shall effect the repurchase of the all of the Securities
(as defined in the Securities Purchase Agreement) pursuant to the Call Notice by
paying the purchase price therefor in cash to Foothill (and its assigns, as
applicable) not less than ten (10) nor more than thirty (30) days after delivery
by the Company of the Call Notice; and at such time each holder shall deliver to
the Company the Securities to be repurchased, properly endorsed for transfer.
Without limiting the generality of the foregoing provisions of this paragraph,
once any Shares have been sold or transferred pursuant to Rule 144 promulgated
under the Act, or pursuant to an effective registration statement under the Act,
the Company shall have no further call rights with respect to such Shares. Any
certificate representing Shares subject to the call right provided for herein
shall bear the following legend: "THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A
CALL RIGHT IN FAVOR OF THE ISSUER HEREOF PURSUANT TO A SECURITIES ISSUANCE
AGREEMENT, A COPY OF WHICH IS AVA11ABLE FOR INSPECTION BY WRITTEN REQUEST TO THE
COMPANY FROM ANY HOLDER OF THESE SHARES." If the Shares evidenced by any
certificate [BE-AXING] the foregoing legend cease to be subject to the call
right provided for herein, the Company upon request and upon presentation by the
holder thereof of the certificate bearing such legend will reissue a certificate
for such Shares without such a legend.
16
b. Upon each adjustment in the Warrant Price pursuant to Section 4 hereof, (i)
with respect to the unexercised portion `of this Warrant, the Call Purchase
Price shall be adjusted as if such Call Purchase Price were subject to
adjustment by the terms of Section 4 in the same manner as the Warrant Price,
and (ii) with respect to Shares after exercise of all or the applicable portion
of the Warrant, the Call Purchase Price shall be adjusted as if such Call
Purchase Price were subject to adjustment by the terms of Sections 4(a) and 4(b)
(and not Sections 4(c) though (e)) in the same manner as the Warrant Price.
11. Representations and Warranties. The Company represents and warrants to the
------------------------------
holder of this Warrant as follows:
a. This Warrant has been duly authorized and executed by the Company and is a
valid and binding obligation of the Company enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and the rules of law or principles at equity governing
specific performance, injunctive relief and other equitable remedies;
b. The Shares have been duly authorized and reserved for issuance by the
Company and, when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable,
c. The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and the holders thereof are as set forth in the
certificate of incorporation of the Company, as amended to the date hereof (as
so amended, the "Charter"), a true and complete copy of which has been delivered
to the original holder of this Warrant;
d. The execution and delivery of this Warrant are not, and the issuance of the
Shares upon exercise of this Warrant in accordance with the terms hereof will
not be, inconsistent with the Charter or by-laws of the Company, do not and will
not contravene, in any material respect, any governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby, in
each case except as would not have a material adverse effect on the Company; and
e. Except as set forth in the Loan Agreement (as defined in the Securities
Issuance Agreement), there are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
17
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, or shall be sent by private courier or certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Common. Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the holder
hereof that, upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft. destruction or mutilation of this Warrant or any stock
certificate and, in the case of any. loss, theft or destruction, upon receipt of
an executed lost securities bond or indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company will make and deliver a new
Warrant or stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several paragraphs
of this Warrant are inserted for convenience only and do not constitute a part
of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the
Commonwealth of Massachusetts.
18. Survival of Representations, Warranties and Agreements. All representations
and warranties of the Company and the holder hereof contained
18
herein shall survive the issuance hereof, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this `Warrant shall have been breached, the holder hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
20. Acceptance. Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
21. No Impairment of Rights. The Company will not, by amendment of its Charter
or through any other means, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of The holder of
this Warrant against impairment.
[Balance of page intentionally omitted]
19
IN WITNESS WHEREOF, this Warrant is issued on September 4, 1998.
BANYAN SYSTEMS INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Title: Vice President & CFO
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
20
EXHIBIT A
NOTICE OF EXERCISE
To: BANYAN SYSTEMS INCORPORATED
1. The undersigned hereby elects to purchase _________ shares of
Common Stock of BANYAN SYSTEMS INCORPORATED pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
shares in full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
________________________________
(Name)
________________________________
________________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
_________________________________
(Signature)
___________________________
(Date)
21
Schedule 1
----------
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: BANYAN SYSTEMS INCORPORATED
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser) represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs arid
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under
applicable tax laws, for a deferred sale, for or until an increase or decrease
in the market price of the Securities, or for a period of one year or any other
fixed period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. In addition, the Purchaser understands
that the certificate evidencing the Securities will be Imprinted with the legend
referred to in the Warrant under which the Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from' the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public
22
information about the Company, the resale occurring not less than one (1) year
after the party has purchased and paid for the securities to be sold, the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934,as amended) and the amount of securities being
sold during any three-month period not exceeding the specified limitations
stated therein.
(e) The Purchaser further understands that at the time it wishes to
sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the one-year minimum holding period had been
satisfied.
(f) The Purchaser farther understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden or proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
_________________________________
Date: ___________________________
23