EXHIBIT 4.1
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
and
KA INVESTMENTS LDC
March 31, 1999
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated as
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of March 31, 1999, between Number Nine Visual Technology Corporation, a Delaware
corporation (the "Company"), and KA Investments LDC, a Cayman Islands
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corporation (the "Purchaser").
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WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchaser and the Purchaser desires
to purchase from the Company, shares of the Company's 4% Series B Convertible
Preferred Stock, par value $.01 per share (the "Preferred Stock"), which are
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convertible into shares of the Company's common stock, par value $.01 per share
(the "Common Stock").
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IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy are hereby
acknowledged, the Company and the Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
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(a) The Closing. (i) Subject to the terms and conditions set forth
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in this Agreement, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase 300 shares of Preferred Stock (the "Shares") for an
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aggregate purchase price of $3,000,000. The closing of the purchase and sale of
the Shares (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ Aronsohn & ▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇"), 1290 Avenue of the
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▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, immediately following the execution hereof
or such later date as the parties shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
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(ii) Prior to the Closing Date, the parties shall deliver or shall
cause to be delivered the following: (A) the Company shall deliver (1) stock
certificates representing the Shares, registered in the name of the Purchaser,
(2) a Common Stock purchase warrant, in the form of Exhibit D, registered in
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the name of the Purchaser, pursuant to which the Purchaser shall have the right
at any time and from time to time thereafter through the third anniversary of
the Closing Date to acquire 195,000 shares of Common Stock at an exercise price
per share (subject to adjustment as provided therein) of $3.45 (the "Warrant"),
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(3) the legal opinion of Mintz, Levin, Cohen, Ferris, Glovsky and Popeo, P.C.,
outside counsel to the Company, substantially in the form of Exhibit C, and (4)
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all other documents, instruments and writings required to have been delivered at
or prior to the Closing Date by the Company pursuant to this Agreement,
including an executed Registration Rights Agreement, dated the date hereof,
between the Company and the Purchaser, in the form of Exhibit B (the
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"Registration Rights Agreement"), and
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the Irrevocable Transfer Agent Instructions, in the form of Exhibit E, delivered
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to and acknowledged by the Company's transfer agent (the "Transfer Agent
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Instructions"); and (B) the Purchaser shall deliver (1) $3,000,000 in United
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States dollars in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose, and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Closing Date by the Purchaser pursuant to this Agreement, including, without
limitation, an executed Registration Rights Agreement.
1.2 Terms of Preferred Stock. The Preferred Stock shall have the
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rights preferences and privileges set forth in Exhibit A, and shall be
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incorporated into a Certificate of Designation (the "Certificate of
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Designation") which shall be filed on or prior to the Closing Date by the
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Company with the Secretary of State of the State of Delaware, in form and
substance mutually agreed to by the parties.
For purposes of this Agreement, "Conversion Price," "Original Issue
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Date" and "Trading Day" shall have the meanings set forth in Exhibit A;
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"Business Day" shall mean any day except Saturday, Sunday and any day which
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shall be a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
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Company hereby makes the following representations and warranties to the
Purchaser:
(a) Organization and Qualification. The Company is a corporation duly
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incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to (i) own and use
its properties and assets, (ii) carry on its business as currently conducted,
and (iii) enter into and perform the transactions contemplated by this
Agreement, the Certificate of Designation, the Registration Rights Agreement,
the Warrant and the Transfer Agent Instructions (collectively, the "Transaction
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Documents"). The Company has no subsidiaries other than as set forth in
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Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the Subsidiaries is
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an entity, duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the full power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly qualified to do business and is
in good standing as a foreign corporation in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of the Securities (as
defined below) or any of the
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Transaction Documents, (y) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
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Effect").
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(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company. Each of the Transaction Documents has been duly executed
by the Company and, when delivered (or filed, as the case may be) in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Neither
the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, by-laws or other charter documents.
(c) Capitalization. The number of authorized, issued and outstanding
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capital stock of the Company is set forth in Schedule 2.1(c). No shares of
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Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the Shares and the
Warrant and except as disclosed in Schedule 2.1(c), there are no outstanding
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options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To the actual
knowledge of the Company, except as specifically disclosed in the SEC Documents
(as defined below) or Schedule 2.1(c), no Person or group of related Persons
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beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), or has the
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right to acquire by agreement with or by obligation binding upon the Company, in
excess of 5% of the Common Stock. A "Person" means an individual or
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corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) Issuance of the Shares and the Warrant. The Shares and the
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Warrant are duly authorized and, when issued and paid for in accordance with the
terms hereof, will be duly and validly issued, fully paid and nonassessable,
free and clear of all liens, encumbrances and rights of first refusal of any
kind (collectively, "Liens"). The Company has on the date hereof an adequate
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reserve of duly authorized shares of Common Stock, reserved for issuance to the
holders of the Shares and the Warrant, to enable it to perform its conversion,
exercise and other
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obligations under this Agreement, the Certificate of Designation and the
Warrant. Such number of reserved and available shares of Common Stock is not
less than the sum of (i) 200% of the number of shares of Common Stock which
would be issuable upon conversion in full of the Shares, assuming such
conversion occurred on the Original Issue Date, (ii) the number of shares of
Common Stock issuable upon exercise of the Warrant, and (iii) the number of
shares Common Stock which would be issuable upon payment of dividends on the
Shares, assuming each Share is outstanding for three years and all dividends are
paid in shares of Common Stock, subject, however, to the limitations on the
Company's obligation to issue shares of Common Stock pursuant to Section
5(a)(iii)(B) of the Certificate of Designation (such number of shares of Common
Stock, the "Initial Minimum"). All such authorized shares of Common Stock shall
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be duly reserved for issuance to the holders of the Shares and the Warrant. The
shares of Common Stock issuable upon conversion of the Shares, as payment of
dividends thereon and upon exercise of the Warrant are collectively referred to
herein as the "Underlying Shares." The Shares, the Warrant and the Underlying
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Shares are collectively referred to herein as, the "Securities." When issued in
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accordance with the Certificate of Designation and the Warrant, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable,
free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the Required Approvals (as defined below), 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 (with or without notice, lapse of time
or both) of, any agreement, credit facility, indenture or instrument
(evidencing a Company debt or otherwise) to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including Federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
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Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
Federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificate of
Designation with the Secretary of State of Delaware, (ii) the filings required
pursuant to Section
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3.10, (iii) the filing of the Underlying Securities Registration Statement with
the Securities and Exchange Commission (the "Commission") meeting the
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requirements set forth in the Registration Rights Agreement and covering the
resale of the Underlying Shares by the Purchaser, (iv) if permitted by
applicable rules, regulations and interpretations of the Nasdaq Stock Market,
Inc. to be filed or obtained after the issuance of the Shares, (x) the
application(s) to the Nasdaq National Market ("NASDAQ") for the listing of the
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Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed) and (y)
obtaining approvals required to validly issue the Shares and Underlying Shares
in accordance herewith and the Certificate of Designation, (v) applicable Blue
Sky filings and (vi) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (collectively, the "Required Approvals").
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(g) Litigation; Proceedings. Except as specifically disclosed in the
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SEC Documents and as set forth in Schedule 2.1(g), there is no action, suit,
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notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, individually or in the aggregate, have or result in a
Material Adverse Effect.
(h) No Default or Violation. Except as set forth in Schedule 2.1(h),
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neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred which has not been waived which, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
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and warranties of the Purchaser set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchaser as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on
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its behalf has taken any action that could subject the offering, issuance or
sale of the Securities to the registration requirements of the Securities Act.
(j) SEC Documents; Financial Statements. The Company has filed all
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reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d)
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thereof, for the three years preceding the date hereof (or such shorter period
as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents" and,
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together with the Schedules to this Agreement the "Disclosure Materials") on a
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timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the Company is
a party or to which the property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required. The financial statements of
the Company included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
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the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments. Since September 30, 1998, except as specifically
disclosed in the SEC Documents, (a) there has been no event, occurrence or
development that has or that could result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not declared
or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock. The Company last filed audited financial statements with the
Commission on March 27, 1998, and has not received any comments from the
Commission in respect thereof.
(k) Investment Company. The Company is not, and is not an Affiliate
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(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable by the Company to
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Brighton Capital Ltd., no fees or commissions will be payable by the Company to
any broker, financial advisor or consultant, finder, placement agent, investment
banker, or bank with respect to the transactions contemplated by this Agreement.
The Purchaser shall have no obligation with
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respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person acting
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on the Company's behalf has solicited any offer to buy or sell the Securities
by means of any form of general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is eligible to register
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securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(o) Seniority. No class of equity securities of the Company is senior
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to the Shares in right of payment, whether upon liquidation or dissolution, or
otherwise, except the Company's Series A Convertible Preferred Stock.
(p) Listing and Maintenance Requirements Compliance. Except as set
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forth in Schedule 2(p), the Company has not, in the two years preceding the date
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hereof, received notice (written or oral) from the NASDAQ or any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange or
market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such maintenance
requirements.
(q) Patents and Trademarks. The Company has, or has rights to use,
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all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary or material for use in
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connection with its business, and which the failure to so have would have a
Material Adverse Effect. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and, except as specifically
disclosed in Schedule 2.1(q), there is no existing infringement by another
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Person of any of the Intellectual Property Rights.
(r) Registration Rights; Rights of Participation. Except as set forth
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on Schedule 6(c) to the Registration Rights Agreement, the Company has not
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granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
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(s) Regulatory Permits. The Company and its Subsidiaries possess all
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certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("Material Permits"), and neither the Company nor
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any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(t) Title. Neither the Company nor any of the Subsidiaries own any
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real property. The Company and the Subsidiaries have 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, except
for Liens as do not materially affect the value of such property and do not
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 interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(u) Disclosure. The Company confirms that it has not provided the
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Purchaser or its agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands and
confirms that the Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company. All disclosure provided to
the Purchaser regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
2.2 Representations and Warranties of the Purchaser. The Purchaser hereby
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represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority, to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
purchase by the Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement and
the Registration Rights Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms.
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(b) Investment Intent. The Purchaser is acquiring the Securities for
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its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser was offered the
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Shares and the Warrant, it was, and at the date hereof it is, and at each
exercise date under the Warrant, it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. The Purchaser, either alone or
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together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of Investment. The
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Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges that it has
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reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
(g) General Solicitation. The Purchaser is not purchasing the
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Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. The Purchaser understands and acknowledges that (i)
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the Securities are being offered and sold to it without registration under the
Securities Act in a
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private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption, depends in part on,
and the Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
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pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with any transfer agent
for the securities of the Company any transfer of Securities by the Purchaser to
an Affiliate of the Purchaser or to one or more funds under common management
with the Purchaser, and any transfer among any such Affiliates or one or more
funds, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act and
that it is acquiring the Securities solely for investment purposes. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of the Purchaser under this Agreement and the Registration
Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO,
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THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Shares, the payment of dividends thereon, and
exercise of the Warrant or other issuances of Underlying Shares as contemplated
hereby, by the Certificate of Designation or the Warrant occurs at any time
while an Underlying Securities Registration Statement is effective under the
Securities Act or, in the event there is not an effective Underlying Securities
Registration Statement, at such time, in the opinion of counsel to the Company,
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that the Underlying Securities Registration Statement is declared
effective by the Commission. The Company agrees that, in the event any
Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within three (3) Trading Days after request therefor by the
Purchaser, provide the Purchaser with a certificate or certificates representing
such Underlying Shares, free from such legend at such time as such legend would
not have been required under this Section 3.1(b) had such issuance occurred on
the date of such request. The Company may not make any notation on its records
or give instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
--------------------------
issuance of the Underlying Shares upon (i) conversion of the Shares and payment
of dividends thereon in accordance with the terms of the Certificate of
Designation, and (ii) exercise of the Warrant in accordance with its terms, will
result in dilution of the outstanding shares of Common Stock, which dilution may
be substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares upon (x) conversion
of the Shares and payment of dividends thereon in accordance with the terms of
the Certificate of Designation, and (y) exercise of the Warrant in accordance
with its terms, is unconditional and absolute, subject to the limitations set
forth herein in the Certificate of Designation or pursuant to the Warrant,
regardless of the effect of any such dilution, subject to stockholder approval
requirements of the NASDAQ that are not required to be obtained prior to the
issuance of the Shares.
3.3 Furnishing of Information. As long as the Purchaser owns Securities,
-------------------------
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchaser owns Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchaser and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchaser to sell the Securities under Rule 144 promulgated under the Securities
Act. The Company further
-11-
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell Underlying Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including the legal opinion referenced above in this
Section. Upon the request of any such Person, the Company shall deliver to such
Person a written certification of a duly authorized officer as to whether it has
complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts to
-----------
ensure that, no Affiliate shall, sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser.
3.5 Increase in Authorized Shares. If on any date the Company would be,
-----------------------------
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from (a) issuing 200% of the number of Underlying Shares
as would then be issuable upon a conversion in full of the Shares and as payment
of any accrued and unpaid dividends in respect thereof in shares of Common
Stock, or (b) issuing the number of Underlying Shares upon exercise in full of
the Warrant, subject to the limitations on the Company's obligation to issue
shares of Common Stock pursuant to Sections 5(a)(iii)(B) and (C) of the
Certificate of Designation (the "Current Required Minimum"), in either case, due
------------------------
to the unavailability of a sufficient number of authorized but unissued or
reserved shares of Common Stock, then the Board of Directors of the Company
shall promptly (and in any case, within 45 Business Days from such date) prepare
and mail to the stockholders of the Company proxy materials requesting
authorization to amend the Company's Certificate of Incorporation to increase
the number of shares of Common Stock which the Company is authorized to issue to
at least such number of shares as reasonably requested by the Purchaser in order
to provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the
Certificate of Designation and the Warrant (the sum of (x) the number of shares
of Common Stock then outstanding plus all shares of Common Stock issuable upon
exercise of all outstanding options, warrants and convertible instruments, and
(y) the Current Required Minimum, shall be a reasonable number). In connection
therewith, the Board of Directors shall (a) adopt proper resolutions authorizing
such increase, (b) recommend to and otherwise use its best efforts to promptly
and duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60/th/ day after delivery
of the proxy materials relating to such meeting) and (c) within five (5)
Business Days of obtaining such stockholder authorization, file an appropriate
amendment to the Company's Certificate of Incorporation to evidence such
increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
--------------------------------------------
(i) not later than the fifth (5th)Business Day following the Closing Date
prepare and file with the
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NASDAQ (and such other national securities exchange or market or trading or
quotation facility on which the Common Stock is then listed) an additional
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing in the NASDAQ (as well as on
any such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchaser evidence of such listing, and the
Company shall maintain the listing of its Common Stock thereon. If the number of
Underlying Shares issuable upon conversion in full of the then outstanding
Shares, as payment of dividends thereon, and upon exercise of the then
unexercised portion of the Warrant exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and any such other
required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon conversion of the Shares and for payment of dividends
thereupon in shares of Common Stock and upon exercise in full of the Warrant in
accordance with this Agreement, the Certificate of Designation and the Warrant,
respectively, in such amount as may be required to fulfill its obligations in
full under the Transaction Documents, which reserve shall equal no less than the
then Current Required Minimum.
3.7 Conversion and Exercise Procedures. The Transfer Agent Instructions,
----------------------------------
Conversion Notice (as defined in Exhibit A) and Notice of Exercise under the
----------
Warrant set forth the totality of the procedures with respect to the conversion
of the Shares and exercise of the Warrant, including the form of legal opinion,
if necessary, that shall be rendered to the Company's transfer agent and such
other information and instructions as may be reasonably necessary to enable the
Purchaser to convert its Shares and exercise the Warrant as contemplated in the
Certificate of Designation and the Warrant (as applicable).
3.8 Notice of Breaches. Each of the Company and the Purchaser shall give
------------------
prompt written notice to the other of any breach by it of any representation,
warranty or other agreement contained in any Transaction Document, as well as
any events or occurrences arising after the date hereof which would reasonably
be likely to cause any representation or warranty or other agreement of such
party, as the case may be, contained therein to be incorrect or breached as of
the Closing Date. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any representation, warranty or
other agreement contained in any Transaction Document.
3.9 Conversion and Exercise Obligations of the Company. The Company shall
--------------------------------------------------
honor conversions of the Shares and exercises of the Warrant and shall deliver
Underlying Shares in accordance with the respective terms, conditions and time
periods set forth in the Certificate of Designation and the Warrant.
-13-
3.10 Right of First Refusal; Subsequent Registrations. (a) The
------------------------------------------------
Company shall not, directly or indirectly, without the prior written consent of
the Purchaser, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities or a transaction intended to be exempt or not subject to registration
under the Securities Act (a "Subsequent Placement") for a period of 180 days
--------------------
after the Closing Date, except (i) the granting of options or warrants to
employees, consultants, officers and directors, and the issuance of shares upon
exercise of options granted, under any stock option plan heretofore or
hereinafter duly adopted by the Company, (ii) options or warrants to be granted
to BankBoston N.A., Brighton Capital Ltd. and S3 Incorporated as referenced in
the Transaction Documents or options or warrants to be issued to any bona fide
joint venture or similar corporate partner, (iii) shares of Common Stock
issuable upon exercise of any currently outstanding warrants and upon conversion
of any currently outstanding convertible securities of the Company, in each case
disclosed in Schedule 2.1(c), (iv) shares of Common Stock issuable upon
---------------
conversion of Preferred Stock and as payment of dividends thereon and upon
exercise of the Warrant in accordance with the Certificate of Designation or the
Warrant, and (v) shares of Common Stock issuable in any primary public offering
of the Company (other than offerings resulting from "equity lines of credit")
respectively, unless (A) the Company delivers to the Purchaser a written notice
(the "Subsequent Placement Notice") of its intention to effect such Subsequent
---------------------------
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto and (B) the Purchaser shall not have notified the Company by
5:00 p.m. (New York City time) on the tenth (10/th/) Trading Day after its
receipt of the Subsequent Placement Notice of its willingness to cause the
Purchaser to provide (or to cause its sole designee to provide), subject to
completion of mutually acceptable documentation, financing to the Company on
substantially the terms set forth in the Subsequent Placement Notice. If the
Purchaser shall fail to notify the Company of its intention to enter into such
negotiations within such time period, the Company may effect the Subsequent
Placement substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice; provided, that the
--------
Company shall provide the Purchaser with a second Subsequent Placement Notice,
and the Purchaser shall again have the right of first refusal set forth above in
this paragraph (a), if the Subsequent Placement subject to the initial
Subsequent Placement Notice shall not have been consummated for any reason on
the terms set forth in such Subsequent Placement Notice within thirty (30)
Trading Days after the date of the initial Subsequent Placement Notice with the
Person (or an Affiliate of such Person) identified in the Subsequent Placement
Notice. Notwithstanding anything to the contrary contained herein, the right of
first refusal granted hereunder shall be junior and subject to the right of
first refusal held by the holders of the Company's Series A Convertible
Preferred Stock, as such rights exist on the Closing Date.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the
-14-
Company permitted pursuant to Schedule 6(c) of the Registration's Rights
-------------
Agreement to be registered, in the Underlying Securities Registration Statement
in accordance with the Registration Rights Agreement, and (z) Common Stock
permitted to be issued pursuant to paragraph (a)(i) - (v) of Section 3.10(a),
the Company shall not, without the prior written consent of the Purchaser (i)
issue or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register for resale any securities of the Company for a period of not less
than 90 Trading Days after the date that the Underlying Securities Registration
Statement is declared effective by the Commission. Any days that a Purchaser is
unable to sell Underlying Shares under the Underlying Securities Registration
Statement shall be added to such 90 Trading Day period for the purposes of (i)
and (ii) above.
3.11 Certain Securities Laws Disclosures; Publicity. The Company shall:
----------------------------------------------
(i) issue a press release acceptable to the Purchaser disclosing the
transactions contemplated hereby on the Closing Date, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions contemplated hereby
within twelve (12) Business Days after the Closing Date, and (iii) timely file
with the Commission a Form D promulgated under the Securities Act as required
under Regulation D promulgated under the Securities Act and provide a copy
thereof to the Purchaser promptly after the filing thereof. The Company shall,
no less than two (2) Business Days prior to the filing of any disclosure
required by clauses (ii) and (iii) above, provide a copy thereof to the
Purchaser. No such filing or disclosure may be made that mentions the Purchaser
by name without the prior consent of the Purchaser. Such filings shall be
subject to Section 4.11 hereof.
3.12 Transfer of Intellectual Property Rights. Except in connection with
----------------------------------------
the sale of all or substantially all of the assets of the Company or a bona fide
licensing arrangement in the ordinary course of business, the Company shall not
transfer, sell or otherwise dispose of any Intellectual Property Rights, or
allow any of the Intellectual Property Rights to become subject to any Liens, or
fail to renew such Intellectual Property Rights (if renewable and it would
otherwise lapse if not renewed), without the prior written consent of the
Purchaser.
3.13 Use of Proceeds. The Company shall use the net proceeds from the
----------------
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem any Company equity or
equity-equivalent securities. Company debt shall not include accounts payable or
any debt owed to BankBoston, N.A. (the "Bank") pursuant to the Company's Loan
----
and Security Agreement, dated the date hereof with the Bank. Pending application
of the proceeds of this placement in the manner permitted hereby, the Company
will invest such proceeds in interest bearing accounts and/or short-term,
investment grade interest bearing securities.
3.14 Reimbursement. If the Purchaser, other than by reason of its gross
--------------
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
-15-
Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any Affiliates of the Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchaser and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchaser and
any such Affiliate and any such Person. The Company also agrees that neither
the Purchaser nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the Purchaser
or entity in connection with the transactions contemplated by this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall pay $20,000
-----------------
to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in connection with the preparation and negotiation of the
Transaction Documents. Other than the amount contemplated in the immediately
preceding sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all U.S. stamp and other
taxes and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents,
----------------------------
together with the Exhibits and Schedules thereto, and the Transfer Agent
Instructions contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 8:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day
-16-
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: Number Nine Visual Technology Corporation
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
Facsimile No.:
Attn: Acting Chief Financial Officer
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: KA Investments LDC
c/o Deephaven Capital Management LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. and
▇▇▇▇ ▇. ▇▇▇▇▇. Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
-------------------
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
-17-
4.5 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Except as set forth in
Section 3.1(a), the Purchaser may not assign this Agreement or any of the rights
or obligations hereunder (other than to an Affiliate of the Purchaser) without
the consent of the Company. This provision shall not limit the Purchaser's
right to transfer securities or transfer or assign rights hereunder or under the
Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. The corporate laws of the State of Delaware shall
-------------
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Shares and the Warrant.
4.10 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
-18-
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Publicity. The Company and the Purchaser shall consult with
---------
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory
agency or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other party with prior notice of such public statement, filing
or other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Purchaser, or include the name of the
Purchaser in any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the Purchaser,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law, in which case the Company shall
provide the Purchaser with prior notice of such disclosure.
4.12 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchaser agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-19-
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
NUMBER NINE VISUAL TECHNOLOGY
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: General Manager/Assistant
Treasurer
KA INVESTMENTS LDC
By:___________________________
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
NUMBER NINE VISUAL TECHNOLOGY
CORPORATION
By:___________________________
Name:
Title:
KA INVESTMENTS LDC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Secretary
COMPANY DISCLOSURE SCHEDULES
----------------------------
NOTES TO SCHEDULES
1. Capitalized terms used in these Company Disclosure Schedules but not
defined herein shall have the meanings ascribed to such terms in the
Convertible Preferred Stock Purchase Agreement, dated as of March 31, 1999,
by and between Number Nine Visual Technology Corporation ("the Company")
and KA Investments LDC (the "Agreement").
2. Headings and captions in these Company Disclosure Schedules are for
convenience of reference only and shall in no way modify or affect, or be
considered in construing or interpreting any information provided herein.
3. The information contained in these Company Disclosure Schedules is as of
the date of the Agreement.
4. Items, information, and other matters disclosed on one Schedule shall be
deemed to be disclosed for matters to which such Schedule should have
reasonably have been expected to relate under these Company Disclosure
Schedule; provided that the Company shall make a good faith effort to
include any disclosure (by cross reference or by repeating the disclosure)
that is required by more than one representation and warranty in each
applicable portion of the Company Disclosure Schedules. Cross references
are for the convenience of reference only and shall not limit the
provisions hereof.
SCHEDULE 2.1(a)
---------------
SUBSIDIARIES
1. Number Nine Visual Technology Vertiebs GmbH
2. Number Nine International, Ltd.
2
SCHEDULE 2.1(c)
---------------
CAPITALIZATION
1. The Company is authorized to issue 20,000,000 shares of common stock, $.01
par value per share ("Common Stock").
2. The Company is authorized to issue 5,000,000 shares of preferred stock,
$.01 par value per share and has designated 3,700,000 shares as Series A
Convertible Preferred Stock.
3. The Company has issued one warrant to Silicon Graphics, Inc. ("SGI"), which
entitles SGI to purchase for a period of three (3) years commencing August
11, 1998 at an exercise price of $2.75 per share that number of shares of
Series A Preferred Stock equal to 3% of the Company's then issued and
outstanding Common Stock at that time of exercise, as calculated on a fully
diluted basis.
4. Pursuant to the terms of a certain Loan and Security Agreement and a
Warrant Purchase Agreement by and between the Company and BankBoston dated
March 31, 1999, the Company will issue a warrant to BankBoston for the
purchase of up to 211,000 shares of Common Stock at an exercise price equal
to the average closing price of the thirty (30) day period immediately
prior to the loan closing (the "BankBoston Warrant"). The BankBoston
Warrant will have a ten (10) year term and will be void after 5:00 p.m.,
eastern standard time on March 31, 2009.
5. In connection with this financing, the Company has agreed to issue to
Brighton Capital Ltd. a warrant to purchase for a period of three (3) years
up to 30,000 shares of Common Stock at an exercise price of 125% of the
then average of the closing price of the ten (10) day period immediately
prior to the date of the Brighton Warrant in consideration for consulting
services provided to the Company.
6. In connection with certain monies to be received by the Company in
consideration for certain non-recurring engineering costs to be performed
by the Company for S3 Incorporated ("S3"), the Company has agreed to issue
to S3 a two year warrant to purchase up to 300,000 shares of Common Stock
at an exercise price equal to the average closing price of the ten (10) day
period immediately prior to the date of the S3 Warrant.
7. The outstanding securities of the Company are shown in the table below:
TYPE OF SECURITY NUMBER OF SHARES
---------------- ----------------
Common Stock 9,416,187
Series A Convertible Preferred Stock 3,350,894
3
WARRANTS
--------
See items ## 3, 4, 5 and 6 above
STOCK OPTIONS
-------------
STOCK PLAN NUMBER OF OPTIONS
---------- -----------------
1989 Employee Stock Plan 79,900
1994 Employee Stock Plan 1,012,404
1996 Employee Stock Plan 707,300
---------
TOTAL 1,799,604
4
SCHEDULE 2.1(g)
---------------
LITIGATION
1. On June 11, 1996, a complaint was filed in the United States District Court
for the District of Massachusetts by named plaintiff RBI, an Alaskan limited
partnership, against the Company, ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the
"Selling Stockholders") and the managing underwriters of the Company's initial
public offering, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, ▇▇▇▇▇ & Company and Unterberg
Harris (the "Managing Underwriters"). On or about July 17, 1996, a complaint was
filed in the United States District Court for the District of Massachusetts by
named plaintiff ▇▇▇▇ ▇▇▇▇▇ against the Company, each member of the Company's
Board of Directors, (▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇ ▇.
Low, ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇), ▇▇▇▇▇ ▇. ▇▇▇▇▇, former Chief
Financial Officer and Treasurer of the Company, and the Managing Underwriters.
On or about October 16, 1996, an additional complaint was filed in the United
States District Court for the District of Massachusetts by named plaintiff
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ against the Company, each member of the Company's Board of
Directors, ▇▇. ▇▇▇▇▇, and the Managing Underwriters. Each of the plaintiffs
purports to represent a class of purchasers of the Common Stock of the Company
between and including May 26, 1995 through January 31, 1996. Each complaint
alleges that the named defendants violated the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, by, among other
things, issuing to the investing public false and misleading statements
regarding the Company's business, products, sales and earnings during the class
period in question. The plaintiffs seek unspecified damages, interest, costs and
fees. By order of the District Court, these actions have been consolidated into
a single action. It is possible that other claims may be made against the
Company or that there may be other consequences from the lawsuits. The
defendants deny any liability, believe they have meritorious defenses, and
intend to vigorously defend these and any similar lawsuits that may be filed,
although the ultimate outcome of these matters cannot yet be determined. If the
lawsuits are not resolved satisfactorily for the Company, there could be a
material adverse effect on the Company's future financial condition and results
of operations and, accordingly, income (loss). The Company does not believe that
the ultimate liability, if any, is estimable or probable, and therefore no
provision for any liability that may result from the actions has been recognized
in the Company's consolidated financial statements.
2. Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P has sent the Company
a letter, dated March 17, 1998, that alleges that the use of the Company's
monitors with certain on-screen displays infringes upon the patents referenced
therein.
3. The Company has received demand letters from Micron, Dell, and Unisys in
connection with a countersuit filed by Hakan Lans against Micron which has filed
a complaint for declaratory judgment of patent, invalidity and non-infringement
against Hakan Lans. A motion to amend the complaint in the countersuit has been
filed by counsel to Hakan Lans to include the Company as an additional
defendant.
5
SCHEDULE 2.1(h)
---------------
OTHER LOAN ARRANGEMENTS
On March 31, 1999, contingent upon the closing of this financing, the
Company established a revolving line of credit with BankBoston, N.A. from which
the Company paid down and replaced a borrowing facility with Marine Midland Bank
("Marine Midland") which, at the time, was subject to a forbearance agreement
pursuant to which Marine Midland waived certain default provisions relating to
the borrowing facility up to and through March 31, 1999.
6
SCHEDULE 2.1(p)
---------------
NOTICE OF LISTING OR MAINTAINANCE REQUIREMENTS
The Company received a letter from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., counsel to NASDAQ
dated June 29, 1998 with regard to the delisting of the Company on the NASDAQ
National Market System with respect to meeting net tangible assets measurements
required by the NASD. The Company responded to counsel to NASDAQ with
information that Silicon Graphics, Inc. converted its secured subordinated
convertible promissory notes in the aggregate amount of $9 million plus accrued
interest into 3,350,894 shares of Series A Preferred Stock (the "Series A
Preferred Stock"). Due to the conversion of Silicon Graphic, Inc.'s secured
subordinated convertible promissory notes into Series A Preferred Stock, the
Company was not delisted.
7
SCHEDULE 2.1(q)
---------------
PATENTS AND TRADEMARKS DISPUTES
1. Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P has sent the Company
a letter, dated March 17, 1998, that alleges that the use of the Company's
monitors with certain on-screen displays infringes upon the patents
referenced therein.
2. The Company has received demand letters from Micron, Dell, and Unisys in
connection with a countersuit filed by Hakan Lans against Micron which has
filed a complaint for declaratory judgment of patent, invalidity and non-
infringement against Hakan Lans. A motion to amend the complaint in the
countersuit has been filed by counsel to Hakan Lans to include the Company
as an additional defendant.
8
EXHIBIT A
Term of Preferred Stock
Section 1. Designation, Amount and Par Value. The series of
---------------------------------
preferred stock shall be designated as 4% Series B Convertible Preferred Stock
(the "Preferred Stock") and the number of shares so designated shall be 300
---------------
(which shall not be subject to increase without the consent of the holders of
the Preferred Stock (each, a "Holder" and collectively, the "Holders")). Each
------ -------
share of Preferred Stock shall have a par value of $.01 and a stated value of
$10,000 (the "Stated Value").
------------
Section 2. Dividends.
---------
(a) Holders shall be entitled to receive, when and as declared by the
Board of Directors out of funds legally available therefor, and the Company
shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) of 4% per annum, payable, subject to the provisions of
this Section 2(a), on a quarterly basis on March 31, June 30, September 30 and
December 31 of each year while such share is outstanding (each a "Dividend
--------
Payment Date") and on each Conversion Date (as defined herein) for such share,
------------
commencing on the earlier to occur of the Conversion Date for such share and
June 30, 1999, in cash or shares of Common Stock (as defined in Section 8).
Subject to the terms and conditions herein, the decision whether to pay
dividends hereunder in Common Stock or cash shall be at the discretion of the
Company. Dividends on the Preferred Stock shall be calculated on the basis of a
360-day year, shall accrue daily commencing on the Original Issue Date (as
defined in Section 8), and shall be deemed to accrue from such date whether or
not earned or declared and whether or not there are profits, surplus or other
funds of the Company legally available for the payment of dividends, unless the
Company provides the Holder with an unqualified legal opinion of its outside
counsel (both of which legal opinion and counsel are acceptable to the Holder)
that the accrual of any such dividend (as opposed to payment) is not permitted
at such time under the General Corporation Law of the State of Delaware. A party
that holds shares of Preferred Stock on the record date with respect to a
Dividend Payment Date will be entitled to receive such dividend payment and any
other accrued and unpaid dividends which accrued prior to such Dividend Payment
Date, without regard to any sale or disposition of such Preferred Stock
subsequent to the applicable record date. Except as otherwise provided herein,
if at any time the Company pays less than the total amount of dividends then
accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares of Preferred Stock
held by each Holder. If the Company is permitted hereunder to pay dividends in
shares of Common Stock, then the number of shares of Common Stock issuable on
account of such dividend shall equal the cash amount of such dividend on either
the Dividend Payment Date or the Conversion Date, as applicable, divided by the
Conversion Price (as defined herein) on such date. Any dividends to be paid in
cash hereunder that are not paid within three (3) Trading Days (as defined in
Section 8) following a Conversion Date or Dividend Payment Date, as applicable,
shall continue to accrue and shall entail a late fee, which must be paid in
cash, at the rate of 18% per annum (such fees to accrue daily, from the date
such dividend is due hereunder through and including the date of payment). The
Company shall provide the Holders written notice of its intention to pay
dividends in cash or shares of Common Stock not less than ten (10) days prior to
any Dividend Payment Date for so long as shares of Preferred Stock are
outstanding (the Company may indicate in such notice the maximum amount of cash
dividends that it intends to pay during such period). Failure to timely provide
such notice shall be deemed an election by the Company to pay dividends for such
period in shares of Common Stock pursuant to the terms hereof.
(b) Notwithstanding anything to the contrary contained herein, the
Company may not
issue shares of Common Stock in payment of dividends on the Preferred Stock (and
must deliver cash in respect thereof, subject to the provisions of Section 2(a)
with respect to applicable law) if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to pay such
dividends in shares of Common Stock;
(ii) after the Dividend Effectiveness Date (as defined in
Section 8), such shares (x) are not registered for resale pursuant to an
effective Underlying Securities Registration Statement (as defined in Section
8), or (y) may not be sold without volume restrictions pursuant to Rule 144
promulgated under the Securities Act (as defined in Section 8), as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent in the form and substance acceptable to the applicable
Holder and such transfer agent (if the Company is permitted and elects to pay
dividends in shares of Common Stock under this clause (ii) prior to the Dividend
Effectiveness Date and thereafter an Underlying Securities Registration
Statement shall be declared effective by the Commission (as defined in Section
8), the Company shall, within three (3) Trading Days after the date of such
declaration of effectiveness, exchange such shares for shares of Common Stock
that are free of restrictive legends of any kind);
(iii) the Company has failed to timely satisfy its conversion
obligations hereunder; or
(iv) the issuance of such shares would result in a violation of
Section 5(a)(iii) or the rules of the Nasdaq Stock Market, Inc. or any other
rules and regulations governing any Subsequent Market (as defined in Section 8)
on which the Common Stock is then listed or quoted for trading.
(c) So long as any Preferred Stock shall remain outstanding, neither
the Company nor any subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities (as defined in Section 8),
nor shall the Company directly or indirectly pay or declare any dividend or make
any distribution (other than a dividend or distribution described in Section 5
or dividends due and paid in the ordinary course on preferred stock of the
Company at such times when the Company is in compliance with its payment and
other obligations hereunder) upon, nor shall any distribution be made in respect
of, any Junior Securities, nor shall any monies be set aside for or applied to
the purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities or shares pari passu with the Preferred Stock.
Section 3. Voting Rights. Except as otherwise provided herein and
-------------
as otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the Holders of a majority of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, (b) authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
in Section 4) senior to or otherwise pari passu with the Preferred Stock, (c)
amend its certificate of incorporation or other charter documents so as to
affect adversely any rights of the Holders, (d) increase the authorized number
of shares of Preferred Stock, or (e) enter into any agreement with respect to
the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
-----------
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
-----------
the Holders shall be entitled, subject to the rights of the holders of the
Company's Series A Convertible Preferred Stock to receive out of the assets of
the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an
2
amount equal to the Stated Value plus all due but unpaid dividends per share,
whether declared or not, before any distribution or payment shall be made to the
holders of any Junior Securities, and if the assets of the Company shall be
insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be distributed among the Holders ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or
disposition of all or substantially all of the assets of the Company or the
effectuation by the Company of a transaction or series of related transactions
in which more than 50% of the voting power of the Company is disposed of, or a
consolidation or merger of the Company with or into any other company or
companies shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Section 5. The Company shall mail written notice of any such
Liquidation, not less than 45 days prior to the payment date stated therein, to
each record Holder.
Section 5. Conversion.
----------
(a)(i) Conversions at Option of Holder. Each share of Preferred Stock
-------------------------------
shall be convertible into shares of Common Stock (subject to the limitations set
forth in Section 5(a)(iii)), at the Conversion Ratio (as defined in Section 8),
at the option of the Holder at any time and from time to time from and after
July 28, 1999 (the "Initial Conversion Date"); provided, that, (A) on and after
----------------------- --------
the Initial Conversion Date, a Holder shall only be entitled to convert up to
25% of the number of shares of Preferred Stock issued to it on the Original
Issue Date, (B) on and after the first month anniversary of the Initial
Conversion Date, a Holder shall only be entitled to convert up to 50% of the
number of shares of Preferred Stock issued to it on the Original Issue Date, on
a cumulative basis, (C) on and after the second month anniversary of the Initial
Conversion Date, a Holder shall only be entitled to convert up to 75% of the
number of shares of Preferred Stock issued to it on the Original Issue Date, on
a cumulative basis and (D) on and after the third month anniversary of the
Initial Conversion Date, a Holder shall be entitled to convert all of the shares
of Preferred Stock originally issued to it on the Original Issue Date. Holders
shall effect conversions by surrendering the certificate or certificates
representing the shares of Preferred Stock to be converted to the Compnay,
together with the form of conversion notice attached hereto as Exhibit A (a
---------
"Conversion Notice"). Each Conversion Notice shall specify the number of shares
-----------------
of Preferred Stock to be converted and the date on which such conversion is to
be effected, which date may not be prior to the date the Holder delivers such
Conversion Notice by fascimile (the "Conversion Date"). If no Conversion Date
---------------
is specified in a Conversion Notice, the Conversion Date shall be the date that
the Conversion Notice is deemed delivered hereunder. If the Holder is converting
less than all shares of Preferred Stock represented by the certificate or
certificates tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(b)) a certificate representing the number of shares of
Preferred Stock as have not been converted.
(ii) Automatic Conversion. Subject to the provisions in this
--------------------
paragraph, all outstanding shares of Preferred Stock for which conversion
notices have not previously been received or for which redemption has not been
made or required hereunder shall be automatically converted on the third
anniversary of the Original Issue Date for such shares. The conversion
contemplated by this paragraph shall not occur at such time as (a) (1) an
Underlying Securities Registration Statement is not then effective or (2) the
Holder is not permitted to resell Underlying Shares (as defined in Section 8)
pursuant to Rule 144(k) promulgated under the Securities Act, without volume
restrictions, as evidenced by an opinion letter of counsel acceptable to the
Holder and the transfer agent for the Common Stock; (b) there are not sufficient
shares of Common Stock authorized and reserved for issuance upon such
conversion; or (c) the Company is then in default of its covenants and
obligations hereunder or under the Purchase Agreement or Registration Rights
Agreement. Notwithstanding the foregoing, the three-year period for conversion
under this Section shall be extended (on a day-for-day
3
basis) for any Trading Days after the date that the Commission declares
effective an Underlying Securities Registration Statement that the Purchaser is
unable to resell Underlying Shares under an Underlying Securities Registration
Statement due to (a) the Common Stock not being listed for trading on the Nasdaq
National Market (the "NASDAQ") or any Subsequent Market, (b) the failure of such
------
Underlying Securities Registration Statement to remain effective during the
Effectiveness Period (as defined in the Registration Rights Agreement) as to all
Underlying Shares, or (c) the suspension of the Holder's ability to resell
Underlying Shares thereunder. The provisions of Sections 5(a)(iii)(A)(1) and (2)
shall not apply to any automatic conversion pursuant to this Section 5(a)(ii).
(iii) Certain Conversion Restrictions.
-------------------------------
(A)(1) A Holder may not convert shares of Preferred Stock or
receive shares of Common Stock as payment of dividends hereunder to the extent
such conversion or receipt of such dividend payment would result in the Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 4.999% of the then issued
and outstanding shares of Common Stock, including shares insuable upon
conversion of dividends on, the shares of Preferred Stock held by such Holder
after application of this Section. The Holder shall have the sole authority and
obligation to determine whether the restriction contained in this Section
applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which shares of
Preferred Stock are convertible shall be in the sole discretion of the Holder.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 75 days prior notice to the
Company, Other Holders shall be unaffected by any such waiver.
(2) A Holder may not convert shares of Preferred Stock or
received shares of Common Stock as payment of dividends hereunder to the extent
such conversion or receipt of such dividend payment would result in the Holder
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act (as defined in Section 8) and the rules thereunder) in excess of
9.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of, and payment of dividends on, the shares of
Preferred Stock held by such Holder after application of this Section. The
Holder shall have the sole authority and obligation to determine whether the
restriction contained in this Section applies and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which shares of Preferred Stock are convertible shall be in the
sole discretion of the Holder. The provisions of this Section may be waived by a
Holder (but only as to itself and not to any other Holder) upon not less than 75
days prior notice to the Company. Other Holders shall be unaffected by any such
waiver.
(B) Notwithstanding anything to the contrary set forth herein,
the Company shall not be obligated to issue in excess of 1,883,237 shares of
Common Stock upon conversion of Preferred Stock and payment of dividends
hereunder, which number of shares shall be subject to adjustment pursuant to
Sections 5(c)(ii), (iii), and (v) (such number of shares, the "Issuable
--------
Maximum"). The Issuable Maximum equals 19.99% of the number of shares of Common
-------
Stock outstanding immediately prior to the Closing. Shares of Common Stock
issued in respect of liquidated damages hereunder shall not count towards the
1,883,237 share limit set forth in this paragraph and shall be paid in cash as
provided herein unless otherwise agreed to by the Holders. If on any Conversion
Date (A) the Conversion Price then in effect is such that the aggregate number
of shares of Common Stock that would then be issuable upon conversion in full of
all then outstanding shares of Preferred Stock and as payment of dividends
thereon in shares of Common Stock, together with any shares of Common Stock
previously issued upon conversion of shares of Preferred Stock and as payment of
dividends thereon, would equal or exceed the Issuable Maximum, and (B) the
Company shall not have previously obtained the vote of
4
shareholders (the "Shareholder Approval"), if any, as may be required by the
--------------------
applicable rules and regulations of the Nasdaq Stock Market or other exchange or
market on which the Common Stock is then listed or quoted for trading to approve
the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof, then the Company shall issue to the Holder so
requesting a conversion a number of shares of Common Stock equal to its pro-rata
share of the Issuable Maximum (determined by reference to the number of shares
of Preferred Stock issued to all Holders on the Original Issue Date) and, with
respect to the remainder of the aggregate Stated Value of the shares of
Preferred Stock then held by such Holder for which a conversion in accordance
with the Conversion Price would result in an issuance of shares of Common Stock
in excess of the Issuable Maximum (the "Excess Stated Value"), the converting
-------------------
Holder shall have the option to require the Company to either (1) obtain the
Shareholder Approval applicable to such issuance as soon as is possible, but in
any event not later than the 75th day after such request, or (2) pay cash to the
converting Holder in an amount equal to the Mandatory Redemption Amount (as
defined in Section 8) for the Excess Stated Value. If the Company fails to pay
the Mandatory Redemption Amount in full pursuant to this Section within seven
(7) days after the date payable, the Company will pay interest thereon at a rate
of 18% per annum to the converting Holder, accruing daily from the Conversion
Date until such amount, plus all such interest thereon, is paid in full. If the
Company has been requested by the Holders to obtain, and fails to obtain, the
Shareholder Approval by the 75/th/ day after such request, then the Holders
shall have the right to require the Company to perform under, at the sole option
of such Holder, clause (3) of this Section 5(a)(iii)(B). The Company and the
Holders understand and agree that shares of Common Stock issued to and then held
by Holders as a result of conversions of Preferred Stock and as payment of
dividends thereon shall not be entitled to cast votes on any resolution to
obtain Shareholder Approval pursuant hereto.
(b)(i) Not later than three (3) Trading Days after any Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares of
Preferred Stock (subject to the limitations set forth in Section 5(a)(iii)
hereof), (ii) one or more certificates representing the number of shares of
Preferred Stock not converted, (iii) a bank check in the amount of accrued and
unpaid dividends (if the Company has elected to pay accrued dividends in cash),
and (iv) if the Company has elected and is permitted hereunder to pay accrued
dividends in shares of Common Stock, certificates, which shall be free of
restrictive legends and trading restrictions (other than those required by
Section 3.1(b) of the Purchase Agreement), representing such shares of Common
Stock, provided, however, that the Company shall not be obligated to issue
-------- -------
certificates evidencing the shares of Common Stock issuable upon conversion of
any shares of Preferred Stock until certificates evidencing such shares of
Preferred Stock are delivered for conversion to the Company, or the Holder of
such Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates, including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued
but unpaid dividends hereunder, are not delivered to or as directed by the
applicable Holder by the third (3/rd/) Trading Day after the Conversion Date,
the Holder shall be entitled by written notice of the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
5
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), including for purposes
hereof, any shares of Common Stock to be issued on the Conversion Date on
account of accrued but unpaid dividends hereunder, by the third (3rd) Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
third (3rd) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder's right to pursue actual damages for the Company's failure
to deliver certificates representing shares of Common Stock upon conversion
within the period specified herein and such Holder shall have the right to
pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company shall not have delivered any cash due in respect of
conversions of Preferred Stock or as payment of dividends thereon by the third
(3rd) Trading Day after the Conversion Date, the Holder may, by notice to the
Company, require the Company to issue shares of Common Stock pursuant to Section
5(c), except that for such purpose the Conversion Price applicable thereto shall
be the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provision of this Section.
(iii) In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, by the third (3rd) Trading Day after the Conversion Date,
and if after such third (3rd) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was entitled to
receive upon such conversion (a "Buy-In"), then the Company shall (A) pay in
-------
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) at the option of the Holder, either return
the shares of Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Preferred Stock with respect to which the
market price of the Underlying Shares on the date of Conversion totaled $10,000,
under clause (A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 5(b)(ii) in respect of the certificates resulting in such Buy-In.
(c)(i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of (a)
----------------
$4,2703 (the "Fixed Conversion Price") or (b) 88% of the average of the ten (10)
----------------------
lowest Per Share Market Values during the thirty (30) Trading Days immediately
preceding the applicable Conversion Date (which, at the Holder's option, may
include Trading Days prior to the Initial Conversion Date), provided, that such
--------
thirty (30) Trading Day period shall be extended for the number of Trading Days,
if any, during such period in which (A) trading in the Common Stock is suspended
from the NASDAQ or a Subsequent Market on which it is listed for trading
6
prior to such suspension, or (B) after the date declared effective by the
Commission, the Underlying Securities Registration Statement is now effective,
or (C) after the date declared effective by the Commission, the Prospectus
included in the Underlying Securities Registration Statement may not be used by
the Holder for the resale of Underlying Shares.
If (a) the Underlying Securities Registration Statement is not filed
on or prior to the Filing Date (if the Company files such Underlying Securities
Registration Statement without affording the Holder the opportunity to review
and comment on the same as required by Section 3(a) of the Registration Rights
Agreement, the Company shall not be deemed to have satisfied this clause (a)),
or (b) the Company fails to file with the Commission a request for acceleration
in accordance with Rule 12d1-2 promulgated under the Securities Exchange Act of
1934, as amended, within five (5) days of the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that an
Underlying Securities Registration Statement will not be "reviewed," or not
subject to further review or comment, or (c) the Underlying Securities
Registration Statement is not declared effective by the Commission on or prior
to the Effectiveness Date, or (d) such Underlying Securities Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities (as defined in the
Registration Rights Agreement) at any time prior to the expiration of the
Effectiveness Period without being succeeded within ten (10) days by a
subsequent Underlying Securities Registration Statement filed with and declared
effective by the Commission, or (e) trading in the Common Stock shall be
suspended from the NASDAQ or a Subsequent Market for more than three (3)
Business Days (which need not be consecutive days), (f) the conversion rights of
the Holders are suspended for any reason or (g) an amendment to the Underlying
Securities Registration Statement is not filed by the Company with the
Commission within ten (10) days of the Commission's notifying the Company that
such amendment is required in order for the Underlying Securities Registration
Statement to be declared effective (if the Company files such amendment
without affording the Holder the opportunity to review and comment on the same
as required by Section 3(a) of the Registration Rights Agreement, the Company
shall not be deemed to have satisfied this clause (g)) (any such failure or
breach being referred to as an "Event" and for purposes of clauses (a), (c), (f)
-----
the date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) day period is exceeded, or for purposes of clauses (d) and
(g) the date which such 10 day-period is exceeded, or for purposes of clause (e)
the date on which such three (3) Business Day-period is exceeded, being referred
to as "Event Date"), then, on the Event Date and on each monthly anniversary
----------
thereof until such time as the applicable Event is cured, the Company shall pay
to the Holder 2.5% of the aggregate Stated Value of all of the shares of
Preferred Stock purchased by such Holder under the Purchase Agreement in cash,
as liquidated damages and not as a penalty. The provisions of this Section are
not exclusive and shall in no way limit the Company's obligations hereunder.
(ii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall (a) pay a stock dividend or otherwise make a distribution
or distributions of shares of its Junior Securities or pari passu securities
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification and
exchange of the Common Stock any shares of capital stock of the Company, then
the Fixed Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
7
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights, warrants or options to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below, then the Fixed Conversion Price shall be multiplied
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights, warrants or
options, plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock offered for subscription or purchase. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right, warrant or option to purchase shares of Common Stock
the issuance of which resulted in an adjustment in the Conversion Price pursuant
to this Section 5(c)(iii), if any such right, warrant or option shall expire and
shall not have been exercised, the Conversion Price shall immediately upon such
expiration shall be recomputed and effective immediately upon such expiration
shall be increased to the price which it would have been (but reflecting any
other adjustments in the Conversion Price made pursuant to the provisions of
this Section 5 upon the issuance of other rights or warrants) had the adjustment
of the Conversion Price made upon the issuance of such rights, warrants, or
options been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights, warrants or options actually exercised.
(iv) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
any shares of Preferred Stock are outstanding, shall issue shares of Common
Stock or rights, warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock ("Common Stock
------------
Equivalents"), other than issuances pursuant to any (a) stockholder approved
-----------
stock option or stock purchase program solely to employees of the Company, (b)
any acquisition, licensing joint venture or strategic partnership not primarily
for the purpose of raising capital, or (c) conversion of any options, warrants
or other convertible securities outstanding on the Original Issue Date,
entitling any Person to acquire shares of Common Stock at a price per share less
than the Conversion Price, then the Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such Common Stock or such
Common Stock Equivalents plus the number of shares of Common Stock which the
offering price for such shares of Common Stock or Common Stock Equivalents would
purchase at the Conversion Price, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock so issued or issuable,
provided, that for purposes hereof, all shares of Common Stock that are issuable
--------
upon conversion, exercise or exchange of Common Stock Equivalents shall be
deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued.
(v) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iv) above), then in each such case the Fixed Conversion Price at which
each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Fixed Conversion Price in effect immediately prior
to the record date fixed for determination of stockholders entitled to receive
such distribution by a fraction of which the denominator shall be the Per Share
Market Value determined as of the record date mentioned above, and of which the
numerator shall be such Per
8
Share Market Value on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding shares of Common Stock as determined
by the Board of Directors in good faith; provided, however, that in the event of
-------- -------
a distribution exceeding ten percent (10%) of the net assets of the Company, if
the Holders of a majority in interest of the Preferred Stock dispute such
valuation, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
---------
good faith by the Holders of a majority in interest of the shares of Preferred
Stock then outstanding; and provided, further, that the Company, after receipt
-------- -------
of the determination by such Appraiser shall have the right to select an
additional Appraiser, in good faith, in which case the fair market value shall
be equal to the average of the determinations by each such Appraiser. In either
case the adjustments shall be described in a statement provided to the Holders
of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Conversion Price is adjusted pursuant
to Section 5(o)(ii), (iii), (iv), or (v) the Company shall promptly mail to each
Holder, a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(viii) In case of any reclassification of the Common Stock,
or any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property (other than compulsory share exchanges
which constitute Change of Control Transactions), the Holders of the Preferred
Stock then outstanding shall have the right thereafter to convert such shares
only into the shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(ix) If (a) the Company shall declare a dividend (or any
other distribution) on the Common Stock, (b) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (c) the
Company shall authorize the granting to all holders of Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any class
or of any rights, (d) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer of
all or substantially all of the assets of the Company, of any compulsory share
of exchange whereby the Common Stock is converted into other securities, cash or
property, or (e) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company; then the
Company shall cause to be filed at each office or agency maintained for the
purpose of conversion of Preferred Stock, and shall cause to be mailed to the
Holders at their last addresses as they shall appear upon the stock books of the
Company, at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a
9
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange. Holders are entitled to
convert shares of Preferred Stock during the 20-day period commencing the date
of such notice to the effective date of the event triggering such notice.
(x) In case of any (1) merger or consolidated of the Company with or
into another Person that would constitute a Change of Control Transaction, or
(2) sale by the Company of more than one-half of the assets of the Company (on
an as valued basis) in one or a series of related transactions, or (3) tender
or other offer or exchange (whether by the Company or another Person) pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, stock, cash or property of the Company or another
Person; then, if a Holder has not exercised its rights of redemption, if any,
under Section 7 hereof, such Holder shall have the right thereafter to (A) if
permitted under Section 7 hereof, exercise its rights of redemption under
Section 7 with respect to such event, (B) convert its shares of Preferred Stock
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such merger,
consolidation or sale, and such Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property
as the shares of Common Stock into which such shares of Preferred Stock could
have been converted immediately prior to such merger, consolidation or sales
would have been entitled, (C) in the case of a merger or consolidation, (x)
require the surviving entity to issue shares of convertible preferred stock or
convertible debentures with such aggregate stated value or in such face amount,
as the case may be, equal to the Stated Value of the shares of Preferred Stock
then held by such Holder, plus all accrued and unpaid dividends and other
amounts owing thereon, which newly issued shares of preferred stock or
debentures shall have terms identical (including with respect to conversion) to
the terms of the Preferred Stock (except, in the case of debentures, as may be
required to reflect the differences between debt and equity) and shall be
entitled to all of the rights and privileges of a Holder of Preferred Stock set
forth herein and the agreements pursuant to which the Preferred Stock was issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon conversion thereof), and (y) simultaneously with the
issuance of such convertible preferred stock or convertible debentures, shall
have the right to convert such instrument only into shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger or consolidation, or (D) in the event of an
exchange or tender offer or other transaction contemplated by clause (3) of this
Section, tender or exchange its shares of Preferred Stock for such securities,
stock, cash and other property receivable upon or deemed to be held by holders
of Common Stock that have tendered or exchanged their shares of Common Stock
following such tender or exchange, and such Holder shall be entitled upon such
exchange or tender to receive such amount of securities, cash and property as
the shares of Common Stock into which shares of Preferred Stock could have been
converted (taking into account all then accrued and unpaid dividends)
immediately prior to such tender or exchange would have been entitled as would
have been issued. In the case of clause (C), the conversion price applicable for
the newly issued shares of convertible preferred stock or convertible debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction, the Conversion Ratio
immediately prior to the effectiveness or closing date for such transaction and
the Conversion Price stated herein. The terms of any such merger, sale,
consolidation, tender or exchange shall include such terms so as to continue to
give the Holders of Preferred Stock the right to receive the securities, cash
and property set forth in this Section upon any conversion or redemption
following such event. This provision shall similarly apply to successive such
10
events.
(d) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of Common Stock, but
may if otherwise permitted, make a cash payment in respect of any final fraction
of a share based on the Per Share Market Value at such time. If the Company
elects not, or is unable, to make such a cash payment, the Holder of a share of
Preferred Stock shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(e) The issuance of certificates for Common Stock on conversion of
Preferred Stock and as payment of dividends in shares of Common Stock shall be
made without charge to the Holders thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such shares of Preferred Stock so converted.
(f) Shares of Preferred Stock converted into Common Stock or redeemed
in accordance with the terms hereof shall be canceled and may not be reissued.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company at the
facsimile telephone number or address of the principal place of business of the
Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
8:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
Section 6. Optional Redemption.
-------------------
(a) Subject to the provisions of this Section 6, the Company shall
have the right, exercisable upon five (5) Trading Days' notice (an "Optional
--------
Redemption Notice") to the Holders to redeem all or any portion of the shares of
-----------------
Preferred Stock which have not previously been redeemed, at a price equal to the
Optional Redemption Price (as defined below); provided, that, in order to be
valid an Optional Redemption Notice must have been delivered either (1) Within
three (3) Trading Days after any 90 consecutive Trading Day period during which
the average Per Share Market Value was less than the Fixed Conversion Price or
(ii) within one Trading Day after the Per Share Market Value for two (2)
consecutive Trading Days was less than $1.60. The Company shall not be entitled
to deliver an Optional Redemption Notice after the Effectiveness Date if: (i)
the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes is insufficient to satisfy the Company's
11
conversion obligations of all shares of Preferred Stock then outstanding, or
(ii) the Underlying Shares then outstanding are not registered for resale
pursuant to an effective Underlying Securities Registration Statement, or (iii)
the Common Stock is not then listed for trading on the NASDAQ, on a Subsequent
Market or the OTC Bulletin Board. The entire Optional Redemption Price shall be
paid in cash. A Holder may convert (and the Company shall honor such conversions
in accordance with the terms hereof) up to 25% of its shares of Preferred Stock
subject to an Optional Redemption Notice given after the Effectiveness Date,
provided that the Conversion Notice for such shares is delivered within 24 hours
following the receipt by such Holder of such an Optional Redemption Notice.
(b) Failure by the Company to pay any portion of the Optional
Redemption Price by the 6th Trading Day following the date of an Optional
Redemption Notice shall result in the invalidation ab initio if the unpaid
---------
portion of such optional redemption, and, notwithstanding anything herein to the
contrary, the Company shall thereafter have no further rights to optionally
redeem any shares of Preferred Stock. In such event, the Company shall, at the
option of the Holder, either, (i) not later than three (3) Trading Days from
receipt of Holder's request for such election, return to the Holder all of the
shares of Preferred Stock for which such Optional Redemption Price has not been
paid in full (the "Unpaid Redemption Shares") or (ii) convert of all or any
------------------------
portion of the Unpaid Redemption Shares in which event the Per Share Market
Value for such shares shall be the lower of the Per Share Market Value
calculated on the date the Optional Redemption Price was originally due and the
Per Share Market Value as of the Holder's written demand for conversion. If the
Holder elects option (ii) above, the Company shall within three (3) Trading Days
of its receipt of such election deliver to the Holder the shares of Common Stock
issuable upon conversion of the Unpaid Redemption Shares subject to such Holder
conversion demand and otherwise perform its obligations hereunder with respect
thereto.
(c) The "Optional Redemption Price" shall equal the sum of (i) the
-------------------------
Applicable Percentage (as defined below) multiplied by the aggregate Stated
Value of the shares of Preferred Stock to be redeemed, (ii) all then accrued and
unpaid dividends in respect of such shares of Preferred Stock and (iii) all
other amounts, costs, expenses and liquidated damages due in respect of such
shares of Preferred Stock. For the purposes hereof, "Applicable Percentage"
shall mean (x)(l) for optional redemptions not satisfying the requirements of
clause (y) of this paragraph, but for which the Optional Redemption Notice meets
the requirements of clause (1) of the first sentence of Section 6(a) and such
notice is given by October 31, 1999. 110%; and (2) for optional redemptions not
satisfying the requirements of clause (y) of this paragraph, but for which the
Optional Redemption Notice meets the requirements of clause (1) of the first
sentence of Section 6(a) and such notice is given after October 31, 1999,118%
and (y)(1) if the Optional Redemption Notice is given by October 31, 1999 and is
given within two (2) Trading Days after the second consecutive Trading Day on
which the Conversion Price is less than $1.60. 110%, and (2) if the Optional
Redemption NOtice is given after October 31, 1999 and is given within two (2)
Trading Days after the second consecutive Day on which the Conversion Price is
less than $1.60, 118%.
Section 7. Redemption Upon Triggering Events.
---------------------------------
Upon the occurrence of a Triggering Event, each Holder shall (in addition
to all other rights may have hereunder or under applicable law), have the right,
exercisable at the sole option of such Holder, to require the Company to redeem
all or a portion of the Preferred Stock then held by such Holder for a
redemption price, in cash, equal to the sum of (i) the Mandatory Redemption
Amount plus (ii) the product of (A) the number of Underlying Shares issued in
respect of conversions or as payment of dividends hereunder and then held by the
Holder and (B) the Per Share Market Value on the date such redemption is
demanded or the date the redemption price hereunder is paid in full, whichever
is greater (such sum, "Redemption Price"). The Redemption Price shall be due and
----------------
payable within (10) days of
12
the date on which the notice for the payment therefor is provided by a Holder.
If the Company fails to pay the redemption price hereunder in full pursuant to
this Section on the date such amount is due in accordance with this Section, the
Company will pay interest thereon at a rate of 18% per annum, accruing daily
from such date until the redemption price, plus all such interest thereon, is
paid in full. For purposes of this Section, a share of Preferred Stock is
outstanding until such date as the Holder shall have received Underlying Shares
upon a conversion (or attempted conversion) thereof that meets the requirements
hereof.
A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) the failure of an Underlying Securities Registration
Statement to be declared effective by the Commission on or prior to the 180th
day after the Original Issue Date;
(ii) if, during the Effectiveness Period, the effectiveness of
the Underlying Securities Registration Statement lapses for any reason for more
than an aggregate of three (3) Trading Days, or the Holder shall not be
permitted to resell Registrable Securities under the Underlying Securities
Registration Statement for more than an aggregate of three (3) Trading Days
(which need not be consecutive Trading Days);
(iii) the failure of the Common Stock to be listed for trading
on the NASDAQ or on a Subsequent Market or the suspension of the Common Stock
from trading on the NASDAQ or an a Subsequent Market, in either case, for more
than three (3) Trading Days (which need not be consecutive Trading Days);
(iv) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion hereunder
that comply with the provisions hereof prior to the 10th day after the
Conversion Date or the Company shall provide notice to any Holder, including by
way of public announcement, at any time, of its intention not to comply with
requests for conversion of any Preferred Stock in accordance with the terms
hereof.
(v) the Company shall be a party to any Change of Control
Transaction, shall agree to sell (in one or a series of related transactions)
all or substantially all of its assets (whether or not such sale would
constitute a Change of Control Transaction) or shall redeem more than a de
minimis number of Common Stock or other Junior Securities (other than
redemptions of Underlying Shares);
(vi) an Event shall not have been cured to the satisfaction of
the Holders prior to the expiration of sixty (60) days from the Event Date
relating thereto (other than an Event under Sections 5(c)(i)(c) and (c) hereof);
(vii) the Company shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-in within seven (7) days after notice
therefor is delivered hereunder; or
(viii) the Company shall not have received at least $1,500,000
either in a bona fide equity financing from any Person or in non-recurring
engineering fees from S3 Incorporated, in either case, by April 2, 1999.
13
Section 8. Definitions. For the purposes hereof, the following
-----------
terms shall have the following meanings:
"Change of Control Transaction" means the occurrence of any of (i) an
------------------------------
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(i) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity, consolidation or sale of all or substantially all of the assets
of the Company in one or a series of related transactions, or (iv) the execution
by the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Company's Common Stock, par value $.01 per
------------
share, and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"Conversion Ratio" means at any time, a fraction, the numerator of
----------------
which is Stated Value plus accrued but unpaid dividends but only to the extent
not paid in Common Stock in accordance with the terms hereof, and the
denominator of which is the Conversion Price at such time.
"Dividend Effectiveness Date" means the earlier to occur of (x) the
---------------------------
Effectiveness Date (as defined in the Registration Rights Agreement) for the
Preferred Stock and (y) the date that an Underlying Securities Registration
Statement relating to the Preferred Stock is declared effective by the
Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Junior Securities" means the Common Stock and all other equity
-----------------
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.
"Mandatory Redemption Amount" for each share of Preferred Stock means
---------------------------
the sum of (i) the greater of (A) the Stated Value and all accrued dividends
with respect to such share and (B) the product of (a) the Per Share Market Value
on the Trading Day immediately preceding (x) the date of the Triggering Event or
the Conversion Date, as the case may be, or (y) the date of payment in full by
the Company of the applicable redemption price, whichever is greater, and (b)
the Conversion Ratio calculated on the date of the Triggering Event, or the
Conversion Date, as the case may be, and (ii) all other amounts, costs, expenses
and liquidated damages due in respect of such share of Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance of any
-------------------
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
14
"Per Share Market Value" means on any particular date (a) the closing
----------------------
bid price per share of Common Stock on such date on the NASDAQ or on the
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ or
on such Subsequent Market on the date nearest preceding such date, or (b) if the
Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent
Market, the closing bid price for a shares of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock are not
then publicly traded the fair market value of a Common Share as determined by an
Appraiser selected in good faith by the Holders of a majority of the shares of
the Preferred Stock.
"Person" means a corporation, in association, a partnership,
------
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Preferred Stock Purchase
------------------
Agreement, dated the Original Issue Date, between the Company and the original
Holder.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement, dated the Original Issue Date, between the Company and the original
Holder.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Subsequent Market" means any of the New York Stock Exchange, American
-----------------
Stock Exchange or Nasdaq SmallCap Market.
"Trading Day" means (a) a day on which the Common Stock is traded on
-----------
the NASDAQ or on the Subacquent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock is not listed on the
NASDAQ or on a Subacquent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
-------- -------
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"Underlying Securities Registration Statement" means a registration
--------------------------------------------
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the recipient thereof, who
shall be named as a "selling stockholder" thereunder.
"Underlying Shares" means, collectively, the shares of Common Stock
-----------------
into which the Shares are convertible and the shares of Common Stock issuable
upon payment of dividends thereon in accordance with the terms hereof.
15
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 4% Series B
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.01 per share (the "Common Stock"), of Number Nine Visual Technology
------------
Corporation (the "Company") according to the conditions hereof, as of the date
-------
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Holder for any conversion except for such transfer taxes, if any.
Conversion calculations: _____________________________________________________
Date to Effect Conversion
_____________________________________________________
Number of shares of Preferred Stock to be Converted
_____________________________________________________
Number of shares of Common Stock to be Issued
_____________________________________________________
Applicable Conversion Price
_____________________________________________________
Signature
_____________________________________________________
Name
_____________________________________________________
Address
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and
---------
entered into as of March 31, 1999, between Number Nine Visual Technology
Corporation, a Delaware corporation (the "Company"), and KA Investments LDC, a
-------
Cayman Islands corporation (the "Purchaser ").
----------
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof between the Company and the
Purchaser (the "Purchase Agreement").
------------------
The Company and the Purchaser hereby agree as follows:
1. Definitions
-----------
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
------
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
---------- ----------- ----------
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government actions
to close.
"Certificate of Designation" shall have the meaning set forth in the
--------------------------
Purchase Agreement.
"Closing Date" shall have the meaning set forth in the Purchase
------------
Agreement.
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the Company's common stock, par value $.01 per
------------
share.
"Effectiveness Date" means the 90/th/ day following the Closing Date.
------------------
"Effectiveness Period" shall have the meaning set forth in Section
--------------------
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Filing Date" means the 30/th/ day following the Closing Date.
-----------
"Holder" or "Holders" means the holder or holders, as the case may be,
------ -------
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
-----------------
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
------------------
"Losses" shall have the meaning set forth in Section 5(a).
------
"Person" means an individual or a corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" means the Company's shares of 4% Series B
---------------
Convertible Preferred Stock, $.01 par value, to be issued to the Purchaser
pursuant to the Purchase Agreement.
"Proceeding" means an action, claim, suit, investigation or proceeding
----------
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
----------
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means the shares of Common Stock issuable (i)
----------------------
upon conversion in full of the Preferred Stock, (ii) as payment of dividends in
respect of the Preferred Stock, assuming all dividends are paid in shares of
Common Stock and that all shares of Preferred Stock remain outstanding for three
years, and (iii) upon exercise of the Warrants; provided, that in order to
--------
account for the fact that the number of shares of Common Stock
issuable upon conversion of the shares of Preferred Stock (and as the payment of
dividends thereon) is determined in part upon the market price of the Common
Stock prior to the time of conversion, Registrable Securities contemplated by
clauses (i) and (ii) above shall include (but not be limited to) a number of
shares of Common Stock equal to no less than 200% of the number of shares of
Common Stock into which the shares of Preferred Stock (together with the payment
of dividends thereon) are convertible, assuming such conversion occurred on the
Closing Date, the Filing Date or the date the Company files an acceleration
request with the Commission relating to the Registration Statement, whichever
yields the lowest Conversion Price (as defined in the Purchase Agreement),
provided, however, that in no event shall the number of Registrable Securities
-------- -------
exceed the number of shares of Common Stock that the Company is obligated to
issue upon conversion of the Preferred Stock (and as payment of dividends
thereon) pursuant to Sections 5(a)(iii)(B) and (C) of the Certificate of
Designation.
"Registration Statement" means the registration statement and any
----------------------
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
--------
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder..
"Special Counsel" means one special counsel to the Holders, for which
---------------
the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
--------------------------------------------------
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means, collectively, the Common Stock purchase warrant
--------
issued to the Purchaser pursuant to the Purchase Agreement and the Common Stock
purchase warrant issued to Brighton Capital Ltd. in connection with consulting
services provided to the Company.
-3-
2. Shelf Registration
------------------
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (or if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to by
the Company and by the Holders of Registrable Securities). The Company shall use
its best efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event prior to the Effectiveness Date, and shall use its best efforts to
keep such Registration Statement continuously effective under the Securities Act
until the date which is three years after the date that such Registration
Statement is declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold or
may be sold without volume restrictions pursuant to Rule 144(k) as determined by
the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent (the "Effectiveness
-------------
Period"), provided, however, that the Company shall not be deemed to have used
------ -------- -------
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in the
Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the Commission has not declared it
effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and, if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable Securities
which in the opinion of such managing underwriters can be sold, and such amount
shall be allocated pro rata among the Holders proposing to sell Registrable
Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering subject to the Company's right to approve
such underwriter (which may not be reasonably withheld or delayed). No Holder
may participate in any Underwritten Offering hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
-4-
3. Registration Procedures
-----------------------
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to by
the Company and by the Holders of Registrable Securities) which shall contain
the "Plan of Distribution" attached hereto as Annex A (except if otherwise
-------
directed by the Holders), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
-------- -------
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall, (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed, which documents (other than those incorporated or deemed
to be incorporated by reference) will be subject to the review of such Holders,
their Special Counsel and such managing underwriters, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as reasonably possible to any comments received from the
Commission with respect to the Registration Statement or any amendment thereto
and as promptly as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the
-5-
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) File additional Registration Statements if the number of
Registrable Securities at any time exceeds the number of shares of Common Stock
then registered in a Registration Statement. The Company shall have 30 days to
file such additional Registration Statements after its receipt of notice of the
requirement thereof which the Holders may give at any time when the Registrable
Securities exceeds 85% of the number of shares of Common Stock then registered
in a Registration Statement hereunder. In such event, the Registration
Statement required to be filed by the Company shall include no less than a
number of shares of Common Stock equal to, subject to the limitations on the
Company's obligation to issue shares of Common Stock pursuant to Sections
5(a)(iii)(B) and (C) of the Certificate of Designation, no less than 200% of the
number of shares of Common Stock into which all then outstanding shares of
Preferred Stock are convertible (assuming such conversion occurred on the Filing
Date for such Registration Statement or the date of the filing of the final
acceleration request therefor, whichever date yields a lower Conversion Price)
and any other Registrable Securities not then registered in a Registration
Statement.
(d) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters as promptly as reasonably possible
(and, in the case of (i)(A) below, not less than five (5) days prior to such
filing) and (if requested by any such Person) confirm such notice in writing no
later than one (1) Business Day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to
each of the Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time any of the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any
-6-
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(e) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters and such Holders reasonably agree should be included
therein, and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the Company
-------- -------
shall not be required to take any action pursuant to this Section 3(f) that
would, in the opinion of counsel for the Company, violate applicable law or be
materially detrimental to the business prospects of the Company.
(g) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(h) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(i) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
reasonably requests in writing, to keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and to do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
-------- -------
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take
-7-
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(j) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request.
(k) Upon the occurrence of any event contemplated by Section 3(d)(vi),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(l) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the Nasdaq National Market
("NASDAQ") or on any other stock market or trading facility on which the shares
------
of Common Stock are traded, listed or quoted (each a "Subsequent Market") as and
-----------------
when required pursuant to the Purchase Agreement.
(m) Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings, and confirm the same if and when requested;
(ii) in the case of an Underwritten Offering obtain and deliver copies thereof
to each Holder and the managing underwriters, if any, of opinions of counsel to
the Company and updates thereof addressed to each Holder and each such
underwriter, in form, scope and substance reasonably satisfactory to any such
managing underwriters and Special Counsel to the selling Holders covering the
matters customarily covered in opinions requested in Underwritten Offerings and
such other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, use its best reasonable
efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary
-8-
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to the Company in form and substance as are
customary in connection with Underwritten Offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling Holders and the under writers, if
any, than those set forth in Section 5 (or such other provisions and procedures
acceptable to the managing underwriters, if any, and holders of a majority of
Registrable Securities participating in such Underwritten Offering); and (v)
deliver such documents and certificates as may be reason ably requested by the
Holders of a majority of the Registrable Securities being sold, their Special
Counsel and any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to Section 3(m)(i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(n) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
-------- -------
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not bound by a
confidentiality agreement with the Company.
(o) Comply with all applicable rules and regulations of the
Commission.
(p) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement and as shall be
reasonably required to effect the registration of their Registrable Securities,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any
-9-
similar Federal statute then in force) the deletion of the reference to such
Holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(h) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(d) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Sections 3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or
3(d)(vi), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(k), or until it is advised in writing (the "Advice")
------
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
4. Registration Expenses
---------------------
-10-
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not pursuant
to an Underwritten Offering and whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, reasonable fees and
expenses (A) with respect to filings required to be made with the NASDAQ and any
Subsequent Market on which the Common Stock is then listed for trading, and (B)
in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
the Holders of a majority of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any, or
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders up to an aggregate of $7,500, (v) Securities Act liability insurance, if
the Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to the
terms hereof, the Company shall be responsible for all costs, fees and expenses
in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts and the costs
of printing prospectuses) and their legal counsel and accountants. By way of
illustration which is not intended to diminish from the provisions of Section
4(a), the Holders shall not be responsible for, and the Company shall be
required to pay the fees or disbursements incurred by the Company (including by
its legal counsel and accountants) in connection with, the preparation and
filing of a Registration Statement and related Prospectus for such offering, the
maintenance of such Registration Statement in accordance with the terms hereof,
the listing of the Registrable Securities in accordance with the requirements
hereof, and printing expenses incurred to comply with the requirements hereof.
5. Indemnification
---------------
-11-
(a) Indemnification by the Company. The Company shall,
------------------------------
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
------
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or
to the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
--------------------------
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by counsel
designated by the Holders to review such Registration Statement expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus,
or in any amendment or supplement thereto. In no event shall the liability of
any selling Holder hereunder be greater in
-12-
amount than the dollar amount of the net proceeds (net of brokerage commissions)
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
--------------------------------------
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
-----------------
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
------------------
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
--------
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
-13-
(d) Contribution. If a claim for indemnification under Section 5(a)
------------
or 5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
--- ----
allocation or by any other method of allo cation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
-14-
6. Miscellaneous
-------------
(a) Transferability. Registrable Securities may only be disposed of
---------------
pursuant to an effective Registration Statement, to the Company or pursuant to
an available exemption from or in a transaction not subject to, the registration
requirements of the Securities Act. Notwithstanding anything herein to the
contrary, the Registrable Securities may be transferred to an Affiliate (as
defined in Rule 405 under the Securities Act) of the Purchaser or to one or more
funds under common management with the Purchaser, and among any such Affiliates
or one or more funds, provided that any such transferee certifies to the Company
that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes. Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of the Purchaser under this Agreement.
In addition, the Company shall cooperate reasonably with the Purchaser and such
assignee or transferee in connection with such assignment or transfer in order
to permit such assignee or transferee to resell Registrable Securities under a
Registration Statement.
(b) Remedies. In the event of a breach by the Company or by a Holder,
--------
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(c) No Inconsistent Agreements. Neither the Company nor any of its
--------------------------
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Except as and to the extent specified in Schedule 6(c) hereto, neither the
-------------
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(d) No Piggyback on Registrations. Except as and to the extent
-----------------------------
specified in Schedule 6(c) hereto, neither the Company nor any of its security
-------------
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
-15-
(e) Piggy-Back Registrations. If at any time when there is not an
------------------------
effective Registration Statement covering all of the Registrable Securities the
Company shall determine to prepare and file with the Commission 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 (each as promulgated under the Securities Act) 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, then the Company
shall send to each holder of Registrable Securities written notice of such
determination and, if within twenty (20) days after receipt of such notice, any
such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that the Company shall not
-------- -------
be required to register any Registrable Securities pursuant to this Section 7(d)
that are eligible for sale pursuant to Rule 144(k) of the Commission.
In connection with any offering by the Company involving an
underwriting of shares of Common Stock to be issued for the account of a
stockholder of the Company other than a Holder, if such offering is one in which
a Holder has elected to participate pursuant to this Section 6(e) and the
managing underwriter has imposed a limitation on the number of shares of Common
Stock which may be included in any such registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution
of the shares of Common Stock and to maintain a stable market for the securities
of the Company, then the Company may cut-back the number of Registrable
Securities to be included in such registration statement on the following basis:
if the registration statement is for the account of a selling stockholder other
than a Holder, then all classes of the Company's stock other than the initiating
securityholder for whom such registration is intended shall first be cut-back,
provided, that all classes of the Company's stock other than the Series A
Convertible Preferred Stock and the Registrable Securities shall be cut back in
full prior to any cut-back to the Series A Preferred and the Registrable
Securities and, thereafter, the holders of the Series A Convertible Preferred
Stock and the Registrable Securities hereunder shall be cut-back pro rata, based
upon the number of shares of Common Stock and the Registrable Securities then
held by such participating securityholder. The Holders will not be subject to
any underwriter cutback in the event of any underwritten offering of Common
Stock by the Company on a primary basis.
(f) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
-------- -------
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided,
--------
-16-
however, that the provisions of this sentence may not be amended, modified, or
-------
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(g) Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 8:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Number Nine Visual Technology Corporation
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇
Facsimile No.:
Attn: Chief Financial Officer
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: KA Investments LDC
c/o Deephaven Capital Management LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq. and
▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
-17-
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock transfer books of
the Company or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
(h) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(i) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
(j) Governing Law. The corporate laws of the State of Delaware shall
-------------
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein are cumulative
-------------------
and not exclusive of any remedies provided by law.
-18-
(l) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the
---------------------------------------------
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
-19-
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
By:
-------------------------------------
Name:
Title:
KA INVESTMENTS LDC
By:
-------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
By:_____________________________________
Name:
Title:
KA INVESTMENTS LDC
By:/s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Name: [SIGNATURE ILLEGIBLE]
Title:[ILLEGIBLE]
Annex A
-------
PLAN OF DISTRIBUTION
--------------------
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
. ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers;
. block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
. purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
. an exchange distribution in accordance with the rules of the applicable
exchange;
. privately negotiated transactions;
. short sales;
. broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
. a combination of any such methods of sale; and
. any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a Selling Stockholder defaults on
a margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not
22
expect these commissions and discounts to exceed what is customary in the types
of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
23
SCHEDULE 6(C) TO THE REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------
Silicon Graphics, Inc. ("SGI") currently owns 3,350,894 shares of Series A
Preferred Stock, $.01 par value per share, (the "Series A Preferred") and a
warrant to purchase for a period of three years commencing on August 11, 1998 at
an exercise price of $2.75 per share up to that number of shares of Series A
Preferred Stock equal to 3% of the Company's then issued and outstanding Common
Stock at the time of exercise (the shares underlying the Warrant together with
the Series A Preferred, "the SGI Shares"). The Company and SGI have entered into
the following agreements regarding the SGI Shares:
1. An Investor Rights Agreement dated August 11, 1998 by and between the
Company and SGI.
2. A Registration Rights Agreement by and between the Company and SGI dated
March 31, 1999 attached to Schedule 6(c) hereto.
9
EXHIBIT C
FORM OF LEGAL OPINION
1. Each of the Company and its Subsidiaries is a corporation, duly
incorporated, validly existing and in corporate good standing under the laws of
the jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than the
Subsidiaries. Each of the Company and the Subsidiaries is duly qualified to do
business and is in corporate good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary or where the failure to so qualify would
not have a materially adverse effect on the Company and/or its Subsidiaries.
2. The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company. Each of the
Transaction Documents has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited as stated in this opinion.
3. Except as set forth in the Disclosure Schedules to the Purchase
Agreement, no shares of common stock of the Company, par value $.01 per share
("Common Stock"), are entitled to preemptive or similar rights.
------------
4. The Shares and the Warrant have been duly authorized and, when paid
for and issued in accordance with the terms of the Purchase Agreement shall have
been validly issued, fully paid and nonassessable.
5. The Company has duly authorized (subject to shareholder approval as
contemplated by Section 5 of the Certificate of Designation) and reserved for
issuance the Initial Minimum as required pursuant to the terms of the Purchase
Agreement, the Certificate of Designation and the Warrant, respectively. When
issued by the Company in accordance with the terms of the Purchase Agreement,
the Certificate of Designation and the Warrant (as the case may be), such
Underlying Shares will be validly issued, fully paid and nonassessable.
6. The execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated by such agreements do not and will not (i) conflict with or violate
any provision of its Certificate of Incorporation or Bylaws, (ii)(A) except as
set forth in the Disclosure Schedule to the Purchase
Agreement, 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 other written instrument relating to indebtedness of the
Company or instrument to which the Company is a party and filed by the Company
with the Securities and Exchange Commission since January 1, 1997, or (B) to our
knowledge, conflict with, or constitute a default under any other material
agreements to which the Company is a party, or (iii) result in (a) a violation
of any law, rule or regulation (other than state and foreign blue sky laws), or
(b) any order, judgment, injunction, decree or other restriction, to our
knowledge, of any court or governmental authority to which the Company is
subject, or by which any property or asset of the Company is bound or affected
or any other restriction of which we have knowledge. To our knowledge, the
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, the violation of which
would have a materially adverse effect on the Company.
7. Other than the Required Approvals, neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
or make any filing or registration with, any court or other Federal, state,
local or other governmental authority or other person in connection with the
execution, delivery and performance by the Company of the Transaction Documents.
Notwithstanding the foregoing, no opinion is provided hereunder as to whether
the issuance of the Shares or the Warrant to the Purchasers requires a filing
with the U.S. Department of Justice in accordance with the provisions of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
8. To our knowledge, the Company has filed all reports required to be
filed by it under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (collectively, the "SEC Documents") on a timely
basis, or has received a valid extension of such time of filing and made such
filing within the applicable grace period. As of their respective dates, the SEC
Documents complied in all material respects as to form with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
9. Assuming the accuracy of the representations and warranties of the
Company set forth in Section 2.1 of the Purchase Agreement and of the Purchaser
set forth in Section 2.2 of the Purchase Agreement, the offer, issuance and sale
of the Shares and the Warrant and the offer, issuance and sale of the Underlying
Shares to the Purchasers pursuant to the Purchase Agreement, the Certificate of
Designation and the Warrant are exempt from the registration requirements of the
Securities Act.
EXHIBIT D
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
WARRANT
-------
Dated: March 31, 1999
Number Nine Visual Technology Corporation, a Delaware corporation (the
"Company"), hereby certifies that, for value received, KA Investments LDC, or
its registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 195,000 shares of Common
Stock, $.01 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") at an
exercise price equal to $3.45 per share (as adjusted from time to time as
provided in Section 9, the "Exercise Price"), at any time and from time to time
from and after the date hereof and through and including March 31, 2002 (the
"Expiration Date"), and subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this
-----------------------
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
2. Registration of Transfers and Exchanges.
---------------------------------------
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at the office specified in or pursuant to Section 3(b).
Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
---------------------------------
(a) This Warrant shall be exercisable by the registered Holder on
any business day before 8:00 P.M., New York City time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
8:00 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 12 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated
-2-
by the Holder to receive Warrant Shares shall be deemed to have become holder of
record of such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety or,
from time to time, for a portion of the number of Warrant Shares. If less than
all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. During the Effectiveness Period
-----------------------------
(as defined in the Registration Rights Agreement, of even date herewith, between
the Company and the original Holder), the Company may not file any registration
statement with the Securities and Exchange Commission (other than registration
statements of the Company filed on Form S-8 or Form S-4, each as promulgated
under the Securities Act, pursuant to which the Company is registering
securities pursuant to a Company employee benefit plan or pursuant to a merger,
acquisition or similar transaction including supplements thereto, but not
additionally filed registration statements in respect of such securities) at any
time when there is not an effective registration statement covering the resale
of the Warrant Shares and naming the Holder as a selling stockholder thereunder,
unless the Company provides the Holder with not less than 20 days notice of its
intention to file such registration statement and provides the Holder the option
to include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with an effective registration statement or upon the Expiration Date. The
Company will pay all registration expenses in connection therewith.
5. Demand Registration Rights. At any time during the term of this
--------------------------
Warrant when the Warrant Shares are not registered pursuant to an effective
registration statement, the Holder may make a written request for the
registration under the Securities Act (a "Demand Registration"), of all of the
Warrant Shares (the "Registrable Securities"), and the Company shall use its
best efforts to effect such Demand Registration as promptly as possible, but in
any case within 90 days thereafter. Any request for a Demand Registration shall
specify the aggregate number of Registrable Securities proposed to be sold and
shall also specify the intended method of disposition thereof. The right to
cause a registration of the Registrable Securities under this Section 5 shall be
limited to one such registration. In any registration initiated as a Demand
Registration, the Company will pay all of its registration expenses in
-3-
connection therewith. A Demand Registration shall not be counted as a Demand
Registration hereunder until the registration statement filed pursuant to the
Demand Registration has been declared effective by the Securities and Exchange
Commission and maintained continuously effective for a period of at least 360
days or such shorter period when all Registrable Securities included therein
have been sold in accordance with such registration statement, provided, however
that any days on which such registration statement is not effective or on which
the Holder is not permitted by the Company or any governmental authority to sell
Warrant Shares under such registration statement shall not count towards such
360 day period.
6. Payment of Taxes. The Company will pay all U.S. documentary
----------------
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost,
----------------------
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it
-----------------------------
will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant
-------------------
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9. Upon each such adjustment of the
Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant
-4-
Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 9(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of
-5-
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Company's independent certified public accountants that
regularly examines the financial statements of the Company (an "Appraiser").
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock for a consideration per
share less than the Exercise Price then in effect, other than issuances pursuant
to any (a) stockholder approved stock option or stock purchase program solely to
employees of the Company, (b) any acquisition, licensing joint venture or
strategic partnership not primarily for the purpose of raising capital, or (c)
conversion of any options, warrants or other convertible securities outstanding
on the date hereof, then, forthwith upon such issue or sale, the Exercise Price
shall be reduced to the price (calculated to the nearest cent) determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of (i) the number of shares of
Common Stock outstanding immediately prior to such issuance, and (ii) the number
of shares of Common Stock which the aggregate consideration received (or to be
received, assuming exercise or conversion in full of such rights, warrants and
convertible securities) for the issuance of such additional shares of Common
Stock would purchase at the Exercise Price, and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding immediately after
the issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made.
(e) For the purposes of this Section 9, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record of
-----------
the holders of its Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
-6-
(g) Whenever the Exercise Price is adjusted pursuant to Section
9(c) above, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case the adjustment shall be
equal to the average of the adjustments recommended by each of the Appraiser and
such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(h) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which
the Company is a party, any sale or transfer of
all or substantially all of the assets of the
Company, or any compulsory share exchange
whereby the Common Stock is converted into
other securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
-7-
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
-------- -------
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Payment of Exercise Price. The Holder may pay the Exercise Price
-------------------------
in one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately
-------------
available funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant
-----------------
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued
to the Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the
Common Stock for the five (5) trading days immediately
prior to (but not including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Fractional Shares. The Company shall not be required to issue or
-----------------
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant
-8-
so presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 11, be issuable on the exercise of this Warrant, the
Company shall pay an amount in cash equal to the Exercise Price multiplied by
such fraction.
12. Notices. Any and all notices or other communications or
-------
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 8:00 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 8:00 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Chief Financial
Officer, or to facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇, or (ii) if to the Holder, to the
Holder at the address or facsimile number appearing on the Warrant Register or
such other address or facsimile number as the Holder may provide to the Company
in accordance with this Section 12.
13. Warrant Agent. The Company shall serve as warrant agent under
-------------
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.
14. Miscellaneous.
-------------
(a) This Warrant shall be binding on and inure to the benefit of
the parties hereto and their respective successors and assigns. This Warrant may
be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
-9-
(c) The corporate laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-10-
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
NUMBER NINE VISUAL TECHNOLOGY CORPORATION
By:
-------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Number Nine Visual Technology Corporation:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Number
Nine Visual Technology Corporation and , if such Holder is not utilizing the
cashless exercise provisions set forth in this Warrant, encloses herewith
$________ in cash, certified or official bank check or checks, which sum
represents the aggregate Exercise Price (as defined in the Warrant) for the
number of shares of Common Stock to which this Form of Election to Purchase
relates, together with any applicable taxes payable by the undersigned pursuant
to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR
TAX IDENTIFICATION NUMBER
_____________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Dated:______, _____ Name of Holder:
(Print)___________________________
(By:)_____________________________
(Name:)
(Title:)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Number Nine Visual
Technology Corporation to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of Number Nine
Visual Technology Corporation with full power of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
EXHIBIT E
TRANSFER AGENT INSTRUCTIONS
Ladies and Gentlemen:
Reference is made to that certain Convertible Preferred Stock Purchase
Agreement (the "PURCHASE AGREEMENT") between Number Nine Visual Technology
Corporation, a Delaware corporation (the "COMPANY"), and the buyer named
therein (the "HOLDER") pursuant to which the Company is issuing to the Holder
its shares of 4% Series B Convertible Preferred Stock, par value $.01 per
share (the "PREFERRED SHARES"), and a Common Stock purchase warrant
(the "WARRANT") which shall be convertible and exercisable, respectively,
into shares of the Common Stock issuable upon conversion of the Preferred
Shares, payment of dividends thereon, and upon exercise of the Warrant are
collectively referred to herein as "UNDERLYING SHARES."
This letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent for the Company with respect to
its Common Stock at such time) to issue Underlying Shares from time to time
upon notice from the Company to issue such Underlying Shares. So long as you
have previously received (x) an opinion of the Company's outside counsel
substantially in the form of EXHIBIT 1 attached hereto (which the Company shall
direct be delivered to you by such outside counsel upon the effectiveness of the
registration statement covering resales of Underlying Shares) stating that a
registration statement covering resales of Underlying Shares has been declared
effective by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and that Underlying Shares may be issued (or reissued
if they have been issued at a time when there was not such an effective
registration statement) or resold without any restrictive legend
(the "OPINION") and (y) a copy of such registration statement, then certificates
representing Underlying Shares shall not bear any legend restricting transfer
of Underlying Shares thereby and should not be subject to any stop-transfer
restriction. Provided, however, that if you have not previously received a
copy of the Opinion and such registration statement, then the certificates
representing Underlying Shares shall bear the following legend.
-1-
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
and, provided, further, that the Company may, from time to time, notify you to
place stop-transfer restrictions on the certificates for Underlying Shares in
the event, but only in the event, a registration statement covering Underlying
Shares is subject to amendment for events then current.
Please be advised that the Holder has relied upon this instruction letter
as an inducement to enter into the Purchase Agreement and, accordingly, the
Holder is a third party beneficiary to these instructions, provided, that any
rights the Holder may have may only be exercised against the Company.
-2-
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 (▇▇▇) ▇▇▇-▇▇▇▇.
Very truly yours,
Number Nine Visual Technology
Corporation
By:______________________________
Name:____________________________
Title:___________________________
ACKNOWLEDGED:
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
-3-
EXHIBIT I
[FORM OF OUTSIDE COUNSEL OPINION]
[ADDRESSEE]
[ADDRESS]
To Whom It May Concern:
The Registration Statement on Form S-3 (File No. 333-__________) of Number
Nine Visual Technology Corporation (the "Registration Statement") was declared
effective at ___:_____ __.M. Eastern Time on ___________, 1999. Upon issuance of
the Underlying Shares referred to in the Company's instruction letter attached,
you are authorized to issue certificates for the Company's common stock without
restrictive legends.
Very truly yours,
-4-