SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 13, 2000 (this
"Agreement"), is entered into by and between ▇▇▇▇ Computer Corporation, a
Virginia corporation (the "Company"), and Briarcliff Investors LLC, a
Delaware limited liability company.
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemptions from registration provided by
Regulation D ("Regulation D") promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Securities Act"), and/or Section 4(2) of the Securities Act; and
WHEREAS, the Purchaser wishes to purchase, and the Company wishes to
issue and sell, upon the terms and conditions of this Agreement for an
aggregate purchase price of three million dollars ($3,000,000), (i) three
thousand (3,000) shares (the "Shares") of the Company's 5% Convertible Series
A Preferred Stock, stated value one thousand dollars ($1,000) per share, par
value $.001 per share (the "Preferred Stock") which shall be governed by the
Certificate of Designations attached hereto as Exhibit A (the "Certificate of
Designations") and (ii) warrants ("Stock Purchase Warrants") to purchase two
hundred forty seven thousand five hundred and twenty-five (247,525) shares
(the "Warrants") of the Company's common stock, par value $.001 per share
(the "Common Stock"); and
WHEREAS, the Series A Preferred Stock shall be convertible into shares
of the Company's Common Stock on the terms set forth in the Certificate of
Designations, and the Stock Purchase Warrants (which shall be in
substantially the form attached as EXHIBIT B) may be exercised for the
purchase of Common Stock, on the terms set forth therein; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
PURCHASE OF SHARES AND WARRANTS. Purchaser hereby agrees to purchase
from the Company, and the Company hereby agrees to issue and sell to the
Purchaser, the Shares and the Warrants for an aggregate purchase price of
three million dollars ($3,000,000) which shall be payable on the Closing Date
(as defined herein) in immediately available funds.
CLOSINGS. The Shares and the Warrants to be purchased by Purchaser
hereunder, in definitive form, and in such denominations as Purchaser or its
representative, if any, may request upon at least twenty-four hours' prior
notice to the Company, shall be delivered by or on behalf of the Company for
the account of Purchaser, against payment by the Purchaser of the aggregate
purchase price of three million dollars ($3,000,000) therefor by wire
transfer to an account of the Company, all at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, by 5:00 PM, New York time on the date
hereof, or at such other time and date as Purchaser or their representative,
if any, and the Company may agree upon in writing, such date being referred
to herein as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION
The Purchaser represents and warrants to, and covenants and agrees
with, the Company as follows:
a. The Purchaser is (i) experienced in making investments of the kind
described in this Agreement and the related documents, (ii) able, by reason
of the business and financial experience of its management, to protect its
own interests in connection with the transactions described in this Agreement
and the related documents, and (iii) able to afford the entire loss of its
investment in the Shares and the Warrants.
b. All subsequent offers and sales of the Shares and the Warrants and
the Common Stock issuable upon conversion or exercise of, or in lieu of
dividend payments on, the Shares and the Warrants shall be made pursuant to
an effective registration statement under the Securities Act or pursuant to
an applicable exemption from such registration.
c. The Purchaser understands that the Shares and the Warrants are being
offered and sold to it in reliance upon exemptions from the registration
requirements of the United States federal securities laws, and that the
Company is relying upon the truth and accuracy of the Purchaser's
representations and warranties, and the Purchaser's compliance with its
agreements, each as set forth herein, in order to determine the availability
of such exemptions and the eligibility of the Purchaser to acquire the Shares
and the Warrants.
d. The Purchaser: (A) has been provided with sufficient information with
respect to the business of the Company and such documents relating to the
Company as the Purchaser has requested and Purchaser has carefully reviewed
the same including, without limitation, the Company's Form 10-K for the
fiscal year ended October 31, 1999 filed with the Securities and Exchange
Commission (the "COMMISSION"), (B) has been provided with such additional
information with respect to the Company and its business and financial
condition as the Purchaser, or the Purchaser's agent or attorney, has
requested, and (C) has had access to management of the Company and the
opportunity to discuss the information provided by management of the Company
and any questions that the Purchaser had with respect thereto have been
answered to the full satisfaction of the Purchaser.
e. The Purchaser has the requisite corporate power and authority to
enter into this Agreement and the registration rights agreement, dated as of
the date hereof, between the Company and the Purchaser (the "Registration
Rights Agreement").
f. This Agreement and the Registration Rights Agreement and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Purchaser; and such agreements, when executed and delivered
by each of the Purchaser and the Company will each be a valid and binding
agreement of the Purchaser, enforceable in accordance with their
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respective terms, except to the extent that enforcement of each such
agreement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and to general principles of
equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Virginia. Except
as set forth on SCHEDULE 3(a), each of the Company's subsidiaries, if any, is
a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction. Each of the Company and its
subsidiaries, if any, is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a material
adverse effect on the Company and its subsidiaries taken as a whole. SCHEDULE
3(a) lists all subsidiaries of the Company and, except as noted therein, all
of the outstanding capital stock of all such subsidiaries is owned of record
and beneficially by the Company.
b. CAPITALIZATION. On the date hereof, the authorized capital of the
Company consists of 20,000,000 shares of Common Stock, par value $.001 per
share, of 9,424,680 shares are issued and outstanding; and 2,000,000 shares
of Preferred Stock, par value $.001 per share, of which no shares are issued
and outstanding. Schedule 3(b) sets forth all of the options, warrants and
convertible securities of the Company, and any other rights to acquire
securities of the Company (collectively, the "Derivative Securities") which
are outstanding on the date hereof, including in each case (i) the name and
class of such Derivative Securities, (ii) the issue date of such Derivative
Securities, (iii) the number of shares of Common Stock of the Company into
which such Derivative Securities are convertible as of the date hereof, (iv)
the conversion or exercise price or prices of such Derivative Securities as
of the date hereof, (v) the expiration date of any conversion or exercise
rights held by the owners of such Derivative Securities and (vi) any
registration rights associated with such Derivative Securities or outstanding
Common Stock.
c. CONCERNING THE COMMON STOCK AND THE WARRANTS. The Shares, the
Warrants and Common Stock issuable upon conversion of, or in lieu of dividend
payments on, the Shares, and upon exercise of the Warrants when issued, shall
be duly and validly issued, fully paid and non-assessable, will not be
subject to preemptive rights and will not subject the holder thereof to
personal liability by reason of being such a holder. There are currently no
preemptive rights of any stockholder of the Company, as such, to acquire the
Shares, the Warrants or the Common Stock issuable to the Purchaser pursuant
to the terms of the Shares and the Warrants.
d. REPORTING COMPANY STATUS. The Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"). The Company has duly and timely filed all materials and documents
required to be filed within the last twelve months pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange Act except
that its Form 10-K for the year ended October 31, 1999 was not timely filed.
The Common Stock is listed and traded on the Nasdaq National Market, and the
Company is not
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aware of any pending or contemplated action or proceeding of any kind to
suspend the trading of the Common Stock except for the notice received from
Nasdaq dated February 18, 2000.
e. AUTHORIZED SHARES. The Company has available a sufficient number of
authorized and unissued shares of Common Stock as may be necessary to effect
conversion of the Shares and the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common
Stock of the issuance of shares of Common Stock upon the conversion of the
Shares and the exercise of the Warrants. The Company further acknowledges
that its obligation to issue shares of Common Stock upon conversion of the
Shares and upon exercise of the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company and notwithstanding
the commencement of any case under 11 U.S.C. Section 101 ET SEQ. (the
"BANKRUPTCY CODE").
f. LEGALITY. The Company has the requisite corporate power and authority
to enter into this Agreement and the Registration Rights Agreement, and to
issue and deliver the Shares, the Warrants and the Common Stock issuable upon
conversion of, or in lieu of dividend payments on, the Shares and the
exercise of the Warrants.
g. TRANSACTION AGREEMENTS. This Agreement, the Registration Rights
Agreement, the Certificate of Designations and the Stock Purchase Warrants
(collectively, the "Primary Documents"), and the transactions contemplated
hereby and thereby, have been duly and validly authorized by the Company;
this Agreement has been duly executed and delivered by the Company and this
Agreement is, and the other Primary Documents, when executed and delivered by
the Company, will each be, a valid and binding agreement of the Company,
enforceable in accordance with their respective terms, except to the extent
that enforcement of each of the Primary Documents may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity.
h. NON-CONTRAVENTION. The execution and delivery of this Agreement and
each of the other Primary Documents, and the consummation by the Company of
the transactions contemplated by this Agreement and each of the other Primary
Documents, does not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under,
the Articles of Incorporation or By-laws of the Company, or any material
indenture, mortgage, deed of trust or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which they or any of
their properties or assets are bound, or any existing applicable law, rule,
or regulation or any applicable decree, judgment or order of any court or
United States or foreign federal or state regulatory body, administrative
agency, or any other governmental body having jurisdiction over the Company,
its subsidiaries, or any of their properties or assets, other than those
which have been waived or satisfied on or prior to the Closing Date. Neither
the filing of the registration statement required to be filed by the Company
pursuant to the Registration Rights Agreement nor the offering or sale of the
Shares or the Warrants as contemplated by this Agreement, and the shares of
Common Stock into which such securities may be converted or exercised, as
applicable, gives rise to any rights, other than those which have been waived
or satisfied on or prior to the Closing Date, for or relating to the
registration of any shares of the Common Stock.
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i. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be
obtained by the Company for the entry into or the performance of this
Agreement and the other Primary Documents.
j. SEC FILINGS. None of the reports or documents filed by the Company
with the Commission (the "SEC Documents") contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein, or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
k. STABILIZATION. Neither the Company, nor any of its affiliates, has
taken or may take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock.
l. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company's SEC
Documents, since October 31, 1999, there has been no material adverse change
nor any material adverse development in the business, properties, operations,
financial condition, prospects, outstanding securities or results of
operations of the Company.
m. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser (i) that could reasonably be expected
to have a material adverse effect upon the condition (financial or otherwise)
or the earnings, business affairs, properties or assets of the Company or
(ii) that could reasonably be expected to materially and adversely affect the
ability of the Company to perform the obligations set forth in the Primary
Documents. The representations and warranties of the Company set forth in
this Agreement (and the schedules thereto) do not contain any untrue
statement of a material fact or omit any material fact necessary to make the
statements contained herein, in light of the circumstances under which they
were made, not misleading.
n. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company has good and
marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional
sale agreements, encumbrances or charges created in the ordinary course of
business.
o. PATENTS AND OTHER PROPRIETARY RIGHTS. The Company has sufficient
title and ownership of all patents, trademarks, service marks, trade names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of its business as now conducted and as proposed to
be conducted, and such business does not and would not conflict with or
constitute an infringement on the rights of others.
p. PERMITS. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now conducted,
the lack of which would materially
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and adversely affect the business or financial condition of the Company. The
Company is not in default in any respect under any of such franchises,
permits, licenses or similar authority.
q. ABSENCE OF LITIGATION. Except as disclosed in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of
the Company or any of its subsidiaries, threatened against or affecting the
Company or any of its subsidiaries, in which an unfavorable decision, ruling
or finding would have a material adverse effect on the properties, business,
condition (financial or other) or results of operations of the Company and
its subsidiaries, taken as a whole, or the transactions contemplated by the
Primary Documents, or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, the Primary Documents.
r. NO DEFAULT. Each of the Company and its subsidiaries is not in
default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its property
may be bound.
s. TRANSACTIONS WITH AFFILIATES. Except as disclosed in the Company's
public filings with the Commission, there are no agreements, understandings
or proposed transactions between the Company and any of its officers,
directors or affiliates that, had they existed on October 31, 1999, would
have been required to be disclosed in the Company's 1999 Annual Report to
stockholders.
t. EMPLOYMENT MATTERS. The Company is in compliance in all respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA)
for which the Company would have any liability; the Company has not incurred
and does not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification.
u. INSURANCE. The Company maintains property and casualty, general
liability, personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate, consistent with
industry standards and the Company's historical claims experience. The
Company has not received notice from, and has no knowledge of any threat by,
any insurer (that has issued any insurance policy to the Company) that such
insurer intends to deny coverage under or cancel, discontinue or not renew
any insurance policy covering the Company or any of its Subsidiaries
presently in force.
v. TAXES. All applicable tax returns required to be filed by the Company
and each of its subsidiaries have been prepared and filed in compliance with
all applicable laws, or if not yet
6
filed have been granted extensions of the filing dates which extensions have
not expired, and all taxes, assessments, fees and other governmental charges
upon the Company, its subsidiaries, or upon any of their respective
properties, income or franchises, shown in such returns and on assessments
received by the Company or its subsidiaries to be due and payable have been
paid, or adequate reserves therefor have been set up if any of such taxes are
being contested in good faith; or if any of such tax returns have not been
filed or if any such taxes have not been paid or so reserved for, the failure
to so file or to pay would not in the aggregate have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries, taken as a whole.
w. FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
directors, officers or other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
bribe, rebate, payoff, influence payment, kickback or other similar payment
to any person.
x. INTERNAL CONTROLS. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
y. INVESTMENT COMPANY ACT. The Company is not conducting, and will not
conduct, its business in a manner which would cause it to become, an
"investment company," as defined in Section 3(a) of the Investment Company
Act of 1940, as amended.
z. AGENT FEES. Except for Cardinal Securities, L.L.C., whose fees and
expenses shall be paid by the Company, the Company has not incurred any
liability for any finder's or brokerage fees or agent's commissions in
connection with the offer and sale of the transactions contemplated by this
Agreement.
aa. PRIVATE OFFERING. Subject to the accuracy of the Purchaser's
representations and warranties set forth in Section 2 hereof, (i) the offer,
sale and issuance of the Shares and the Warrants, (ii) the issuance of Common
Stock in lieu of dividend payments on the Shares, and (iii) the conversion
and/or exercise of such securities into shares of Common Stock, each as
contemplated by the Primary Documents are exempt from the registration
requirements of the Securities Act. The Company agrees that neither the
Company nor anyone acting on its behalf will offer any of the Preferred
Stock, the Stock Purchase Warrants or any similar securities for issuance or
sale, or solicit any offer to acquire any of the same from anyone so as to
render the issuance and sale of such securities subject to the registration
requirements of the Securities Act. The Company has not offered or sold the
Preferred Stock or the Stock Purchase Warrants by any
7
form of general solicitation or general advertising, as such terms are used
in Rule 502(c) under the Securities Act.
bb. YEAR 2000 PROCESSING. The computer systems used by the Company and
its subsidiaries (the "Systems"), both hardware and software, are in good
working order. As of the date of this Agreement, the Company has experienced
no disruptions in its business or operations as a result of the inability of
its information systems to process date and time data from, into and beyond
the year 2000.
cc. ENVIRONMENTAL MATTERS. Neither the Company and its subsidiaries, nor
any predecessor in interest nor, to the Company's knowledge, after due
inquiry, any other person has ever caused or permitted any Hazardous Material
(as defined below) to be released, treated or disposed of on, at, under or
within any real property owned, leased or operated by the Company and its
subsidiaries or any predecessor in interest, and no such real property has
ever been used (either by the Company and its subsidiaries, any predecessor
in interest or, to the Company's knowledge, after due inquiry, by any other
person) as a treatment, storage or disposal site for any Hazardous Material.
The Company has no liabilities with respect to Hazardous Materials, and to
the knowledge of the Company, after due inquiry, no facts or circumstances
exist which could give rise to liabilities with respect to Hazardous
Materials, which could have any reasonable likelihood of having a material
adverse effect on the Company. For purposes of this Agreement "Hazardous
Materials" shall mean (a) any pollutants or contaminations, (b) any asbestos
or insulation or other material composed of or containing asbestos and (c)
any petroleum product and any hazardous, toxic or dangerous waste, substance
or material defined as such in, or for purposes of, the Comprehensive
Environmental Response, Compensation and Liability Act, any so-called
"Superfund" or "Superlien" law, or (d) any other applicable federal, state,
local or other statute, law, ordinance, code, rule, regulation, order or
decree concerning the protection of human health or the environment or
otherwise regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect.
dd. INTELLECTUAL PROPERTY. Except as set forth in the SEC Documents, to
the best of the Company's knowledge, each of the Company and its subsidiaries
owns or possesses adequate rights to use all material patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names
and copyrights which are described in the SEC Documents; except as set forth
in the SEC Documents, the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names and
copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business of
the Company and its subsidiaries, taken as a whole, as presently conducted;
and, except as set forth in the SEC Documents, the Company has not received
any notice of, and has no knowledge of, any infringement of or conflict with
the asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names
and copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect
on the condition (financial or otherwise), earnings, operations, or business
of the Company and its subsidiaries, taken as a whole, as presently
conducted.
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4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
a. TRANSFER RESTRICTIONS. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, (1) neither the Shares, the
Warrants nor the Common Stock issuable upon conversion of, or in lieu of
dividend payments on, the Shares or upon exercise of the Warrants, have been,
or are being, registered under the Securities Act, and such securities may
not be transferred unless (A) subsequently registered thereunder or (B) they
are transferred pursuant to an exemption from such registration; and (2) any
sale of the Shares, the Warrants or the Common Stock issuable upon conversion
or exchange thereof (collectively, the "Securities") made in reliance upon
Rule 144 under the Securities Act may be made only in accordance with the
terms of said Rule. The provisions of Section 4(a) and 4(b) hereof, together
with the rights of the Purchaser under this Agreement and the other Primary
Documents, shall be binding upon any subsequent transferee of the Preferred
Stock and the Stock Purchase Warrants.
b. RESTRICTIVE LEGEND. The Purchaser acknowledges and agrees that, until
such time as the Securities shall have been registered under the Securities
Act or the Purchaser demonstrates to the reasonable satisfaction of the
Company and its counsel that such registration shall no longer be required,
such Securities may be subject to a stop-transfer order placed against the
transfer of such Securities, and such Securities shall bear a restrictive
legend in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION SHALL NO LONGER BE REQUIRED.
c. FILINGS. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Securities to the
Purchaser as required by United States laws and regulations, or by any
domestic securities exchange or trading market, and if applicable, the filing
of a notice on Form D (at such time and in such manner as required by the
Rules and Regulations of the Commission), and to provide copies thereof to
the Purchaser promptly after such filing or filings.
d. NASDAQ LISTING. The Company undertakes and agrees that it will
promptly file an additional application with the NASDAQ to list all of the
shares of Common Stock issuable upon conversion of, or in lieu of dividend
payments on, the Shares and upon exercise of the Warrants on the NASDAQ
National Market. The Company further agrees and covenants that it will use
its best efforts to maintain its eligibility for trading on the NASDAQ
National Market and, if such trading of its Common Stock is suspended or
terminated, will use its best efforts to requalify its Common Stock or
otherwise cause such trading to resume. In the event the Company is unable to
requalify its Common Stock or otherwise cause such trading to resume,
9
the Company shall promptly take all action necessary, including filing an
application, to list all of the Company's shares of Common Stock, including
those issuable upon conversion of, or in lieu of dividend payments on, the
Shares and upon the exercise of the Warrants, on the NASDAQ Smallcap Market,
and to maintain its eligibility for trading on the NASDAQ Smallcap Market.
The Company shall promptly provide to the Purchaser copies of any notices it
receives from the Nasdaq National Market or the NASDAQ Smallcap Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation systems. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(d).
e. REPORTING STATUS. So long as the Purchaser beneficially owns any of
the Securities or any shares of Common Stock issuable upon conversion thereof
(collectively with the Securities, the "Collective Securities"), the Company
shall timely file all reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act and shall not terminate
its status as an issuer required to file reports under the Exchange Act even
if the Exchange Act or the rules and regulations thereunder would permit such
termination.
f. STATE SECURITIES FILINGS. The Company shall from time to time
promptly take such action as the Purchaser or any of its representatives, if
applicable, may reasonably request to qualify the Collective Securities for
offering and sale under the securities laws (other than United States federal
securities laws) of the jurisdictions in the United States as shall be so
identified to the Company, and to comply with such laws so as to permit the
continuance of sales therein, provided that in connection therewith, the
Company shall not be required to qualify as a foreign corporation or to file
a general consent to the service of process in any jurisdiction.
g. USE OF PROCEEDS. The Company will use $1,000,000 of the net proceeds
from the issuance of the Collective Securities to settle the $2,000,000
judgment against the Company and will use the remainder for working capital
and shall not use the proceeds to repay any indebtedness of the Company.
h. RESERVATION OF COMMON STOCK. The Company will at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Shares and the
exercise of the Warrants. The Company will use its best efforts at all times
to maintain a number of shares of Common Stock so reserved for issuance that
is no less than the sum of (i) one and one half (1.5) times the maximum
number of shares of Common Stock that could be issuable upon the conversion
of the Shares and (ii) the number of shares of Common Stock issuable upon
exercise in full of the Warrants.
i. SALES OF ADDITIONAL SHARES. The Company shall not, directly or
indirectly, without the prior written consent of the Purchaser, unless all of
the Shares have been converted by the Purchaser, all of the Warrants have
been exercised by the Purchaser and all shares of Common Stock issuable upon
conversion of, or in lieu of dividend payments on, the Shares or upon
exercise of the Warrants have been sold by the Purchaser, offer, sell, offer
to sell, contract to sell or otherwise dispose of any shares of its capital
stock or any security or other instrument convertible into or exchangeable
for shares of Common Stock, in each case for a period of two-hundred and
seventy (270) days after the Closing Date at a price per share of Common
Stock of less than three dollars and sixty-four cents ($3.64) (the "Lock-Up
Period"), except that
10
notwithstanding the foregoing the Company may issue securities for the
aggregate consideration of at least ten million dollars in connection with a
bona fide, firm commitment, underwritten public offering under the Securities
Act and may issue 250,000 shares of Common Stock in connection with the
settlement referred to in Section 4(g) above. In addition, the Company agrees
that it will not cause any shares of its capital stock that were issued in
connection with any financing, acquisition or other transaction that occurred
prior to the date of this Agreement to be covered by a registration statement
to be filed or declared effective by the Commission until the date that the
registration statement filed by the Company pursuant to its obligations under
the Registration Rights Agreement has been effective under the Securities Act
for a period of at least one-hundred and eighty (180) days, except that the
250,000 shares of Common Stock to be issued in connection with the settlement
referred to in Section 4(g) above and the shares of Common Stock issuable
upon the exercise of the warrant issued to Cardinal Securities L.L.C. in
connection with the transactions contemplated by this Agreement may be
included in the registration statement which will be filed to register the
resale of the shares of Common Stock issuable upon conversion of, or in lieu
of dividend payments on, the Shares or upon the exercise of the Warrants.
j. RIGHT OF FIRST REFUSAL. Subject to Section 4(i), unless all of the
Shares have been converted by the Purchaser, all of the Warrants have been
exercised by the Purchaser and all shares of Common Stock issuable upon
conversion of, or in lieu of dividend payments on, the Shares or upon
exercise of the Warrants have been sold by the Purchaser, if during the six
(6) month period following the Lock-Up Period the Company shall desire to
sell, offer to sell, contract to sell or otherwise dispose of any securities
or any security or other instrument convertible into or exchangeable for
shares of Common Stock (collectively, the "Offered Securities") to a
prospective investor (the "Prospective Investor"), the Company shall notify
(the "Offer Notice") the Purchaser in accordance with Section 10 hereof of
the terms (the "Third Party Terms") on which the Company proposes to sell,
contract to sell or otherwise dispose of the Offered Securities to the
Prospective Investor. If, within the five (5) day period following the
Purchaser's receipt of the Offer Notice, the Purchaser delivers a written
notice (the "Acceptance Notice") to the Company stating its desire to
purchase all or any portion of the Offered Securities on the Third Party
Terms, the Company shall be required to sell the Offered Securities (or any
portion thereof so desired by the Purchaser) to the Purchaser at the price
and on the terms set forth in the Offer Notice and the Company shall not be
permitted to sell such Offered Securities to the Prospective Investor. If the
Purchaser does not deliver an Acceptance Notice to the Company in such five
(5) day period, then for a period of sixty (60) days following the date of
the Offer Notice the Company may sell the Offered Securities to the
Prospective Investor on the terms set forth in the Offer Notice.
k. ADDITIONAL REGISTRATION STATEMENTS. At any time during the period
beginning on the date hereof and ending on the first date that follows a
period of one hundred eighty (180) consecutive days following the
effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement) during which there has been no Blackout Event (as defined
in the Registration Rights Agreement) relating to such Registration
Statement, the Company agrees that it will neither file nor cause any
registration statement to be declared effective by the Commission other than
(i) any Registration Statement relating to the Securities or (ii) any
Registration Statement relating to a proposed bona fide, firm commitment
underwritten public
11
offering under the Securities Act of an aggregate initial public offering
price of at least ten million dollars.
l. STOCKHOLDER APPROVAL. Notwithstanding Section 4(s) below, if required
in accordance with Nasdaq Rule 4310 or 4460, the Company agrees to use its
best efforts (including obtaining any vote of its stockholders required by
applicable law or Nasdaq rules) to authorize and approve the issuance of the
Common Stock issuable upon conversion of the Shares and upon exercise of the
Warrants, to the extent that such conversion or issuance results in the
issuance of 20% or more of the Company's outstanding Common Stock, except
that the conversion of the Shares and the exercise of the Warrants will not
equal 20% or more of the Company's common stock as of the Closing Date;
provided, however, that the failure to obtain any such stockholder approval
shall not limit any of Purchaser's rights hereunder or pursuant to any
Primary Document.
m. OWNERSHIP. At no time shall the Purchaser (including its officers,
directors and affiliates) maintain in the aggregate beneficial ownership (as
defined for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended) of shares of Common Stock in excess of 9.99% of the Company's
outstanding Common Stock unless the Purchaser gives the Company at least
sixty-one (61) days notice that it intends to increase its ownership
percentage.
n. RETURN OF CERTIFICATES ON CONVERSION AND STOCK PURCHASE WARRANTS ON
EXERCISE. (i) Upon any conversion by Purchaser of less than all of the Shares
of Preferred Stock pursuant to the terms of the Certificate of Designations,
the Company shall issue and deliver to Purchaser within three (3) days of the
Series A Preferred Stock Conversion Date (as defined in the Certificate of
Designations), a new certificate or certificates for, as applicable, the
total number of shares of Preferred Stock, in each case, which Purchaser has
not yet elected to convert (with the number of and denomination of such new
certificate(s) designated by Purchaser).
(ii) Upon any partial exercise by Purchaser of Stock Purchase
Warrants, the Company shall issue and deliver to Purchaser within three (3)
days of the date on which such Stock Purchase Warrants are exercised, a new
Stock Purchase Warrant or Stock Purchase Warrants representing the number of
adjusted Shares covered thereby, in accordance with the terms thereof.
o. REPLACEMENT CERTIFICATES AND STOCK PURCHASE WARRANTS. (i) The
certificate(s) representing the shares of Preferred Stock, held by Purchaser
shall be exchangeable, at the option of Purchaser, at any time and from time
to time at the office of Company, for certificates with different
denominations representing, as applicable, an equal aggregate number of
shares of Preferred Stock, as requested by Purchaser upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
(ii) The Stock Purchase Warrants will be exchangeable, at the option
of Purchaser, at any time and from time to time at the office of the Company,
for other Stock Purchase Warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of
Common Stock as are purchasable under such Stock Purchase Warrants. No
service charge will be made for such transfer or exchange.
12
p. DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY SECURITIES. So long
as any portion of the Shares or the Warrants remain outstanding, the Company
agrees that it shall not (a) declare or pay any dividends or make any
distributions to any holder or holders of Common Stock, or (b) purchase or
otherwise acquire for value, directly or indirectly, any shares of Common
Stock or equity security of the Company.
q. BANKRUPTCY WAIVER. In the event the Company becomes a debtor under
the Bankruptcy Code, the Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11 U.S.C. Section 362 in
respect of the conversion of the Shares and the exercise of the Warrants. At
the direction of Purchaser, the Company agrees, without cost or expense to
the Purchaser, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. Section 362.
r. NO SHORTING CLAUSE. The Purchaser covenants and agrees that neither
Purchaser nor any of its affiliates will enter into or engage in short sales
of the Company's common stock at any time while the Shares purchased
hereunder are outstanding.
s. MEETING OF STOCKHOLDERS. The Company hereby covenants and agrees to
take all action necessary in accordance with applicable law and its
Certificate of Incorporation and Bylaws to consider and vote upon the
approval of the issuance of Shares and Warrants and the issuance of shares of
Common Stock into which such Shares and Warrants are convertible or
exchangeable pursuant to the transactions contemplated hereby at the 2000
Annual Meeting of Stockholders of the Company to be held April 28, 2000 or at
any postponement or adjournment thereof (the "Company Stockholder Meeting").
The Board of Directors of the Company shall recommend such approval and the
Company shall take all lawful action to solicit such approval, including,
without limitation, timely mailing of the proxy statement.
5. TRANSFER AGENT INSTRUCTIONS
a. The Company warrants that no instruction, other than the instructions
referred to in this Section 5 and stop transfer instructions to give effect
to Sections 4(a) and 4(b) hereof prior to the registration and sale under the
Securities Act of the Common Stock issuable upon conversion of the Shares or
the shares of Common Stock issuable upon exercise of the Warrants, will be
given by the Company to the transfer agent and that the shares of Common
Stock issuable upon conversion of, or in lieu of dividend payments on, the
Shares or upon exercise of the Warrants, shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing in this Section shall affect in any way the Purchaser's
obligations and agreement to comply with all applicable securities laws upon
resale of the Collective Securities. If the Purchaser provides the Company
with an opinion of counsel that registration of a resale by the Purchaser of
any of the Collective Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the Securities Act, the Company
shall permit the transfer of the Collective Securities and, in the case of
the Common Stock, promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without legend in such names and in
such denominations as specified by the Purchaser.
13
b. Purchaser shall exercise its right to convert the Shares or to
exercise the Warrants by faxing an executed and completed Notice of
Conversion or Form of Election to Purchase, as applicable, to the Company,
and delivering within three (3) business days thereafter, the original Notice
of Conversion (and the related certificates representing the shares of
Preferred Stock, as applicable) or Form of Election to Purchase (and the
related original Stock Purchase Warrants) to the Company by hand delivery or
by express courier, duly endorsed. Each date on which a Notice of Conversion
or Form of Election to Purchase is faxed in accordance with the provisions
hereof shall be deemed a "Conversion Date." The Company will transmit the
certificates representing the Common Stock issuable upon conversion of any
shares of Preferred Stock or upon exercise of any Stock Purchase Warrants
(together with the shares of Preferred Stock not so converted or the Stock
Purchase Warrants not so exercised) to the Purchaser via express courier as
soon as practicable, but in all events no later than three (3) business days
after the Conversion Date relating to shares of Preferred Stock or Stock
Purchase Warrants (each such delivery date, together with the Dividend
Delivery Date referred to in paragraph c below, is referred to herein as a
"DELIVERY DATE"). For purposes of this Agreement, any conversion of the
Shares or the exercise of the Warrants shall be deemed to have been made
immediately prior to the close of business on the Conversion Date.
c. The Company will transmit the certificates representing the Common
Stock issuable in lieu of dividends payable on any shares of Preferred Stock
to the Purchaser via express courier as soon as practicable, but in all
events no later than three (3) business days after the dividend payment date
applicable to which such Common Stock is delivered (the "DIVIDEND DELIVERY
DATE").
d. In lieu of delivering physical certificates representing the Common
Stock issuable upon the conversion of, or in lieu of dividends on, the Shares
or upon the exercise of the Warrants, provided the Company's transfer agent
is participating in the Depositary Trust Company ("DTC") Fast Automated
Securities Transfer program, on the written request of the Purchaser, who
shall have previously instructed the Purchaser's prime broker to confirm such
request to the Company's transfer agent, the Company shall cause its transfer
agent to electronically transmit such Common Stock to the Purchaser by
crediting the account of the Purchaser's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system no later than the
applicable Delivery Date.
e. The Company understands that a delay in the issuance of Common Stock
beyond the applicable Delivery Date could result in an economic loss to the
Purchaser. As compensation to the Purchaser for such loss, the Company agrees
to pay to the Purchaser for late issuance of Common Stock upon conversion of,
or in lieu of dividend payments on, the Shares or upon exercise of the
Warrants, the sum of five thousand dollars ($5,000) per day for each (i) one
hundred thousand dollars ($100,000) of aggregate Stated Value (as defined in
the Certificate of Designations) amount of Shares that are being converted,
or (ii) twenty-five thousand (25,000) shares of Common Stock purchased upon
the exercise of Warrants. The Company shall pay any payments that are payable
to the Purchaser pursuant to this Section 5 in immediately available funds
upon demand. Nothing herein shall limit the Purchaser's right to pursue
actual damages for the Company's failure to so issue and deliver Common Stock
to the Purchaser. Furthermore, in addition to any other remedies which may be
available to the Purchaser, in the event that the Company fails for any
reason to effect delivery of such Common Stock within five (5) business
14
days after the relevant Delivery Date, the Purchaser will be entitled to
revoke the relevant Notice of Conversion or Form of Election to Purchase by
delivering a notice to such effect to the Company, whereupon the Company and
the Purchaser shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion or Form of
Election to Purchase. For purposes of this Section 5, "business day" shall
mean any day in which the financial markets of New York are officially open
for the conduct of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SHARES AND THE
WARRANTS
The Purchaser understands that the Company's obligation to issue the
Shares and the Warrants on the Closing Date to the Purchaser pursuant to this
Agreement is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Purchaser contained in this Agreement as if made on the
Closing Date and the performance by the Purchaser on or before the Closing
Date of all covenants and agreements of the Purchaser required to be
performed on or before the Closing Date.
b. The absence or inapplicability of any and all laws, rules or
regulations prohibiting or restricting the transactions contemplated hereby,
or requiring any consent or approval which shall not have been obtained.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE THE SHARES AND THE
WARRANTS
The Company understands that the Purchaser's obligation to purchase
the Shares and the Warrants on the Closing Date is conditioned upon:
a. The Certificate of Designations shall have been filed with the
Secretary of State of the State of Virginia, and a copy thereof certified by
such Secretary of State shall have been delivered to the Purchaser.
b. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the
Closing Date, and the performance by the Company on or before the Closing
Date of all covenants and agreements of the Company required to be performed
on or before the Closing Date.
c. On the Closing Date, the Purchaser shall have received an opinion of
counsel for the Company, dated the Closing Date, in substantially the form as
attached in EXHIBIT D.
d. The Company shall have executed and delivered to the Purchaser (i) a
signed counterpart to the Registration Rights Agreement in substantially the
form as attached in EXHIBIT C, (ii) the Shares and (iii) the Warrants.
e. On the Closing Date, the Purchaser shall have received a certificate
executed by the President or the Chairman of the Company and by the Chief
Financial Officer of the Company, stating that all of the representations and
warranties of the Company set forth in this Agreement
15
are accurate as of the Closing Date and that the Company has performed all of
its covenants and agreements required to be performed under this Agreement on
or before the Closing Date.
f. On the Closing Date, the Purchaser shall have received from the
Company such other certificates and documents as it or its representatives,
if applicable, shall reasonably request, and all proceedings taken by the
Company in connection with the Primary Documents contemplated by this
Agreement and the other Primary Documents and all documents and papers
relating to such Primary Documents shall be satisfactory to the Purchaser.
g. On or prior to the Closing Date, there shall not have occurred any of
the following: (i) a suspension or material limitation in the trading of
securities generally on the New York Stock Exchange, NASDAQ or the NASDAQ
Bulletin Board; (ii) a general moratorium on commercial banking activities in
New York declared by the applicable banking authorities; (iii) the outbreak
or escalation of hostilities involving the United States, or the declaration
by the United States of a national emergency or war; or (iv) a change in
international, political, financial or economic conditions, if the effect of
any such event, in the judgment of the Purchaser, makes it impracticable or
inadvisable to proceed with the purchase of the Securities on the terms and
in the manner contemplated in this Agreement and in the other Primary
Documents.
h. The Company shall have delivered to the Purchaser reimbursement of
the Purchaser's out-of-pocket costs and expenses incurred in connection with
the transactions contemplated by this Agreement (including fees and
disbursements of the Purchaser's legal counsel) in accordance with Section 8
hereof.
i. On the Closing Date, the Purchaser shall have received a six month
lock-up agreement, dated the Closing Date, from each of the officers and
directors of the Company in substantially the form as attached in EXHIBIT E.
8. EXPENSES
The Company covenants and agrees with the Purchaser that the Company
will pay or cause to be paid the following: (a) the fees, disbursements and
expenses of the Purchaser and Purchaser's counsel in connection with the
issuance of the Collective Securities payable on the Closing Date up to
Twenty Thousand Dollars ($20,000), (b) all expenses in connection with
registration or qualification of the Collective Securities for offering and
sale under state securities laws as provided in Section 4(f) hereof, and (c)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for in this Section
8, including the fees and disbursements of the Company's counsel, accountants
and other professional advisors, if any. If the Company fails to satisfy its
obligations or to satisfy any condition set forth in this Agreement, as a
result of which the Collective Securities are not delivered to the Purchaser
on the terms and conditions set forth herein, the Company shall reimburse the
Purchaser for any out-of-pocket expenses reasonably incurred in making
preparations for the purchase, sale and delivery of the Collective Securities
not so delivered.
16
9. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, without regard to principles of
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on FORUM NON
CONVENIENS, to the bringing of any such proceeding in such jurisdictions.
This Agreement may be signed in one or more counterparts, each of which shall
be deemed an original. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of
this Agreement. This Agreement and each of the Primary Documents have been
entered into freely by each of the parties, following consultation with their
respective counsel, and shall be interpreted fairly in accordance with its
respective terms, without any construction in favor of or against either
party. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity
or unenforceability of this Agreement in any other jurisdiction. This
Agreement shall inure to the benefit of, and be binding upon the successors
and assigns of each of the parties hereto, including any transferees of the
Shares and the Warrants. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
10. NOTICES
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission and mailing a copy of such confirmation, postage prepaid by
certified mail, return receipt requested) or two business days following
deposit of such notice with an internationally recognized courier service,
with postage prepaid and addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party
may designate by five days advance written notice to each of the other
parties hereto.
COMPANY: ▇▇▇▇ Computer Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
17
WITH A COPY TO:
▇▇▇▇▇▇▇, Savage & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
PURCHASER: Briarcliff Investors LLC
c\o WEC Asset Management LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇-▇▇-▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11. SURVIVAL
The agreements, covenants representations and warranties of the
Company and the Purchaser shall survive the execution and delivery of this
Agreement and the delivery of the Securities hereunder.
12. INDEMNIFICATION
Each of the Company and the Purchaser (the "Indemnifying Party")
agrees to indemnify the other party and each officer, director, employee,
agent, partner, stockholder, member and affiliate of such other party
(collectively, the "Indemnified Parties") for, and hold each Indemnified
Party harmless from and against: (i) any and all damages, losses, claims and
other liabilities of any and every kind, including, without limitation,
judgments and costs of settlement, and (ii) any and all reasonable
out-of-pocket costs and expenses of any and every kind, including, without
limitation, reasonable fees and disbursements of counsel for such Indemnified
Parties (all of which expenses periodically shall be reimbursed as incurred),
in each case, arising out of or suffered or incurred in connection with any
of the following: (a) any misrepresentation or any breach of any warranty
made by the Indemnifying Party herein or in any of the other Primary
Documents, (b) any breach or non-fulfillment of any covenant or agreement
made by the Indemnifying Party herein or in any of the other Primary
Documents and
18
(c) any claim relating to or arising out of a violation of applicable federal
or state securities laws by the Indemnifying Party in connection with the
sale or issuance of the Shares or Warrants by the Indemnifying Party to the
Indemnified Party (collectively, the "Indemnified Liabilities"). To the
extent that the foregoing undertaking by the Indemnifying Party may be
unenforceable for any reason, the Indemnifying Party shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
[REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]
19
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by each of the undersigned.
▇▇▇▇ COMPUTER CORPORATION
By:
-------------------------------
Name:
Title:
Briarcliff Investors LLC
By: WEC Asset Management LLC, Manager
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
20
EXHIBIT INDEX
EXHIBIT A FORM OF CERTIFICATE OF DESIGNATIONS
EXHIBIT B FORM OF STOCK PURCHASE WARRANT
EXHIBIT C FORM OF REGISTRATION RIGHTS
AGREEMENT
EXHIBIT D OPINION OF COUNSEL
EXHIBIT E FORM OF LOCK-UP AGREEMENT
SCHEDULE INDEX
SCHEDULE 3(a) LIST OF SUBSIDIARIES
SCHEDULE 3(b) CAPITALIZATION, DERIVATIVE
SECURITIES AND REGISTRATION
RIGHTS
SCHEDULE 3(a)
------------
LIST OF SUBSIDIARIES
▇▇▇▇ Computer Corporation (Delaware) - Not in good standing.
▇▇▇▇ Computer Operating Company (Virginia)
STMS, Inc. (Virginia) - Registration fee to come into good standing was
forwarded to the Virginia Secretary of State on 3/16/00.
International Data products, Inc. (Maryland) - Not in good standing.
Puerto Rico Industrial Manufacturing Operations Acquisition Corp. (Puerto Rico)
SCHEDULE 3(b)
------------
CAPITALIZATION, DERIVATIVE SECURITIES AND REGISTRATION RIGHTS
Employee Stock Options: 1,888,733 Outstanding
Exercise prices range between $1.75 and $8.50
Expiration dates range between 12/31/02 and
12/31/08
Underwriters Warrants: 100,000 warrants exercisable at $6.00 per shares
until April 21, 2002. Underwriters warrants have
demand registration rights.
EXHIBIT A
---------
CERTIFICATE OF DESIGNATIONS OF
SERIES A 5% CONVERTIBLE PREFERRED STOCK OF
▇▇▇▇ COMPUTER CORPORATION
PURSUANT TO SECTION 13.1-639 OF THE GENERAL
CORPORATION LAW OF THE STATE OF VIRGINIA
The undersigned, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇, hereby certify that:
I. They are the duly elected and acting President and Secretary,
respectively, of ▇▇▇▇ Computer Corporation, a Virginia corporation (the
"CORPORATION").
II. The Certificate of Incorporation of the Corporation authorizes two
million (2,000,000) shares of preferred stock, $0.001 par value per share.
III. The following is a true and correct copy of resolutions duly
adopted by the Board of Directors of the Corporation (the "BOARD OF
DIRECTORS") on March 13, 2000 pursuant to the Articles of Incorporation of
the Corporation and in accordance with the provisions of the General
Corporation Law of the State of Virginia.
RESOLUTIONS
WHEREAS, the Board of Directors is authorized to provide for the
issuance of the shares of preferred stock, and by filing a certificate
pursuant to the applicable law of the State of Virginia, to establish and
issue preferred stock with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating,
optional or other special rights, and with such qualifications, limitations
or restrictions thereon as the Board of Directors may determine.
WHEREAS, the Board of Directors desires, pursuant to its authority as
aforesaid, to designate a new series of preferred stock, set the number of
shares constituting such series and fix the rights, preferences, privileges
and restrictions of such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
designates a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
A. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred stock
shall be designated as the Series A 5% Convertible Preferred Stock (the
"Series A Preferred Stock"), and the number of shares so designated shall be
three thousand (3,000) (which shall not be subject to increase or decrease).
Each share of Series A Preferred Stock shall have a par value of $0.001 per
share and a stated value (the "Stated Value") of the Liquidation Preference
(as hereinafter defined in Section C(1)).
B. DIVIDENDS.
(1) Holders of the Series A Preferred Stock shall be entitled to
receive, out of funds legally available therefor, dividends at a rate equal
to 5% (the "Dividend Rate") of the Liquidation Preference per share per annum
(subject to appropriate adjustments in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares),
and no more, payable in accordance with the provisions of this Certificate of
Designations.
(2) At the election of the Corporation, each dividend on Series A
Preferred Stock shall be paid either in shares of Common Stock of the
Corporation, $.001 par value per share ("Common Stock") or in cash on the
Delivery Date (as defined in Subsection G(2)(a) of this Certificate of
Designations) with respect to any shares of Series A Preferred Stock which
are the subject of a Notice of Conversion (as defined in Subsection G(2) of
this Certificate of Designations). Dividends paid in shares of Common Stock
shall be paid (based on an assumed value of $1,000 per share) in full shares
only, with a cash payment equal to the value of any fractional shares. Each
dividend paid in cash shall be mailed to the holders of record of the Series
A Preferred Stock as their names and addresses appear on the share register
of the Corporation or at the office of the transfer agent on the
corresponding dividend payment date. Holders of Series A Preferred Stock will
receive written notification from the Corporation or the transfer agent if a
dividend is paid in kind, which notification will specify the number of
shares of Common Stock paid as a dividend and the recipient's aggregate
holdings of Common Stock as of that dividend payment date and after giving
effect to the dividend. All holders of shares of Common Stock issued as
dividends shall be entitled to all of the rights and benefits relating to
shares of Common Stock as set forth in the Corporation's Articles of
Incorporation, as amended, and By-laws.
(3) Holders of the Series A Preferred Stock shall be entitled to
payment of any dividends in preference and priority to any payment of any
cash dividend on Common Stock or any other class or series of capital stock
of the Corporation. Dividends on the Series A Preferred Stock shall accrue
with respect to each share of the Series A Preferred Stock from the date on
which such share is issued and outstanding and thereafter shall be deemed to
accrue from day to day whether or not earned or declared and whether or not
there exists profits, surplus or other funds legally available for the
payment of dividends, and shall be cumulative so that if such dividends on
the Series A Preferred Stock shall not have been paid, or declared and set
apart for payment, the deficiency shall be fully paid or declared and set
apart for payment before any dividend shall be paid or declared or set apart
for any Common Stock or other class or series of capital stock ranking junior
to the Series A Preferred Stock (such stock being collectively referred to
herein as the "Junior Stock") and before any purchase or acquisition of any
Junior Stock is made by the Corporation. At the earlier of: (1) the
redemption or conversion of the Series A Preferred Stock or (2) the
liquidation of the Corporation, any accrued but undeclared dividends shall be
paid to the holders of record of outstanding shares of the Series A Preferred
Stock in accordance with the provisions of this Certificate of Designations.
No accumulation of dividends on the Series A Preferred Stock shall bear
interest.
C. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, the
holders of shares of the
2
Series A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
before any payment shall be made to the holders of Junior Stock by reason of
their ownership thereof, an amount equal to one thousand dollars ($1,000) per
share of Series A Preferred Stock (the "Liquidation Preference") plus any
accrued but unpaid dividends (whether or not declared). If upon any such
liquidation, dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of shares of the Series A Preferred
Stock the full amount to which they shall be entitled, the holders of shares
of the Series A Preferred Stock shall share ratably in any distribution of
the remaining assets and funds of the Corporation in proportion to the
respective amounts which would otherwise be payable in respect of the shares
held by them upon such distribution if all amounts payable on or with respect
to such shares were paid in full.
D. VOTING.
(1) Each holder of outstanding shares of Series A Preferred Stock
shall be entitled, at each meeting of stockholders of the Corporation (and
with respect to written consents of stockholders in lieu of meetings) with
respect to any and all matters presented to the stockholders of the
Corporation for their action or consideration, to the number of votes equal
to the number of whole shares of Common Stock into which the shares of Series
A Preferred Stock held by such holder are convertible (as adjusted from time
to time pursuant to Subsection I hereof) immediately after the close of
business on the record date fixed for such meeting or the effective date of
such written consent. Except as provided by law, and by the provisions of
Section K below, holders of Series A Preferred Stock shall vote together with
the holders Common Stock as a single class.
(2) The holders of the Series A Preferred Stock shall not be entitled
to any rights of cumulative voting with respect to their shares.
E. OTHER SECURITIES. Subject to any limitations contained in this
Certificate of Designations, the Corporation's Articles of Incorporation
and/or the Primary Documents (as defined in the Securities Purchase
Agreement, dated as of March 13, 2000, hereinafter the "Securities Purchase
Agreement"), the Board of Directors of the Corporation reserves the right to
establish additional classes and/or series of capital stock of the
Corporation and to designate the preferences, limitations and relative rights
of any such classes and/or series; provided, however, that no such class
and/or series may have preferences, limitations and relative rights which are
superior to or senior to the preferences, limitations and relative rights
granted to the holders of the Series A Preferred Stock.
F. CAPITAL REORGANIZATION. If the Corporation shall at any time
hereafter subdivide or combine its outstanding shares of Common Stock,
declare a dividend payable in Common Stock, or in case of any capital
reorganization or reclassification of the shares of Common Stock of the
Corporation, the number of shares of the Series A Preferred Stock and the
Stated Value of the Series A Preferred Stock shall be adjusted appropriately
to allow the holders of the Series A Preferred Stock, as nearly as reasonably
possible, to maintain (i) the aggregate Stated Value of the Series A
Preferred Stock and (ii) their pro rata interest in the Corporation and
3
in the Common Stock upon conversion of the Series A Preferred Stock, that
each holder had prior to any such subdivision, combination, stock dividend,
reorganization or reclassification.
G. CONVERSION.
(1) The holders of the Series A Preferred Stock shall have conversion
rights as follows (the "Series A Preferred Stock Conversion Rights"):
(a) Each share of Series A Preferred Stock shall be convertible,
at the option of the holder thereof, at any time and from time to time,
into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $1,000, plus the amount of any accrued and
unpaid dividends the Corporation elects to pay in Common Stock, by the
Conversion Price (as defined below) in effect at the time of conversion.
The Conversion Price at which shares of Common Stock shall be
deliverable upon conversion of Series A Preferred Stock without the
payment of additional consideration by the holder thereof (the
"Conversion Price") shall be the lower of (i) three dollars and
sixty-four cents ($3.64) or (ii) 85% of the average of the three lowest
Closing Bid Prices of the shares of Common Stock for the twenty-five
(25) trading days immediately preceding the Series A Preferred Stock
Conversion Date (as hereinafter defined); PROVIDED, HOWEVER, that,
notwithstanding clauses (i) and (ii) above, for a period of 90 days
following March 13, 2000 (the "Original Issue Date"), the Conversion
Price shall not be less than one dollar and sixty cents ($1.60). For
purposes of these Articles of Amendment, the term "Closing Bid Price"
means, for any security as of any date, the closing bid price on the
principal securities exchange or trading market where the Common Stock
is listed or traded as reported by Bloomberg, L.P. ("Bloomberg") or, if
applicable, the closing bid price of the Common Stock in the
over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no closing bid price is
reported for the Common Stock by Bloomberg, then the average of the bid
prices of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price
of the Common Stock can not be calculated on such date on any of the
foregoing bases, the Closing Bid Price of the Common Stock on such date
shall be the fair market value as determined by the holders of a
majority of the outstanding shares of Series A Preferred Stock being
converted for which the calculation of the Closing Bid Price is required
in order to determine the Conversion Price of such shares. "Trading day"
shall mean any day on which the Corporation's Common Stock is traded for
any period on the principal securities exchange or other securities
market on which the Common Stock is then being traded. If, during any
period following the Original Issue Date, as a result of the occurrence
of any of the events set forth in Section 3(f) or 3(g) of the
Registration Rights Agreement, dated as of March 13, 2000, by and
between the Corporation and the Purchaser set forth therein (the
"Registration Rights Agreement"), the Purchasers set forth therein are
not able to sell shares of Common Stock issuable upon conversion of, or
in lieu of dividends on, shares of Series A Preferred Stock pursuant to
a registration statement filed pursuant to such agreement, the holders
of shares of Series A Preferred Stock shall have the right, for any
purpose during such period and thereafter, to designate as the
Conversion Price any Conversion Price that would have been applicable
during such period had such Series A
4
Preferred Stock shareholder delivered a Notice of Conversion with
respect to any such Series A Preferred Stock.
(b) At any time that the number of shares of Common Stock issued
(A) upon conversion of the Series A Preferred Stock and (B) in lieu of
dividend payments on the Series A Preferred Stock, shall equal 20% or
more of the Corporation's outstanding Common Stock (a "Common Stock
Redemption Event"), the Corporation shall (x) redeem, at a price per
share equal to (A) the quotient of (i) the Liquidation Preference per
share of Series A Preferred Stock plus all accrued but unpaid dividends
on such shares of Series A Preferred Stock and (ii) the Conversion Price
as if the Series A Preferred Stock had been converted on the Series A
Preferred Stock Redemption Date multiplied by (B) the average Closing
Bid Price of shares of Common Stock for the five (5) trading days
immediately preceding the Series A Preferred Stock Redemption Date, all
of the outstanding Series A Preferred Stock or (y) call a special
meeting of its stockholders for the purpose of approving the
transactions contemplated by the Securities Purchase Agreement,
including the issuance of the Series A Preferred Stock on the terms set
forth therein, together with any other approvals that shall be required
so as to cause the transactions contemplated by the Securities Purchase
Agreement to remain in compliance with the Rules and Regulations of The
Nasdaq Stock Market (including Rules 4300 and 4310 of Nasdaq's
Non-Qualitative Designation Criteria in connection with conversions of
Series A Preferred Stock; such approvals are referred to herein as the
"Required Approvals"). The Corporation shall determine within five (5)
business days following the receipt of a Notice of Conversion which of
such actions it shall take, and shall promptly furnish notice to each of
the holders of Series A Preferred Stock as to such determination,
including, if applicable, a notice of redemption. In no event shall the
Corporation issue shares of Common Stock upon conversion of, or in lieu
of dividend payments on, the Series A Preferred Stock, after the
occurrence of a Common Stock Redemption Event until the Required
Approvals, if any, are obtained.
(c) If the Corporation elects to call a special meeting of its
stockholders pursuant to Subsection G(1)(b) of this Certificate of
Designations to obtain the Required Approvals, the Corporation shall use
its best efforts to obtain such Required Approvals within thirty (30)
days of the Closing Date (as defined in the Securities Purchase
Agreement) (such thirty (30) day period is referred to herein as an
"Approval Period"). If the Corporation does not obtain the Required
Approvals within the Approval Period and the Corporation receives a
Notice of Conversion after the termination of the Approval Period, the
Corporation must redeem, in accordance with this Subsection G of this
Certificate of Designations, any shares of Series A Preferred Stock
outstanding after the Corporation has issued in excess of 1,884,936
shares of Common Stock in connection with conversions of the Series A
Preferred Stock.
(d) If the Corporation elects, pursuant to this Subsection G, to
redeem the Series A Preferred Stock on the occurrence of a Common Stock
Redemption Event, it shall redeem such Series A Preferred Stock at the
price determined in accordance with Subsection G(1)(b) of this
Certificate of Designations. If the Corporation shall have elected,
pursuant to this Subsection G(1), to obtain the Required Approvals but
shall not have done so by the later of the occurrence of the Common
Stock Redemption Event or
5
the expiration of the Approval Period, it shall furnish a redemption
notice to the Purchaser within three (3) business days after the
expiration of the Approval Period.
(2) The Series A Preferred Stock Conversion Rights shall be exercised
as follows:
(e) The Corporation will permit each holder of Series A
Preferred Stock to exercise its right to convert the Series A Preferred
Stock by faxing an executed and completed notice of conversion (the
"Notice of Conversion") to the Corporation, and delivering within three
(3) business days thereafter, the original Notice of Conversion (and the
certificates representing the related shares of Series A Preferred
Stock) to the Corporation by hand delivery or by express courier, duly
endorsed. Each date on which a Notice of Conversion is faxed in
accordance with the provisions hereof shall be deemed a "Series A
Preferred Stock Conversion Date." The Corporation will transmit the
certificates representing the Common Stock issuable upon conversion of
the Series A Preferred Stock (together with certificates representing
the related shares of Series A Preferred Stock not so converted and, if
applicable, a check representing any fraction of a share not converted)
to such holder via express courier as soon as practicable, but in all
events no later than (the "Delivery Date") three (3) business days after
the Series A Preferred Stock Conversion Date. For purposes of this
Certificate of Designations, such conversion of the Series A Preferred
Stock shall be deemed to have been made immediately prior to the close
of business on the Series A Preferred Stock Conversion Date.
(f) In lieu of delivering physical certificates representing the
Common Stock issuable upon the conversion of the Series A Preferred
Stock, provided that the Corporation's transfer agent is participating
in the Depository Trust Corporation ("DTC") Fast Automated Securities
Transfer program, on the written request of a holder of Series A
Preferred Stock who shall have previously instructed such holder's prime
broker to confirm such request to the Corporation's transfer agent, the
Corporation shall use its best efforts to cause its transfer agent to
electronically transmit such Common Stock to such holder by crediting
the account of the holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission system no later than the applicable Delivery
Date.
(g) The Corporation will at all times have authorized and
reserved for the purpose of issuance a sufficient number of shares of
Common Stock to provide for the conversion of the Series A Preferred
Stock. The Corporation will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance
that is no less than the sum of (i) one and one-half (1.5) times the
number that would then actually be issuable upon the conversion of three
thousand (3,000) shares of Series A Preferred Stock and (ii) the
exercise of the Warrants (as defined in the Securities Purchase
Agreement). Before taking any action which would cause an adjustment
reducing the Conversion Price below the established par value of the
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, the Corporation shall take any corporate action which
may, in the opinion of its counsel or in the opinion of counsel to
holders of the Series A Preferred Stock, be necessary in order that the
6
Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock at such adjusted Conversion Price.
(3) In the event of a liquidation of the Corporation, the Series A
Preferred Stock Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of the Series A Preferred Stock.
(4) If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series A Preferred
Stock for conversion, be conditioned upon the closing with the underwriter of
the sale of securities pursuant to such offering, in which event the
person(s) entitled to receive the Common Stock issuable upon such conversion
of the Series A Preferred Stock shall not be deemed to have converted such
Series A Preferred Stock until immediately prior to the closing of the sale
of securities.
(5) At no time shall any holder of the Series A Preferred Stock
convert such amount of Series A Preferred Stock as shall result in such
Purchaser's ownership, after such conversion, exceeding 9.99% of the
Corporation's outstanding Common Stock.
(6) No fractional shares of Common Stock shall be issued upon
conversion of the Preferred Stock. In lieu of fractional shares, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective and applicable Conversion Price.
(7) The Corporation will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed under this Certificate of
Designations by the Corporation, but will at all times in good faith assist
in the carrying out of all the provisions of this Certificate of Designations
and in the taking of all such action as may be necessary or appropriate in
order to protect the Series A Preferred Stock Conversion Rights of the
holders of the Series A Preferred Stock against impairment.
(8) In the event (a) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in Common Stock or other
securities of the Corporation, (b) that the Corporation subdivides or
combines its outstanding shares of Common Stock, (c) of any reclassification
of the Common Stock of the Corporation (other than a subdivision or
combination of its outstanding shares of Common Stock or a stock dividend or
stock distribution thereon), (d) of any consolidation or merger of the
Corporation into or with another corporation, (e) of the sale of all or
substantially all of the assets of the Corporation, or (f) of the involuntary
or voluntary dissolution, liquidation or winding up of the Corporation, then
the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause
to be mailed to each holder of the Series A Preferred Stock at their last
address as shown on the records of the Corporation or such transfer agent, at
least ten (10) days prior to the record date specified in (i) below or twenty
(20) days before the date specified in (ii) below, a notice stating
7
(i) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined, or
(ii) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is expected to
become effective, 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 or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution or winding
up.
H. SINKING FUND. There shall be no sinking fund for the payment of
dividends, or liquidation preferences on the Series A Preferred Stock or the
redemption of any shares thereof.
I. REDEMPTION EVENTS. In case one or more of the following events, each
a redemption event, shall have occurred:
(a) If the Corporation fails to have a registration statement
effective within one hundred eighty (180) days of the date of the Stock
Purchase Agreement, at the option of the Purchaser, the Corporation
shall redeem the outstanding shares of Series A Preferred Stock at a
redemption price of one hundred twenty-five percent (125%) of the Stated
Value per share plus accrued and unpaid dividends thereon, if any; or
(b) failure to deliver the shares of Common Stock required to be
delivered upon conversion of the shares of Series A Preferred Stock in
the manner and at the time required by Section 5 of the Securities
Purchase Agreement; or
(c) failure of the Corporation to have authorized the number of
shares of Common Stock issuable upon conversion of the shares of Series
A Preferred Stock or exercise of the Stock Purchase Warrants (as defined
in the Securities Purchase Agreement); or
(d) failure on the part of the Corporation to duly observe or
perform any of the provisions of this Certificate of Designations or any
of its other covenants or agreements contained in the Securities
Purchase Agreement, or to cure any material breach in a material
representation or covenant contained in the Securities Purchase
Agreement or the Registration Rights Agreement for a period of ten (10)
days after the date on which written notice of such failure or breach
requiring the same to be remedied has been given by a registered holder
of shares of Series A Preferred Stock to the Corporation; or
(e) a decree or order by a court having jurisdiction has been
entered adjudging the Corporation (or any Material Subsidiary) a
bankrupt or insolvent, or approving a petition seeking reorganization of
the Corporation (or any Material Subsidiary) under any applicable
bankruptcy law and such decree or order has continued undischarged or
unstayed for a period of sixty (60) days; or a decree or order of a
court
8
having jurisdiction for the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of the Corporation (or
any Material Subsidiary) or of all or substantially all of its property,
or for the winding-up or liquidation of its affairs, has been entered,
and has remained in force undischarged or unstayed for a period of sixty
(60) days; or
(f) the Corporation (or any Material Subsidiary) institutes
proceedings to be adjudicated a voluntary bankrupt, or consents to the
filing of a bankruptcy proceeding against it, or files a petition or
answer or consent seeking reorganization under applicable law, or
consents to the filing of any such petition or to the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of all or substantially all of its property, or
makes an assignment for the benefit of creditors, or admits in writing
its inability to pay its debts generally as they become due; or if the
Corporation (or any Material Subsidiary) shall suffer any writ of
attachment or execution or any similar process to be issued or levied
against it or any significant part of its property which is not
released, stayed, bonded or vacated within sixty (60) days after its
issue or levy; or if the Corporation (or any Material Subsidiary) takes
corporate action in furtherance of any of the aforesaid purposes or
conditions; or
(g) If any default shall occur under any indenture, mortgage,
agreement, instrument or commitment evidencing or under which there is
at the time outstanding any indebtedness of the Corporation (or a
Material Subsidiary, as hereinafter defined), in excess of $400,000, or
which results in such indebtedness, in an aggregate amount (with other
defaulted indebtedness) in excess of $400,000 becoming due and payable
prior to its due date and if such indenture or instrument so requires,
the holder or holders thereof (or a trustee on their behalf) shall have
declared such indebtedness due and payable; or
(h) If any of the Corporation or its subsidiaries shall default in
the observance or performance of any material term or provision of a
material agreement to which it is a party or by which it is bound, and
such default is not waived or cured within the applicable grace period;
or
(i) If there shall occur a Change in Control of the Corporation (as
defined below). Nothing in this subsection shall limit the right of a
holder of Series A Preferred Stock to convert their shares of Series A
Preferred Stock on or prior to such Change in Control. For purposes
hereof, a "Change in Control" shall be deemed to have occurred if (A)
any person or group (as defined for purposes of Regulation 13D of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall
have become the beneficial owner or owners of more than 50% of the
outstanding voting stock of the Corporation; (B) there shall have
occurred a merger or consolidation in which the Corporation or an
affiliate of the Corporation is not the survivor or in which holders of
the Common Stock of the Corporation shall have become entitled to
receive cash, securities of the Corporation other than voting common
stock or securities of any other person; (C) at any time persons
constituting the Existing Board of Directors cease for any reason
whatsoever to constitute at least a majority of the members of the Board
of Directors of the Corporation; or (D) there shall have occurred a sale
of all or substantially
9
all the assets of the Corporation. For purposes hereof, the term
"Existing Board of Directors" shall mean the persons constituting the
Board of Directors of the Corporation on the date hereof, together with
each new director whose election, or nomination for election by the
Corporation's stockholders is approved by a vote of the majority of the
members of the Existing Board of Directors who are in office immediately
prior to the election or nomination of such director.
then, and in each and every such case, so long as such
redemption event has not been remedied, the holders of not less than
fifty-one percent (51%) of the shares of Series A Preferred Stock then
outstanding, by notice in writing to the Corporation (the date of such
notice the "Redemption Notice Date"), may demand that the Corporation
redeem, and the Corporation shall redeem, each share of Series A
Preferred Stock then outstanding at a price per share equal to one
hundred twenty-five percent (125%) of the sum of (x) the Stated Value
and (y) the aggregate accrued and unpaid dividends on such Redemption
Notice Date
For purposes of this Section I "Material Subsidiary" means any
subsidiary with respect to which the Corporation has directly or indirectly
invested, loaned, advanced or guaranteed the obligations of, an aggregate
amount exceeding fifteen percent (15% ) of the Corporation's gross assets, or
the Corporation's proportionate share of the assets or net income of which
(based on the subsidiary's most recent financial statements) exceed fifteen
percent (15%) of the Corporation's gross assets or net income, respectively,
or the gross revenues of which exceed fifteen percent (15%) of the gross
revenues of the Corporation based upon the most recent financial statements
of such subsidiary and the Corporation.
J. AMENDMENT. This Certificate of Designations constitutes an
agreement between the Corporation and the holders of the Series A Preferred
Stock. The Corporation shall not amend this Certificate of Designations or
alter or repeal the preferences, rights, powers or other terms of the Series
A Preferred Stock so as to affect adversely the Series A Preferred Stock,
without the written consent or affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the then outstanding shares of
Series A Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class.
10
IN WITNESS WHEREOF, ▇▇▇▇ Computer Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, its President, and attested by ▇▇▇▇▇▇▇ ▇▇▇▇▇, its Secretary, this __
day of March, 2000.
▇▇▇▇ COMPUTER CORPORATION
By:
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Attest:
By:
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
11
EXHIBIT B
---------
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE
RULES AND REGULATIONS THEREUNDER OR ANY STATE SECURITIES LAWS OR THE
PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 247,525
WARRANT
To Purchase Common Stock of
▇▇▇▇ COMPUTER CORPORATION
THIS IS TO CERTIFY THAT Briarcliff Investors LLC, a Delaware limited
liability company, or its registered assigns, is entitled, at any time from
the Warrant Issuance Date (as hereinafter defined) to the Expiration Date (as
hereinafter defined), to purchase from ▇▇▇▇ COMPUTER CORPORATION, a Virginia
corporation (the "Company"), two hundred forty seven thousand five hundred
and twenty-five (247,525) shares of Common Stock (as hereinafter defined and
subject to adjustment as provided herein), in whole or in part, including
fractional parts, at a purchase price per share equal to three dollar and
sixty-four cents ($3.64) (subject to any adjustments made to such amount
pursuant to Section 4 hereto) on the terms and conditions and pursuant to the
provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number
of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by a firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, par value $.001 per share, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof which is
also not preferred as to dividends or assets over any other class of stock of
the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Common Stock of the Company in the circumstances contemplated
by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares
of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Current Warrant Price" shall mean three dollars and sixty-four cents
($3.64) subject to any adjustments to such amount made in accordance with
Section 4 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to
time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean March 13, 2005.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on
such date, and other options or warrants to purchase, or securities
convertible into, including without limitation the shares of Common Stock
outstanding on such date which would be deemed outstanding in accordance with
GAAP for purposes of determining book value or net income per share.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained
for such purpose.
"Market Price" per Common Share means the average of the closing bid
prices of the Common Shares as reported on the National Association of
Securities Dealers Automated Quotation System for the National Market,
("NASDAQ") or, if such security is not listed or admitted to trading on the
NASDAQ, on the principal national security exchange or quotation
2
system on which such security is quoted or listed or admitted to trading, or,
if not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by the National
Association of Security Dealers, Inc., or a similar generally accepted
reporting service, as the case may be, for the five (5) trading days
immediately preceding the date of determination.
"Other Property" shall have the meaning set forth in Section 4.5.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith by and between the Company and
Briarcliff Investors LLC, as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith by and between the Company and
Briarcliff Investors LLC, as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or
of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Issuance Date" shall mean any date on which Warrants are issued
pursuant to the Securities Purchase Agreement.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
3
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Warrant Issuance Date and
until 5:00 P.M., New York City time, on the Expiration Date, Holder may
exercise this Warrant, on any Business Day, for all or any part of the number
of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at the office or agency designated by the Company
pursuant to Section 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to be purchased, (ii) payment by cash, check or bank draft payable to the
Company of the Warrant Price in cash or by wire transfer or cashier's check
drawn on a United States bank or by the Holder's surrender of Warrant Stock
(or the right to receive such number of shares) having an aggregate Market
Price equal to the Warrant Price for all shares then being purchased and
(iii) this Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt of the items
referred to in clauses (i), (ii) and (iii) above, the Company shall, as
promptly as practicable, and in any event within five (5) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise, together
with cash in lieu of any fraction of a share, as hereinafter provided. The
stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as Holder shall request in
the notice and shall be registered in the name of Holder or, subject to
Section 9, such other name as shall be designated in the notice. This Warrant
shall be deemed to have been exercised and such certificate or certificates
shall be deemed to have been issued, and Holder or any other Person so
designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Warrant Price. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery
of the certificate or certificates representing Warrant Stock, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
The Holder shall be entitled to exercise the Warrant notwithstanding the
commencement of any case under 11 U.S.C. Section 101 ET SEQ. (the "Bankruptcy
Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. Section 362 in respect of the Holder's exercise right.
The Company hereby waives to the fullest extent permitted any rights to
relief it may have under 11 U.S.C. Section 362 in respect of the exercise of the
Warrant. The
4
Company agrees, without cost or expense to the Holder, to take or consent to
any and all action necessary to effectuate relief under 11 U.S.C.
Section 362.
2.2. PAYMENT OF TAXES AND CHARGES. All shares of Common Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued, fully paid and nonassessable, and without any preemptive
rights. The Company shall pay all expenses in connection with, and all taxes
and other governmental charges that may be imposed with respect to, the issue
or delivery thereof.
2.3. FRACTIONAL SHARES. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the Market Price
per share of Common Stock on the relevant exercise date.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock issued upon
the exercise of this Warrant, in whole or in part (other than a holder who
acquires such shares after the same have been publicly sold pursuant to a
Registration Statement under the Securities Act or sold pursuant to Rule 144
thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10
and 14 of this Warrant. The Company will, at the time of exercise of this
Warrant, in whole or in part, upon the request of Holder, acknowledge in
writing, in form reasonably satisfactory to Holder, its continuing obligation
to afford Holder all such rights; PROVIDED, HOWEVER, that if Holder shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to Holder all such rights.
2.5. RIGHT TO CONVERT WARRANT. In addition to any right to exercise this
Warrant in accordance with Section 2.1, the Holder may, with the Company's
consent, convert, in whole or in part, this Warrant (the "Conversion Right")
at any time prior to the expiration of the Exercise Period, into shares of
Common Stock in accordance with this Section 2.5. Upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of the Warrant Price) that number of shares of Common Stock equal
to the quotient obtained by dividing (x) the value of the portion of this
Warrant being converted at the time the Conversion Right is exercised
(determined by subtracting the Warrant Price for the portion of this Warrant
being converted (in effect immediately prior to the exercise of the
Conversion Right) from the amount obtained by multiplying the number of
shares of Common Stock issuable upon the whole or partial exercise of this
Warrant, as the case may be, by the Market Price immediately prior to the
exercise of the Conversion Right) by (y) the Market Price of one share of
Common Stock immediately prior to the exercise of the Conversion Right.
The Conversion Right may be exercised by the Holder, at any time or from
time to time, prior to its expiration, on any business day by delivering a
written notice (the "Conversion Notice") to the Company at the offices of the
Company, exercising the Conversion Right and specifying (i) the total number
of shares of Common Stock the Holder will purchase pursuant to the conversion
and (ii) a place and date not less than two (2) nor more than twenty (20)
Business Days from the date of the Subscription Notice for the closing of
such purchase.
5
At any closing under this Section 2.5, (i) the Holder will surrender
this Warrant and (ii) the Company will deliver to the Holder a certificate or
certificates for the number of shares of Common Stock issuable upon such
conversion. If this Warrant shall have been converted only in part, the
Company shall, at the time of delivery of said stock certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights of
the Holder to purchase the remaining shares of Common Stock called for by
this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be
made on this Warrant and the same returned to the Holder. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, issue and delivery of such stock certificates and new Warrants,
except that, in case such stock certificates and/or new Warrants shall be
registered in a name or names other than the name of the Holder, funds
sufficient to pay all stock transfer taxes that are payable upon the issuance
of such stock certificates or new Warrants shall be paid by the Holder at the
time of delivering the notice of exercise mentioned above.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with Sections 9, transfer of this
Warrant and all rights hereunder, in whole or in part, shall be registered on
the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal office of the Company referred to in Section
2.1 or the office or agency designated by the Company pursuant to Section 12,
together with a written assignment of this Warrant substantially in the form
of EXHIBIT B hereto duly executed by Holder or its agent or attorney. Upon
such surrender, the Company shall, subject to Section 9, execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new
Holder for the purchase of shares of Common Stock without having a new
Warrant issued.
3.2. DIVISION AND COMBINATION. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be
issued, signed by Holder or its agent or attorney. Subject to compliance with
Section 3.1 and with Section 9, as to any transfer which may be involved in
such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at its own
expense the new Warrant or Warrants under this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
6
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant, shall be subject to adjustment from time to time as set
forth in this Section 4. The Company shall give Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at
the time of such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any time the
Company shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder
of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Current
Warrant Price shall be adjusted to equal (A) the Current Warrant Price
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares for which this Warrant is exercisable immediately after such
adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS.
(a) If at any time prior to the Expiration Date the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive any dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock),
or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock),
7
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock
(other than a change in par value, or from par value to no par value or from
no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock
within the meaning of this Section 4.2 and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be deemed
a subdivision or combination, as the case may be, of the outstanding shares
of Common Stock within the meaning of Section 4.1.
(b) In case the Company shall issue any Common Stock or any rights,
options or warrants to all holders of record of its Common Stock entitling
all holders to subscribe for or purchase shares of Common Stock at a price
per share less than the Market Price per share of the Common Stock on the
date fixed for such issue, the Current Warrant Price in effect immediately
prior to the close of business on the date fixed for such determination shall
be reduced to the amount determined by multiplying such Current Warrant Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the close of business on the date
fixed for such determination plus the number of shares of Common Stock which
the aggregate of the offering price of the total number of shares of Common
Stock so offered for subscription or purchase would purchase at such Market
Price and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to the close of business on the date
fixed for such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such reduced amount to become effective
immediately after the close of business on the date fixed for such
determination. For the purposes of this clause (b), (i) the number of shares
of Common Stock at any time outstanding shall not include shares held in the
treasury of the Company and (ii) in the case of any rights, options or
warrants which expire by their terms not more than 60 days after the date of
issue, sale, grant or assumption thereof, no adjustment of the Current
Warrant Price shall be made until the expiration or exercise of all rights,
options or warrants, whereupon such adjustment shall be made in the manner
provided in this clause (b), but only with respect to the shares of Common
Stock actually issued pursuant thereto. Such adjustment shall be made
successively whenever any event specified above shall occur. In the event
that any or all rights, options or warrants covered by this clause (b) are
not so issued or expire or terminate before being exercised, the Current
Warrant Price then in effect shall be appropriately readjusted.
4.3. COMMON SHARE DISTRIBUTION.
(a) If, other than in an Exempt Distribution, the Company shall issue
or otherwise sell any shares of its Common Stock (any such issuance or sale
other than an Exempt Distribution, including any event described in
paragraphs (b) and (c) of this Section 4.3, hereafter being called a "Common
Share Distribution"), the Current Warrant Price shall be reduced to the price
(calculated to the nearest cent) determined by multiplying the Current
Warrant Price in effect immediately prior to such Common Share Distribution
by a fraction, the numerator of which shall be the sum of (A) the number of
shares of Common Stock outstanding immediately prior to such Common Share
Distribution multiplied by the Market Price per share on the date of such
Common Share Distribution plus (B) the consideration received by the Company
upon such Common Share Distribution, and the denominator of which shall be the
8
product of (1) the total number of shares of Common Stock outstanding
immediately after such Common Share Distribution, multiplied by (2) the
Market Price per share on the date of such Common Share Distribution.
No adjustment of the Current Warrant Price shall be made in an amount
less than 1% of such Current Warrant Price, but any such lesser adjustment
shall be carried forward and shall be made at the time of, and together with,
the next subsequent adjustment which together with any adjustments so carried
forward shall aggregate an amount equal to or greater than 1% of such Current
Warrant Price.
If any Common Share Distribution shall require an adjustment to the
Current Warrant Price pursuant to the foregoing provisions of this Section
4.3, then effective at the time such adjustment is made, the number of shares
of Common Stock subject to purchase upon exercise of this Warrant shall be
increased to a number determined by multiplying the number of shares of
Common Stock subject to purchase immediately before such Common Share
Distribution by a fraction, the numerator of which shall be the number of
shares outstanding immediately after giving effect to such Common Share
Distribution and the denominator shall be the sum of the number of shares
outstanding immediately before giving effect to such Common Share
Distribution plus the number of shares of Common Stock which the aggregate
consideration received by the Company with respect to such Common Share
Distribution would purchase at the Market Price on the date of such Common
Share Distribution (before giving effect to such Common Share Distribution).
The provisions of this Section 4.3 shall not operate to increase the Current
Warrant Price or reduce the number of shares of Common Stock subject to
purchase upon exercise of this Warrant.
(b) If, other than in an Exempt Distribution, the Company shall
issue, sell, distribute or otherwise grant in any manner (whether directly or
by assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common Stock or any
stock or securities convertible into or exchangeable for Common Stock (such
rights, warrants or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such Options or the right to
convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which shares of Common Stock are
issuable upon exercise of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the aggregate amount, if
any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options,
plus, in the case of Options to acquire Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue
or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options) shall
be less than the Market Price per share on the date of granting such Options
(before giving effect to such grant), then, for purposes of paragraph (a)
above, the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued as of the date of granting of such Options and
thereafter shall be deemed to be
9
outstanding and the Company shall be deemed to have received as consideration
such price per share, determined as provided above, therefor, provided,
however upon the expiration or termination of Convertible Securities or
Options, if any thereof shall not have been converted, exchanged or
exercised, the number of shares of Common Stock deemed to be issued and
outstanding pursuant to this subsection (b) shall be reduced by such number
of shares as to which Convertible Securities or Options shall have expired or
terminated unexercised, and such shares shall no longer be deemed to be
issued and outstanding, and the Current Warrant Price then in effect shall be
readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually
issued pursuant to such Convertible Securities or Options. Except as
otherwise provided in paragraph (c) below, no additional adjustment of the
Current Warrant Price shall be made upon the actual exercise of such Options
or upon conversion or exchange of such Convertible Securities.
(c) If the purchase price provided for in any Option referred to in
paragraph (b) above, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) above, or the rate at which any Convertible Securities referred to in
paragraph (b) above are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions
designed to protect against dilution upon an event which results in a related
adjustment pursuant to this Section 4), the Current Warrant Price then in
effect shall forthwith be readjusted (effective only with respect to any
exercise of this Warrant after such readjustment) to the Current Warrant
Price which would then be in effect had the adjustment made upon the issue,
sale, distribution or grant of such Options or Convertible Securities been
made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be; provided, however, that such
readjustment shall give effect to such change only with respect to such
Options and Convertible Securities as then remain outstanding.
(d) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor,
after deduction therefrom of any expenses incurred and any underwriting
commission or concessions paid or allowed by the Company in connection
therewith. If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair market value of such consideration, after deduction of
any expenses incurred and any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. If any shares of Common
Stock, Options or Convertible Securities shall be issued in connection with
any merger in which the Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair market value of such
portion of the assets and business of the nonsurviving corporation as shall
be attributable to such shares of Common Stock, Option or Convertible
Securities, as the case may be. If any Options shall be issued in connection
with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for an amount of consideration equal to the fair
market value thereof.
10
(e) For the purposes of this Section 4, "Exempt Distribution" shall
means an issuance or other sale by the Company of any shares of its Common
Stock:
(i) (a) to the Company's officers or directors or
(b) to the Company's officers, directors or employees pursuant to
employee stock option, benefit or incentive plans established for
their benefit, whether in existence on the date hereof or approved
by the Board of Directors of the Company after the date hereof,
provided that the number of shares of Common Stock issued from and
after March 13, 2000 pursuant to all issuances and sales pursuant to
this subparagraph (i) does not exceed, in the aggregate, ten percent
(10%) of the Fully Diluted Outstanding of the Company March 13,
2000;
(ii) at a price per share of more than the greater
of (a) the Current Warrant Price or (b) eighty five percent (85%) of
the Market Price;
(iii) upon the conversion or exercise of any
options, warrants or other convertible securities of the Company
outstanding on March 13, 2000 and disclosed on the disclosure
schedules to the Securities Purchase Agreement;
4.4. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and
the Current Warrant Price provided for in this Section 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by this
Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this Section
4, fractional interests in Common Stock shall be taken into account to the
nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be
required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
(d) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board of
Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination
may be challenged in good faith by the Holder, and any dispute shall be
resolved by an investment banking firm of recognized national standing
selected by the Holder and reasonably acceptable to the Company.
(e) PROCEEDING PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to
11
this Section 4, the Company shall take any action which may be necessary,
including obtaining regulatory approvals or exemptions, in order that the
Company may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock which the Holder is entitled to
receive upon exercise hereof.
4.5. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or
distributed to the holders of Common Stock of the Company, then Holder shall
have the right thereafter to receive, upon exercise of the Warrant, the
number of shares of common stock of the successor or acquiring corporation or
of the Company, if it is the surviving corporation, and Other Property
receivable upon or as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets by a holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately
prior to such event. In case of any such reorganization, reclassification,
merger, consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate, subject to the Holder's consent, in order to provide
for adjustments of shares of Common Stock for which this Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 4. For purposes of this Section 4.5,
"common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or
other rights to subscribe for or purchase any such stock. The foregoing
provisions of this Section 4.4 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or disposition of
assets.
4.6. OTHER ACTION AFFECTING COMMON STOCK. In case at any time or from
time to time the Company shall take any action in respect of its Common
Stock, other than any action taken in the ordinary course of the Company's
business or any action described in this Section 4, which would have a
material adverse effect upon the rights of the Holder, the number of shares
of Common Stock and/or the purchase price thereof shall be adjusted in such
manner as may be equitable in the circumstances, as determined in good faith
by an investment bank selected by Holder.
12
4.6. CERTAIN LIMITATIONS. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the Current Warrant Price to
be less than the par value per share of Common Stock.
4.7. NO VOTING RIGHTS. This Warrant shall not entitle its Holder to any
voting rights or other rights as a shareholder of the Company.
5. NOTICES TO HOLDER
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of the Warrants,
shall be adjusted pursuant to Section 4, the Company shall forthwith prepare
a certificate to be executed by an executive officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, specifying the number of
shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to Section 4.4 or 4.5) describing the number and
kind of any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause
a signed copy of such certificate to be delivered to the Holder in accordance
with Section 14.2. The Company shall keep at its office or agency designated
pursuant to Section 12 copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours by
the Holder, its representatives, or any prospective purchaser of a Warrant
designated by the Holder.
5.2. NOTICE OF CORPORATE ACTION. If at any time
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or
other disposition of all or substantially all the property, assets or
business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i)
at least thirty (30) Business Days' prior written notice of the date on which
a record date shall be selected for such dividend, distribution or right or
for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least thirty (30)
Business Days' prior written notice of the date when the same shall take
place. Such
13
notice in accordance with the foregoing clause also shall specify (i) the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common
Stock shall be entitled to any such dividend, distribution or right, and the
amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common
Stock shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Holder at the last address of Holder
appearing on the books of the Company and delivered in accordance with
Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate to protect
the rights of Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any shares
of Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this Warrant, and (c) use its
best efforts to obtain all such authorizations, exemptions or consents from
any public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant
and payment therefor in accordance with the terms of such Warrant, shall be
duly and validly issued and fully paid and nonassessable, and not subject to
preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
14
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in
the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any
public regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record as of the close of business on a
Business Day. The Company will not at any time close its stock transfer books
or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in
this Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant
or any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be
bound by the provisions of this Section 9.
9.1. Restrictive Legend. The Holder by accepting this Warrant and any
Warrant Stock agrees that this Warrant and the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the
Securities Act or (ii) a registration statement relating to such securities
has been filed by the Company and declared effective by the Commission.
(a) Each certificate for Warrant Stock issuable hereunder shall bear
a legend substantially worded as follows unless such securities have been
sold pursuant to an effective registration statement under the Securities
Act:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended (the
"Act") or any state securities laws. The securities may not be
offered for sale, sold, assigned, offered, transferred or otherwise
distributed for value except (i) pursuant to an effective
registration statement under the Act or any state securities laws or
(ii) pursuant to an exemption from registration or prospectus
delivery requirements under the Act or any state securities laws in
respect of which the Company has received an opinion of counsel
satisfactory to the Company to such effect. Copies of the agreement
covering both the purchase of the securities and restricting their
transfer may be obtained at no cost by written request made by the
holder of record of this certificate to the Secretary of the Company
at the principal executive offices of the Company."
15
(b) Except as otherwise provided in this Section 9, the Warrant shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
"This Warrant and the securities represented hereby have not
been registered under the Securities Act of 1933, as amended, or any
state securities laws and may not be transferred in violation of such
Act, the rules and regulations thereunder or any state securities
laws or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS. Prior to any Transfer or attempted
Transfer of any Warrants or any shares of Restricted Common Stock, the Holder
shall give five (5) days' prior written notice (a "Transfer Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner
and circumstances of the proposed Transfer, and obtain from counsel to Holder
an opinion that the proposed Transfer of such Warrants or such Restricted
Common Stock may be effected without registration under the Securities Act or
state securities laws. After the Company's receipt of the Transfer Notice and
opinion, such Holder shall thereupon be entitled to Transfer such Warrants or
such Restricted Common Stock, in accordance with the terms of the Transfer
Notice. Each certificate, if any, evidencing such shares of Restricted Common
Stock issued upon such Transfer and the Warrant issued upon such Transfer
shall bear the restrictive legends set forth in Section 9.1, unless in the
opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act.
9.3. REQUIRED REGISTRATION. Pursuant to the terms and conditions set
forth in the Registration Rights Agreement, the Company shall prepare and
file with the Commission not later than the thirtieth (30th) day after the
Closing Date, a Registration Statement relating to the offer and sale of the
Common Stock issuable upon exercise of the Warrants and shall use its best
efforts to cause the Commission to declare such Registration Statement
effective in accordance with the terms set forth in Section 2(a) of the
Registration Rights Agreement.
9.4. TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long as such
security shall have been effectively registered under the Securities Act and
applicable state securities laws and disposed of pursuant thereto or (ii)
when the Company shall have received an opinion of counsel that such shares
may be transferred without registration thereof under the Securities Act and
applicable state securities laws. Whenever the restrictions imposed by
Section 9 shall terminate as to this Warrant, as hereinabove provided, the
Holder hereof shall be entitled to receive from the Company upon written
request of the Holder, at the expense of the Company, a new Warrant bearing
the following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON _________, 20__, AND ARE OF
NO FURTHER FORCE AND EFFECT."
16
All Warrants issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant or Warrants entitled to bear such
legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any share of
Restricted Common Stock, as hereinabove provided, the holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive
legends set forth in Section 9.1.
9.5. LISTING ON SECURITIES EXCHANGE. If the Company shall list any
shares of Common Stock on any securities exchange, it will, at its expense,
list thereon, maintain and, when necessary, increase such listing of, all
shares of Common Stock issued or, to the extent permissible under the
applicable securities exchange rules, issuable upon the exercise of this
Warrant so long as any shares of Common Stock shall be so listed during the
Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a
condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like
tenor to Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant, such office
to be initially located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ fax: (703)
▇▇▇-▇▇▇▇, provided, however, that the Company shall provide prior written
notice to Holder of a change in address no less than thirty (30) days prior
to such change.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
17
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Expiration
Date. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
direct and indirect losses, damages, costs and expenses including, but not
limited to, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto
or in otherwise enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Except as may be otherwise provided herein, any
notice or other communication or delivery required or permitted hereunder
shall be in writing and shall be delivered personally or sent by certified
mail, postage prepaid, or by a nationally recognized overnight courier
service, and shall be deemed given when so delivered personally or by
overnight courier service, or, if mailed, three (3) days after the date of
deposit in the United States mails, as follows:
(a) if to the Company, to: ▇▇▇▇ Computer Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇, Savage & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention; ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Phone (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Purchaser to: Briarcliff Investor LLC
c\o WEC Asset Management LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇-▇▇-▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
18
The Company or the Holder may change the foregoing address by notice
given pursuant to this Section 14.2.
14.3. INDEMNIFICATION. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by
or asserted against Holder in any manner relating to or arising out of any
failure by the Company to perform or observe in any respect any of its
covenants, agreements, undertakings or obligations set forth in this Warrant.
14.4. REMEDIES. Holder in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and
hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
14.5. SUCCESSORS AND ASSIGNS. Subject to the provisions of Sections 3.1
and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and,
with respect to Section 9 hereof, holders of Warrant Stock, and shall be
enforceable by any such Holder or holder of Warrant Stock.
14.6. AMENDMENT. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived only with the prior written consent
of the Company and the Holder.
14.7. SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Warrant.
14.8. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
14.9. GOVERNING LAW. This Warrant shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to
conflict of laws. The Company consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Warrant or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on FORUM NON
CONVENIENS, to the bringing of any such proceeding in such jurisdictions.
19
[REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: ▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇ COMPUTER CORPORATION
By:
----------------------
Name:
Title:
Attest:
By:
--------------------------
Name:
Title:
21
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ Shares of Common Stock of ▇▇▇▇ Computer
Corporation, and herewith makes payment therefor in cash or by check or bank
draft made payable to the Company, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is _________________ and, if such shares of
Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
22
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF
COMMON STOCK
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of ▇▇▇▇ Computer
Corporation maintained for the purpose, with full power of substitution in
the premises.
Dated:__________________ Print Name:___________________
Signature:_____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
23
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 13, 2000 (this
"Agreement"), is made by and between ▇▇▇▇ Computer Corporation, a Virginia
corporation (the "Company") and Briarcliff Investors LLC, a Delaware limited
liability company (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of the
date hereof among the Purchaser and the Company (the "Securities Purchase
Agreement"), the Company has agreed to issue and sell to the Purchaser, (i)
three thousand (3,000) shares of the Company's 5% Convertible Series A
Preferred Stock, stated value $1,000 per share (the "Preferred Stock") and
(ii) warrants (the "Warrants") to purchase two hundred forty seven thousand
five hundred twenty-five (247,525) shares of the common stock par value $.001
per share of the Company (the "Common Stock");
WHEREAS, pursuant to the terms of the Preferred Stock and the
Warrants, (i) upon the conversion of the Preferred Stock, (ii) in lieu of
dividend payments on the Preferred Stock and (iii) upon exercise of the
Warrants, the Company will issue to the Purchaser shares of Common Stock
(such shares are referred to herein as the "Shares"); and
WHEREAS, to induce the Purchaser to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Effectiveness Deadline" shall have the meaning set
forth in section 2(a)(i) hereof.
(ii) "Filing Deadline" shall have the meaning set forth in
Section 2(a)(i) hereof.
(iii) "Purchase Price" means the aggregate purchase price paid
by the Purchaser for the Preferred Stock and the Warrants.
(iv) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415
under the Securities Act or any successor rule providing for offering
securities on a continuous basis ("Rule 415"), and the declaration or
ordering of
effectiveness of such Registration Statement by the United States Securities
and Exchange Commission (the "Commission").
(v) "Registrable Securities" means the Shares.
(vi) "Registration Statement" means a registration statement
or registration statements of the Company filed under the Securities Act
covering Registrable Securities relating to the Shares.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set-forth in the Securities Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATIONS.
(i) REGISTRATION STATEMENT. The Company shall prepare, and, as soon as
practicable but in no event later than thirty (30) days after the Closing
Date (as defined in the Securities Purchase Agreement) (the "Filing
Deadline"), file with the Commission a Registration Statement or Registration
Statements (as necessary) on Form S-3, covering the resale of all of the
Registrable Securities. In the event that Form S-3 is unavailable for such a
registration, the Company shall use Form S-1 or such other form as is
available for such a registration. Any Registration Statement prepared
pursuant hereto shall register for resale at least that number of shares of
Common Stock equal to the product of (x) two and, (y) the sum of (i) the
maximum number of Shares that are issuable upon conversion of the Preferred
Stock on the date of filing, and (ii) the maximum number of Shares issuable
upon exercise of the Warrants, in each case, without regard to any limitation
on any holder's ability to convert any of the Warrants or the Preferred Stock
and without regard to whether any or all of such Preferred Stock or Warrants
have been issued to Purchaser (on the date calculated, the "Minimum
Conversion Amount"). Such Registration Statement shall state that, in
accordance with Rule 416 under the Securities Act, it also covers such
indeterminate number of additional Shares as may become issuable upon
conversion of such Preferred Stock or exercise of such Warrants (i) resulting
from any adjustment in the applicable Conversion Price of such Preferred
Stock or the Exercise Price of such Warrants or (ii) to prevent dilution
resulting from stock splits or stock dividends. If at any time the Minimum
Conversion Amount exceeds the total number of Shares so registered, the
Company shall, within five (5) business days after receipt of a written
notice from the Purchaser, either (i) amend the Registration Statement or
Registration Statements filed by the Company pursuant to the preceding
sentence, if such Registration Statement has not been declared effective by
the Commission at that time, to register all of the Shares into which the
Preferred Stock and the Warrants may be converted or exercised, as
applicable, or (ii) if such Registration Statement has been declared
effective by the Commission at that time, file with the Commission an
additional Registration Statement on Form S-3, or such other appropriate
form, to register the number of shares of Common Stock into which the
Preferred Stock and Warrants may be converted or exercised, as applicable,
that exceed the number of Shares already registered. The Company shall use
its best efforts to have the Registration Statement declared effective within
the earliest to occur of (i) ninety (90) days following the Closing Date (ii)
if the Commission elects not to conduct a review of the Registration
Statement, the date which is three (3) business days after the date upon
which either the Company or its counsel is so notified, whether orally or in
writing; or (iii) if the Registration Statement is reviewed by the
Commission, the date which is three (3) business days after the date upon
which the Company or its counsel is notified by the
2
Commission, whether orally or in writing, that the Commission has no further
comments with respect to the Registration Statement or that the Registration
Statement may be declared effective. The earliest of such dates is referred
to herein as the "Required Effective Date." Notwithstanding the use of the
terms "Required Filing Date" and "Required Effective Date" herein, the
Company shall at all times use its best efforts to file each required
Registration Statement or amendment to a Registration Statement as soon as
possible after the Closing Date or after the date the Company becomes
obligated to file such Registration Statement or amendment, as the case may
be, and to cause each such Registration Statement or amendment to become
effective as soon as possible thereafter. No securities of the Company other
than the Registrable Securities shall be included in any such Registration
Statement.
(ii) The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier
of (i) the date on which all of the Registrable Securities have been sold,
(ii) the date on which the Registrable Securities (in the opinion of counsel
to the Purchaser) may be immediately sold without restriction (including
without limitation as to volume by each holder thereof) without registration
under the Securities Act and (iii) the date which is twenty four (24) months
following the date on which the Registration Statement was declared effective
(the "Registration Period").
(B) PAYMENTS BY THE COMPANY.
(i)(A) If the Registration Statement covering the
Registrable Securities is not filed in proper form with the Commission on or
prior to the Filing Deadline, (B) if the Registration Statement covering the
Registrable Securities is not effective on or prior to the Effectiveness
Deadline, (C) if the number of Shares listed for trading on the NASDAQ
National Market, as applicable, or reserved by the Company for issuance shall
be insufficient, for any period of five (5) consecutive days at any time
after the Effectiveness Deadline, for issuance upon the conversion of the
Shares and the exercise of the Warrants, or (D) upon the occurrence of a
Blackout Event (as described in Section 3(f) or Section 3(g) below), for any
period of five (5) consecutive days at any time after the Effectiveness
Deadline (each of the events described in clauses (A) through (D) of this
paragraph are referred to herein as a "Registration Default"), the Company
will make payments to the Purchaser in such amounts and at such times as
shall be determined pursuant to this Section 2(b).
(ii) The amount (the "Periodic Amount") to be paid by the
Company to the Purchaser as of each thirty (30) day period during which a
Registration Default shall be in effect (each such period, a "Default
Period") shall be equal to (x) with respect to any Registration Default
described in Section 2(b)(i) clause (A) or (B), one percent (1%) of the
Purchase Price paid by the Purchaser for the first thirty (30) day period and
two percent (2%) of such amount for each thirty (30) day period thereafter
and (y) with respect to any Registration Default described in Section 2(b)(i)
clause (C) or (D), one percent (1%) of the Purchase Price paid by the
Purchaser of any securities affected by such event as described in Section
2(b)(i) clause (C) or (D) for the first thirty (30) day period and two
percent (2%) of such amount for each thirty (30) day period thereafter;
PROVIDED that, with respect to any Default Period during which the relevant
Registration Defaults shall have been cured, the Periodic Amount shall be PRO
RATED for the number of days during such period during which the Registration
Defaults were pending; and provided, however, that the payment of such
Periodic Amounts shall not relieve the Company from its continuing
obligations to register the Shares pursuant to Section 2(a).
3
(iii) Each Periodic Amount shall be payable by the Company
in cash or other immediately available funds to the Purchaser monthly,
without demand therefor by the Purchaser.
(iv) The parties acknowledge that the damages which may be
incurred by the Purchaser if the Registration Statement is not filed by the
Filing Deadline, if the Registration Statement has not been declared
effective by the Effectiveness Deadline, or if the provisions of Section 3(e)
or 3(f) become applicable, may be difficult to ascertain. The parties agree
that the Periodic Amount represents a reasonable estimate on the part of the
parties, as of the date of this Agreement, of the amount of such damages.
(C) PIGGYBACK REGISTRATION. (i) If at any time or from time to time,
the Company shall determine to register any of its securities, for its own
account or the account of any of its shareholders, other than a Registration
relating solely to employee share option plans or pursuant to an acquisition
transaction on Form S-4, the Company will:
(A) provide to the Purchaser written notice thereof as soon as
practicable prior to filing the Registration Statement; and
(B) include in such Registration Statement and in any underwriting
involved therein, all of the Registrable Securities specified in a written
request by the Purchaser made within fifteen (15) days after receipt of such
written notice from the Company.
(ii) If the Registration is for a registered public offering
involving an underwriting, the Company shall so advise the Purchaser as a
part of the written notice given pursuant to this Section. In such event, the
rights of the Purchaser hereunder shall include participation in such
underwriting and the inclusion of the Registrable Securities in the
underwriting to the extent provided herein. To the extent that the Purchaser
proposes to distribute its securities through such underwriting, the
Purchaser shall (together with the Company and any other security holders of
the Company distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding
any other provision of this Section, if the managing underwriter of such
underwriting determines that marketing factors require a limitation of the
number of shares to be offered in connection with such underwriting, the
managing underwriter may limit the number of Registrable Securities to be
included in the Registration and underwriting (PROVIDED, HOWEVER, (a) the
Registrable Securities shall not be excluded from such underwritten offering
prior to any securities held by officers and directors of the Company or
their affiliates, (b) the Registrable Securities shall be entitled to at
least the same priority in an underwritten offering as any of the Company's
existing security holders, and (c) the Company shall not enter into any
agreement that would provide any security holder with priority in connection
with an underwritten offering greater than the priority granted to the
Purchaser hereunder). The Company shall so advise any of its other security
holders who are distributing their securities through such underwriting
pursuant to their respective piggyback registration rights, and the number of
shares of Registrable Securities and other securities that may be included in
the registration and underwriting shall be allocated among the Purchaser and
all other security holders of the Company in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by the
Purchaser and such other security holders at the time of the filing of the
registration statement. If the Purchaser disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written
4
notice to the Company. Any Registrable Securities so excluded or withdrawn
from such underwriting shall be withdrawn from such Registration.
(D) ELIGIBILITY FOR FORM S-1. The Company represents and warrants
that it meets all of the requirements for the use of Form S-1 for the
Registration, of the sale by the Purchaser of the Registrable Securities and
any transferee who purchases the Registrable Securities, and the Company
shall file all reports required to be filed by the Company with the
Commission in a timely manner, and shall take such other actions as may be
necessary to maintain such eligibility for the use of Form S-1.
(E) PRIORITY IN FILING. From the date hereof until one hundred eighty
(180) days following the effective date of the Registration Statement
pursuant to Section 2(a) of this Agreement, provided, however, that such one
hundred eighty day period shall be extended by the number of days after the
effective date of such Registration Statement when the Purchaser is not
permitted to utilize the prospectus or otherwise to resell Registrable
Securities, the Company shall not permit the registration of any of its
securities under the Securities Act to be filed or to become effective, other
than those covered by this Agreement, without the prior written approval of
the Purchaser.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following:
(a) Prepare and file with the Commission the Registration Statements
required by Section 2 of this Agreement and such amendments (including
post-effective amendments) and supplements to the Registration Statement and
the prospectuses used in connection with the Registration Statement, each in
such form as to which the Purchaser and its counsel shall not have objected,
as may be necessary to keep the Registration effective at all times during
the Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all of
the Registrable Securities and all of the Warrants of the Company covered by
the Registration Statement until such time as all of such Registrable
Securities and all of such Warrants have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in the Registration Statement;
(b) Furnish to the Purchaser, if the Registrable Securities of the
Purchaser are included in the Registration Statement, and its legal counsel
identified to the Company, promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by the Company, a copy of
the Registration Statement, each preliminary prospectus, each final
prospectus, and all amendments and supplements thereto and such other
documents, as the Purchaser may reasonably request in order to facilitate the
disposition of its Registrable Securities and Warrants;
(c) Furnish to the Purchaser and its counsel copies of any
correspondence between the Company and the Commission with respect to any
registration statement or amendment or supplement thereto filed pursuant to
this Agreement;
(d) Use all best efforts to (i) register and qualify the
Registrable Securities covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations
5
and qualifications as may be necessary to maintain the effectiveness thereof
at all times during the Registration Period, (iii) take such other actions as
may be necessary to maintain such registrations and qualifications in effect
at all times during the Registration Period and (iv) take all other actions
necessary or advisable to qualify the Registrable Securities for sale in such
jurisdictions, provided that in connection therewith, the Company shall not
be required to qualify as a foreign corporation or to file a general consent
to the service of process in any jurisdiction;
(e) List such securities on the Nasdaq National Market and
all the other national securities exchanges on which any securities of the
Company are then listed, and file any filings required by the Nasdaq National
Market and/or such other exchanges.
(f) As promptly as practicable after becoming aware of such
event, notify each Purchaser of the occurrence of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and to use its best efforts to promptly
prepare a supplement or amendment to the Registration Statement or other
appropriate filing with the Commission to correct such untrue statement of
omission, and to deliver a number of copies of such supplement or amendment
to the Purchaser as the Purchaser may reasonably request;
(g) As promptly as practicable after becoming aware of such
event, notify the Purchaser who holds Warrants or Registrable Securities
being sold (or, in the event of an underwritten offering, the underwriters)
of the issuance by the Commission or any stop order or other suspension of
the effectiveness of the Registration Statement at the earliest possible
time, and to use its best efforts to promptly obtain the withdrawal of such
stop order or other suspension of effectiveness;
(h) As promptly as practicable after becoming aware of such
event, notify the Purchaser who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time,
and to use its best efforts to promptly obtain the withdrawal of such stop
order or other suspension of effectiveness (the occurrence of any of the
events described in paragraphs (f) and (g) of this Section 3 is referred to
herein as a "Blackout Event");
(i) During the period commencing upon (i) the Purchaser's
receipt of a notification pursuant to Section 3(f) above, or (ii) the entry
of a stop order or other suspension of effectiveness of the Registration
Statement described in Section 3(g) above, and ending at such time as (y) the
Company shall have completed the applicable filings (and if applicable, such
filings shall have been declared effective) and shall have delivered to the
Purchaser the documents required pursuant to Section 3(f) above, or (z), such
stop order or other suspension of the effectiveness of the Registration
Statement shall have been removed, the Company shall be liable to remit the
payments required to be paid pursuant to Section 2(b) above;
(j) If the offering is underwritten, at the request of a
Purchaser, to furnish on the date that Registrable Securities are delivered
to the underwriters for sale pursuant to such registration: (i) an opinion
dated such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to any Purchaser selling
Registrable
6
Securities in connection with such underwriting, stating that such
registration statement has become effective under the Securities Act and that
(A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the Securities Act
and (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements or other financial data contained
therein) and (ii) a letter dated such date from the Company's independent
public accountants addressed to the underwriters and to the Purchaser,
stating that they are independent public accountants within the meaning of
the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five (5)
business days prior to the date of such letter) with respect to such
registration as such underwriters may reasonably request; and
(k) Cooperate with the Purchaser to facilitate the timely
preparation and delivery of certificates for the Registrable Securities to be
offered pursuant to the Registration Statement and to enable such
certificates for the Registrable Securities to be in such denominations or
amounts, as the case may be, as the Purchaser may reasonably request, and
registered in such names as the Purchaser may request; and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the Commission, the Company shall deliver,
and shall cause legal counsel selected by the Company to deliver, to the
transfer agent for the Registrable Securities (with copies to the Purchaser)
an appropriate instruction and opinion of such counsel.
4. OBLIGATIONS OF THE PURCHASER. In connection with the registration of
the Registrable Securities, the Purchaser shall have the following
obligations:
(a) Take all other reasonable actions necessary to expedite
and facilitate the disposition by the Purchaser of the Registrable Securities
pursuant to the Registration Statement.
(b) Furnish to the Company such information regarding
itself, the Registrable Securities held by it, and the intended method of
disposition of and the Registrable Securities held by it, as shall be
reasonably required to effect the registration of such Registrable
Securities, and the Purchaser shall execute such documents in connection with
such registration as the Company may reasonably request. At least five (5)
days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify the Purchaser of the information the
Company included in the Registration Statement.
(c) The Purchaser, by its acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any Registration
Statement hereunder.
(d) The Purchaser agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 3(f) or 3(g) above, it will immediately discontinue disposition of
its Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such copies of the supplemented or amended
prospectus contemplated by Section 3(f) or 3(g) shall be furnished to the
Purchaser.
7
5. EXPENSES OF REGISTRATION. All expenses, other than underwriting
discounts and commissions and other fees and expenses of investment bankers
and other than brokerage commissions, incurred in connection with
registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualification
fees, printing and accounting fees, and the fees and disbursements of counsel
for the Company, and the fees of one counsel to the Purchaser with respect to
each Registration Statement filed pursuant hereto, shall be borne by the
Company.
6. INDEMNIFICATION. In the event any Registrable Securities are included
in a Registration Statement under this Agreement:
(a) The Company will indemnify and hold harmless the
Purchaser, each of its officers, directors, shareholders and members, and
each person, if any, who controls the Purchaser within the meaning of the
Securities Act or the Exchange Act (each, an "Indemnified Person"), against
any losses, claims, damages, liabilities or expenses (joint or several)
incurred (collectively, "Claims") to which any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereof or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement
thereto with the Commission) or the omission to state therein any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state or foreign securities law or any rule or regulation
under the Securities Act, the Exchange Act or any state or foreign securities
law (the matters in foregoing clauses (i) through (iii) being, collectively,
"Violations"). The Company shall, subject to the provisions of Section 6(b)
below, reimburse the Purchaser, promptly as such expenses are incurred and
are due and payable, for any legal and other costs, expenses and
disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise, including without limitation, the costs, expenses and
disbursements, as and when incurred, of investigating, preparing or defending
any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which the Purchaser is a party), incurred by it
in connection with the investigation or defense of any such Claim.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (i) apply
to any Claim arising out of or based upon a modification which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (ii) with respect to any preliminary
prospectus, inure to the benefit of any such person from whom the person
asserting any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such person) if
the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the final prospectus, as then amended
or supplemented, if such final prospectus was timely made available by the
Company pursuant to Section 3(b) hereof; (iii) be available to the extent
that such Claim is based upon a failure of the Purchaser to deliver or to
8
cause to be delivered the prospectus made available by the Company, if such
prospectus was timely made available by the Company pursuant to Section 3(b)
hereof; or (iv) apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Purchaser pursuant to Section 9. The Purchaser will
indemnify the Company and its officers and directors against any Claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on
behalf of the Purchaser, expressly for use in connection with the preparation
of the Registration Statement, subject to such limitations and conditions as
are applicable to the Indemnification provided by the Company in this Section
6.
(b) Promptly after receipt by an Indemnified Person under
this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in,
and to the extent that the indemnifying party so desires, jointly with any
other indemnifying party similarly notified, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the
Indemnified Person, provided, however, that an Indemnified Person shall have
the right to retain its own counsel with the reasonable fees and expenses to
be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person and
any other party represented by such counsel in such proceeding. In such
event, the Company shall pay for only one separate legal counsel for the
Purchaser, and such legal counsel shall be selected by the Purchaser. The
failure to deliver written notice to an indemnifying party within a
reasonable time after the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person under this
Section 6, except to the extent that the indemnifying party is materially
prejudiced in its ability to such action. The indemnification required by
this Section 6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as such expense, loss,
damage or liability is incurred and is due and payable.
(c) No indemnifying party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Person of an unconditional and irrevocable
release from all liability in respect of such claim or litigation.
(d) Notwithstanding the foregoing, to the extent that any
provisions relating to indemnification or contribution contained in the
underwriting agreements entered into among the Company, the underwriters and
the Purchaser in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in such underwriting
agreements shall be controlling as to the Registrable Securities included in
the public offering; PROVIDED, HOWEVER, that if, as a result of this Section
6(d), the Purchaser, its officers, directors, shareholders, members or any
person controlling the Purchaser is or are held liable with respect to any
Claim for which they would be entitled to indemnification hereunder but for
this Section
9
6(d) in an amount which exceeds the aggregate proceeds received by the
Purchaser from the sale of Registrable Securities included in a registration
pursuant to such underwriting agreement (the "Excess Liability"), the Company
shall reimburse the Purchaser for such Excess Liability.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited under applicable law, the indemnifying party
agrees to contribute to the amount paid or payable by such indemnified party
as a result of such loss, claim, damage, liability or expense in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and the Indemnified Person on the other
hand in connection with the statements or omissions which resulted in such
Claim, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and the Indemnified Person shall be
determined by reference to, among other things, whether the untrue statement
of a material fact or the omission to state a material fact on which such
Claim is based relates to information supplied by the indemnifying party or
by the Indemnified Person, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. Notwithstanding the forgoing, (a) no contribution shall be made
under circumstances where the payor would not have been liable for
indemnification under the fault standards set forth in Section 6, (b) no
seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any seller of Registrable Securities who was not guilty
of such fraudulent misrepresentation and (c) contribution by any seller of
Registrable Securities shall be limited in amount to the net proceeds
received by such seller from the sale of such Registrable Securities. The
Company and the Purchaser agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro-rata
allocation (even if the Purchaser and any other party were treated as one
entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in this Section.
8. REPORTS UNDER EXCHANGE ACT.
With a view to making available to the Purchaser the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Purchaser to
sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144;
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(iii) furnish to the Purchaser so long as the Purchaser owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
periodic report of the Company and such other reports and documents so filed
by the Company and (iii) such other information as may be reasonably
requested to permit the Purchaser to sell such securities pursuant to Rule
144 without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assigned by Purchaser to any transferee of all or any portion
of the Shares, Warrants or the underlying
10
Common Stock held by Purchaser if: (a) Purchaser agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (b)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee
or assignee and (ii) the Securities with respect to which such registration
rights are being transferred or assigned; (c) at or before the time the
Company receives the written notice contemplated by clause (b) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (d) the transfer of the
relevant Securities complies with the restrictions set forth in Section 4 of
the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Purchaser. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon
Purchaser and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Warrants or
Registrable Securities whenever such person or entity owns of record such
Warrants or Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with
respect to the same Warrants or Registrable Securities, the Company shall act
upon the basis of the instructions, notice or election received from the
registered owner of such Warrants or Registrable Securities.
(b) Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon
personal delivery, via facsimile (upon receipt of confirmation of error-free
transmission and mailing a copy of such confirmation postage prepaid by
certified mail, return receipt requested) or two business days following
deposit of such notice with an internationally recognized courier service,
with postage prepaid and addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party
may designate by ten (10) days advance written notice to each of the other
parties hereto.
COMPANY: ▇▇▇▇ Computer Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇, Savage & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Phone (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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PURCHASER: Briarcliff Investors LLC
c\o WEC Asset Management LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇-▇▇-▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York, except for provisions with respect to
internal corporate matters of the Company which shall be governed by the
corporate laws of the State of Virginia. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions. This Agreement may be signed in one or
more counterparts, each of which shall be deemed an original. The headings of
this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such
validity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction. Subject to the provisions of Section 10
hereof, this Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement. This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.
(e) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof. This Agreement supersedes
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure for the benefit of and be binding upon the successors and assigns
of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
12
(h) The Company acknowledges that any failure by the Company to
perform its obligations under Section 2(a), or any delay in such performance
could result in direct damages to the Purchaser, and the Company agrees that,
in addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused
by any such failure or delay. Nothing herein shall limit the Purchaser's
right to pursue any claim seeking such direct damages.
[REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]
13
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned.
"COMPANY"
▇▇▇▇ COMPUTER CORPORATION
By:
---------------------------
Name:
Title:
"PURCHASER"
Briarcliff Investors LLC
By: WEC ASSET MANAGEMENT LLC, Manager
By:
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
14
EXHIBIT D
[FORM OF OPINION OF COUNSEL]
March 13, 2000
Briarcliff Investors LLC
c\o WEC Asset Management LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
RE: ▇▇▇▇ COMPUTER CORPORATION
Dear Sirs:
This opinion is delivered to you pursuant to a Securities Purchase
Agreement (the "Purchase Agreement") dated as of March 13, 2000, between
Briarcliff Investors LLC, Delaware limited liability company (the
"Purchaser") and ▇▇▇▇ Computer Corporation, a Virginia corporation (the
"Company"), in connection with the sale by the Company and purchase by the
Purchaser of the Company's Shares and Warrants (as such terms are defined in
the Purchase Agreement). All capitalized terms not otherwise defined herein
shall have the meanings given them in the Purchase Agreement.
I have examined and are familiar with the Certificate of
Incorporation and By-laws of the Company any and all amendments thereto. I
have also examined and are familiar with the Primary Agreements and any and
all other instruments executed and delivered by or on behalf of the Company
in connection with the Purchase Agreement and the transactions contemplated
thereunder. In addition to the foregoing, I have examined such minutes and
other corporate proceedings of the Company and such matters of law, documents
and certificates of public officials as I have deemed necessary in rendering
my opinion. In all such examinations, I have assumed the genuineness of all
the signatures on original documents and the conformity to original and
certified documents of all copies submitted to us as conformed or photostatic
copies.
Based upon the foregoing, I are of the opinion that:
1. The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Virginia, and has all requisite corporate power and authority to own its
properties and to carry on its business as now being conducted and is duly
qualified and in good standing as a foreign corporation in, and is authorized
to do business under the laws of, each jurisdiction where the character of
the properties owned or leased by it or the transaction of its business makes
such qualification or authorization necessary and in which the failure to so
qualify would have a material adverse effect on the Company and its
subsidiaries taken as a whole.
2. The authorized and issued and outstanding capital stock of the
Company are as stated in Section 3(b) of the Purchase Agreement. All shares
of the outstanding capital
stock of the Company have been validly issued and are fully paid and
non-assessable. To my knowledge, Schedule 3 (b) of the Purchase Agreement
accurately sets forth the information to be provided therein pursuant to
Section 3 (b) of the Purchase Agreement.
3. The issuance by the Company of the Shares and Warrants
(collectively, the "Initial Securities"), and the shares of Common Stock
issuable upon conversion of, or in lieu of dividend payments on, the Shares
and Additional Shares and exercise of the Warrants (collectively, the
"Shares") have been duly authorized and the Initial Securities have been
validly issued and the consideration to be paid therefor under the Purchase
Agreement has been fully paid. The Common Stock issuable upon conversion of,
or in lieu of dividend payments on, the Preferred Stock, and upon exercise of
the Warrants, when issued in accordance with the Primary Documents, shall be
duly and validly issued, fully paid and non-assessable, and will not subject
the holder thereof to personal liability by reason of being such a holder.
There are no preemptive rights of any stockholder of the Company to acquire
any of the Initial Securities or the Shares (collectively, the "Collective
Securities").
4. The Common Stock is registered under Section 12 of the Securities
Exchange Act of 1934, as amended. The Company has duly and timely filed all
materials and documents required to be filed pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange Act, if any,
through the date hereof (prior to the offer and sale of the Securities). The
Common Stock is listed and traded on the Nasdaq National Market, and to my
knowledge there is no pending or contemplated action or proceeding of any
kind to suspend the trading of the Common Stock.
5. The Company has the requisite corporate power and authority to
enter into the Purchase Agreement and to issue and deliver the Collective
Securities.
6. The Primary Documents and the transactions contemplated thereby,
have been duly and validly authorized by the Company and are legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, except to the extent that enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
7. The execution and delivery of the Primary Documents and the
consummation by the Company of the other transactions contemplated thereby,
does not and will not conflict with or result in a breach by the Company of
any of the terms or provisions of, or constitute a default under, the
Certificate of Incorporation or By-laws of the Company, or, to my knowledge,
(i) any material indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which they or any of their properties or assets are bound, or (ii) any
existing applicable law, rule, or regulation or any applicable decree,
judgment or order of any court or United States Federal or state regulatory
body, administrative agency, or any other governmental body having
jurisdiction over the Company, its subsidiaries, or any of their properties
or assets. Except as set forth on Schedule 3(h) to the Purchase Agreement,
neither the filing of the registration statement required to be filed by the
Company pursuant to the Registration Rights Agreement nor the offering or
2
sale of the Collective Securities gives rise to any rights for or relating to
the registration of any shares of the Common Stock.
8. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, stock exchange or
market or the stockholders of the Company is required to be obtained by the
Company for the entry into or the performance of the Primary Documents by the
Company.
9. To my knowledge, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or
threatened against or affecting the Company or any of its subsidiaries, in
which an unfavorable decision, ruling or finding would have a material
adverse effect on the properties, business, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole,
or the transactions contemplated by the Primary Documents, or which would
adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, the Primary
Documents.
10. To my knowledge, neither the Company nor any of its subsidiaries
is in default in the performance or observance of any obligation, covenant or
condition contained in any material indenture, mortgage, deed of trust or
other instrument or agreement to which it is a party or by which it or its
property may be bound.
11. Subject to the accuracy of the Purchaser's representations and
warranties set forth in Section 2 of the Purchase Agreement, the offer, sale
and issuance of the Securities and the other securities as contemplated by
the Purchase Agreement are exempt from the registration requirements of the
Securities Act.
This opinion is rendered only with regard to the matters set out in
the numbered paragraphs above. No other opinions are intended nor should they
be inferred.
[I am a member of the Bar of the State of Virginia. I call your attention to
the fact that the Purchase Agreement is stated therein to be governed by the
State of New York and that I am not a member of the Bar of the State of New
York. I express no opinion as to the enforceability of the choice of law
provisions of such documents under New York law. The enforceability opinions
contained herein are given on the assumption that the internal laws (as
opposed to conflict of law provisions) of the State of New York are identical
to those of the State of Virginia. This opinion is based solely upon the
foregoing state laws and the laws of the United States as currently in
effect.]
The opinions expressed herein are given to you solely for your use in
connection with the transaction contemplated by the Purchase Agreement and
may not be relied upon by, or delivered to, any other person or entity or for
any other purpose without my prior written consent.
Sincerely,
3
EXHIBIT E
FORM OF LOCK-UP AGREEMENT
▇▇▇▇ Computer Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
March 13, 2000
Briarcliff Investors LLC
c/o WEC Asset Management LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇-▇▇-▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: SALE OF UP TO $3,000,000 OF SECURITIES OF ▇▇▇▇ COMPUTER
CORPORATION TO BRIARCLIFF INVESTORS LLC
Ladies & Gentlemen:
In connection with the offering (the "Offering") of 5% Convertible
Series A Preferred Stock, par value $.001 per share (the "Preferred Stock")
and warrants to purchase shares of common stock, par value $.001 per share
(the "Common Stock") of ▇▇▇▇ Computer Corporation (the "Company") to
Briarcliff Investors LLC. (the "Investor"), a Delaware limited liability
company. The undersigned understands that the Company will be filing a
registration statement with the Securities and Exchange Commission to
register the Common Stock underlying the securities purchased by the Investor
in the Offering. The undersigned further understands the Investor is
contemplating entering into a Securities Purchase Agreement with the Company
in connection with the Offering (the "Securities Purchase Agreement").
In order to induce the Investor to enter into the Securities Purchase
Agreement and to proceed with the Offering, the undersigned hereby agrees,
for the benefit of the Investor, that should the Offering be effected, except
for sales made in accordance with the volume limitations of Rule 144 of the
Securities Act of 1933, as amended, the undersigned will not, without the
prior written consent of the Investors, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of an option to purchase or other sale or
disposition) of any his shares of Common Stock or other capital stock of the
Company or any securities convertible into, or exchangeable or exercisable
for Common Stock or other capital stock of the Company, including any such
securities beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) by the undersigned on the date
hereof for a period of six months subsequent to the date of the consummation
of the Offering.
In addition, in order to induce the Investor to enter into the
Securities Purchase Agreement and to proceed with the Offering, the
undersigned hereby agrees, for the benefit of
the Investor, that at the Company Stockholder Meeting (as defined in the
Securities Purchase Agreement) or any other meeting of the stockholders of
the Company however called, and in any action by consent of the stockholders
of the Company, the undersigned will vote all shares of Common Stock owned
beneficially or of record by the undersigned in favor of the issuance to the
Investor of Preferred Stock, warrants to purchase Common Stock or Common
Stock issuable upon the conversion of the Preferred Stock or exercise of the
warrants. In addition, to the extent inconsistent with the provisions of this
paragraph, the undersigned hereby revokes any and all proxies with respect to
shares of Common Stock or any other voting securities of the Company held by
the undersigned.
2
The undersigned acknowledges and agrees that you and the Company will
rely upon the representations set forth in this agreement in proceeding with
the Offering. This agreement shall be binding on the undersigned and his
respective successors, heirs, personal representatives and assigns.
This agreement may be executed in any number of counterparts. Each
counterpart shall be deemed to be an original and all such counterparts shall
together constitute one instrument.
Very truly yours,
---------------
---------------
The foregoing is accepted and agreed to as of the date first above written:
Briarcliff Investors LLC
By: WEC Asset Management LLC, Manager
By:_____________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
3