Exhibit 4.01
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
AMONG
INTELIDATA TECHNOLOGIES CORPORATION
AND
THE INVESTORS SIGNATORY HERETO
JULY 22, 1999
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"),
dated as of July 22, 1999, among InteliData Technologies Corporation, a Delaware
corporation (the "COMPANY"), and the investors signatory hereto on the date of
this Agreement (each such investor is a "PURCHASER" and all such investors are,
collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company,
shares of the Company's 4% Series B Convertible Preferred Stock, par value $.001
per share (the "PREFERRED Stock"), which are convertible into shares of the
Company's common stock, par value $.001 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy are
hereby acknowledged, the Company and the Purchasers agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.1 THE CLOSING. Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchasers and the Purchasers
shall, severally and not jointly, purchase 600 shares of Preferred Stock (the
"SHARES") for an aggregate purchase price of $6,000,000. The closing of the
purchase and sale of the Shares (the "CLOSING") shall take place at the offices
of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("XXXXXXXX XXXXXXXXX"), 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Closing is hereinafter referred to as the "CLOSING DATE."
On the Closing Date, the parties shall deliver or shall cause to be
delivered the following: (A) the Company shall deliver to each Purchaser (1)
stock certificates, registered in the name of such Purchaser, representing a
number of Shares equal to the quotient obtained by dividing the purchase price
indicated below such Purchaser's name on the signature page to this Agreement by
10,000, (2) the legal opinions of Hunton & Xxxxxxxx, outside counsel to the
Company, and Xx. Xx Xxxxxxx, general counsel to the Company, each substantially
in the form of EXHIBIT C-1 and EXHIBIT C-2, respectively, and (3) all other
documents, instruments and writings required to have been delivered at or prior
to the Closing Date by the Company pursuant to this Agreement, including an
executed Registration Rights Agreement, dated the date hereof, among the Company
and the Purchasers, in the form of EXHIBIT B (the "REGISTRATION RIGHTS
AGREEMENT"), the Transfer Agent Instructions, in the form of EXHIBIT D,
delivered to and acknowledged by the Company's transfer agent (the "TRANSFER
AGENT INSTRUCTIONS") and an executed Letter Agreement, dated the date hereof,
among the Company and the Purchasers, in the form of EXHIBIT E (the "LETTER
AGREEMENT"); and (B) each Purchaser shall deliver (1) the purchase price
indicated below such Purchaser's name on the signature page to this Agreement in
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose, and (2) all
documents, instruments and writings required to have been
delivered at or prior to the Closing Date by such Purchaser pursuant to this
Agreement, including, without limitation, an executed Registration Rights
Agreement and Letter Agreement.
1.2. TERMS OF PREFERRED STOCK. The Preferred Stock shall have the
rights preferences and privileges set forth in EXHIBIT A, and shall be
incorporated into a Certificate of Designation (the "CERTIFICATE OF
DESIGNATION") which shall be filed on or prior to the Closing Date by the
Company with the Secretary of State of the State of Delaware, in form and
substance mutually agreed to by the parties.
For purposes of this Agreement, "CONVERSION PRICE," "ORIGINAL ISSUE
DATE" and "TRADING DAY" shall have the meanings set forth in EXHIBIT A;
"BUSINESS DAY" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York or the Commonwealth of Virginia are authorized or required by
law or other governmental action to close.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
A. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and carry on its business as currently conducted. The
Company has no subsidiaries other than as set forth in SCHEDULE 2.1(a)
(collectively the "SUBSIDIARIES"). Each of the Subsidiaries is an entity, duly
incorporated or otherwise organized, validly existing and, except as set forth
in SCHEDULE 2.1(a), in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. Other than Colonial Technologies Corp., the Subsidiaries
collectively account for less than 1% of the consolidated gross revenues or
assets of the Company. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality, validity or enforceability
of the Securities (as defined below) or any of this Agreement, the Certificate
of Designation, the Registration Rights Agreement, the Letter Agreement or the
Transfer Agent Instructions (collectively, the "TRANSACTION DOCUMENTS"), (y)
have or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "MATERIAL ADVERSE EFFECT").
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B. AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company. Each of the Transaction Documents has been duly executed by
the Company and, when delivered (or filed, as the case may be) in accordance
with the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Neither
the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, by-laws or other charter documents.
C. CAPITALIZATION. The number of authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the Shares and except
as disclosed in SCHEDULE 2.1(c), there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the actual knowledge of the
Company, except as specifically disclosed in the SEC Documents (as defined
below) or SCHEDULE 2.1(c), no Person or group of related Persons beneficially
owns (as determined pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT")), or has the right to
acquire by agreement with or by obligation binding upon the Company, in excess
of 5% of the Common Stock. A "PERSON" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
D. ISSUANCE OF THE SHARES. The Shares are duly authorized and, when
issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind (collectively, "LIENS").
The Company has an adequate reserve of duly authorized shares of Common Stock,
reserved for issuance to the holders of the Shares to enable it to perform its
conversion and other obligations under this Agreement and the Certificate of
Designation. Such number of reserved and available shares of Common Stock is not
less than the number of shares of Common Stock which would be issuable upon
conversion in full of the Shares, assuming such conversion occurred on the
Original Issue Date at a Conversion Price of $1.00 per share and no dividends on
the Shares are paid in shares Common Stock (such number of shares of Common
Stock, the "INITIAL MINIMUM"). The shares of Common Stock issuable upon
conversion of the Shares are referred to herein as the "UNDERLYING SHARES." The
Shares and the Underlying Shares are collectively referred to herein as, the
"SECURITIES." When issued in accordance with the Certificate of Designation, the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
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E. NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the Required Approvals (as defined below), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, loan, credit facility, indenture or instrument (with
respect to such indentures and instruments, evidencing a Company debt or
otherwise) to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected, except in the case of each of clauses (ii) and (iii), as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, could not have or result in a Material
Adverse Effect.
F. FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
Federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Certificate of
Designation with the Secretary of State of Delaware, (ii) the filings required
pursuant to Section 3.10, (iii) the filing of registration statement with the
Securities and Exchange Commission (the "COMMISSION") meeting the requirements
set forth in the Registration Rights Agreement and covering the resale of the
Underlying Shares by the Purchasers (the "UNDERLYING SHARES REGISTRATION
STATEMENT"), (iv) the application(s) to the Nasdaq Stock Market for the listing
of the Underlying Shares for trading on the Nasdaq National Market ("NASDAQ")
and with any other national securities exchange, trading facility or market on
which the Common Stock is then listed, (v) applicable Blue Sky filings and (vi)
in all other cases where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (collectively, the "REQUIRED APPROVALS").
G. LITIGATION; PROCEEDINGS. Except as set forth in SCHEDULE 2.1(g),
there is no action, suit, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(Federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, individually or in the aggregate,
have or result in a Material Adverse Effect.
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H. NO DEFAULT OR VIOLATION. Except as set forth in SCHEDULE 2.1(h),
neither the Company nor any Subsidiary (i) is in default under or in violation
of (and no event has occurred which has not been waived which, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
I. PRIVATE OFFERING. Assuming the accuracy of the representations and
warranties of the Purchaser set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchaser as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor any Person authorized to
act on its behalf has taken any action that could subject the offering, issuance
or sale of the Securities to the registration requirements of the Securities
Act.
J. SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such material)
(the foregoing materials being collectively referred to herein as the "SEC
DOCUMENTS" and, together with the Schedules to this Agreement and the Company's
Confidential Private Placement Memorandum, dated June 1999, the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject and which are required to be filed as exhibits to the
SEC Documents have been so filed. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Since March 31, 1999, except as specifically disclosed in SCHEDULE
2.1(j) or in the SEC Documents, (a) there has been no event, occurrence or
development that has or that could result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in
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the Company's financial statements pursuant to GAAP or required to be disclosed
in filings made with the Commission, (c) the Company has not altered its method
of accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock. The Company last filed audited financial statements with the
Commission on March 31, 1999, and has not received any comments from the
Commission in respect thereof.
K. INVESTMENT COMPANY. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
L. CERTAIN FEES. Except for certain fees payable by the Company to
Pacific Continental Securities Corporation, no fees or commissions will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless each Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
M. SOLICITATION MATERIALS. Neither the Company nor any Person
authorized to act on the Company's behalf has solicited any offer to buy or sell
the Securities by means of any form of general solicitation or advertising.
N. FORM S-3 ELIGIBILITY. The Company is eligible to register securities
for resale with the Commission under Form S-3 promulgated under the Securities
Act.
O. SENIORITY. No class of equity securities of the Company is senior to
the Shares in right of payment, whether upon liquidation or dissolution, or
otherwise.
P. LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except as specified
in SCHEDULE 2.1(p), the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from the NASDAQ or any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange or
market. Except as specified in SCHEDULE 2.1(p), the Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such maintenance requirements.
Q. PATENTS AND TRADEMARKS. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights,
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licenses and rights which are necessary or material for use in connection with
its business, and which the failure to so have would have a Material Adverse
Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). To the best knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
R. REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set forth on
SCHEDULE 6(b) to the Registration Rights Agreement, the Company has not granted
or agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission or
any other governmental authority which has not been satisfied. No Person, has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents.
S. REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
T. TITLE. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them which is material to the
business of the Company and its Subsidiaries and good and marketable title in
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
U. DISCLOSURE. The Company confirms that it has not provided any
Purchaser or its agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All of the disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
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A. ORGANIZATION; AUTHORITY. Such Purchaser is a corporation, limited
liability company or limited partnership validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite power
and authority, to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations thereunder.
The purchase by such Purchaser of the Securities hereunder has been duly
authorized by all necessary corporate or partnership action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by such Purchaser and constitutes the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.
B. INVESTMENT INTENT. Such Purchaser is acquiring the Securities
offered and sold to it hereunder as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof or interest therein, without prejudice, however,
to such Purchaser's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration. By making this representation,
such Purchaser does not represent that it will hold such Securities for any
period of time.
C. PURCHASER STATUS. Such Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
D. EXPERIENCE OF PURCHASER. Such Purchaser either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.
E. ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser is
able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
F. ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of
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the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
G. GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
H. RELIANCE. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with any transfer agent
for the securities of the Company any transfer of Securities by a Purchaser to
an Affiliate of such Purchaser or to one or more funds under common management
with such Purchaser, and any transfer among any such Affiliates or one or more
funds, provided that the transferee renders to the Company the representations
and warranties contained in Section 2.2(b) - (g). Any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have the
rights of the Purchaser under this Agreement and the Registration Rights
Agreement.
The Purchasers agree to the imprinting, so long as is required by this
Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES
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COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND , ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Shares or other issuances of Underlying Shares
as contemplated hereby or by the Certificate of Designation occurs at any time
while an Underlying Shares Registration Statement is effective under the
Securities Act or, in the event there is not an effective Underlying Shares
Registration Statement, at such time, in the opinion of counsel to the Company,
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that the Underlying Shares Registration Statement is declared effective
by the Commission. The Company agrees that, in the event any Underlying Shares
are issued with a legend in accordance with this Section 3.1(b), it will, within
three (3) Trading Days after request therefor by a Purchaser, provide such
Purchaser with a certificate or certificates representing such Underlying
Shares, free from such legend at such time as such legend would not have been
required under this Section 3.1(b) had such issuance occurred on the date of
such request. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of transfer set forth in this Section.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Underlying Shares upon conversion of the Shares in accordance
with the terms of the Certificate of Designation will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Underlying Shares upon conversion of the Shares in accordance with the
terms of the Certificate of Designation is unconditional and absolute, subject
to the limitations set forth herein in the Certificate of Designation regardless
of the effect of any such dilution.
3.3 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as any Purchaser owns Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to such Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for such Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares
10
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers.
3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would
be, if a notice of conversion were to be delivered on such date, precluded from
issuing the number of Underlying Shares as would then be issuable upon a
conversion in full of the Shares, subject to the limitations on the Company's
obligation to issue shares of Common Stock pursuant to Sections 5(a)(iii) of the
Certificate of Designation (the "CURRENT REQUIRED MINIMUM"), in either case, due
to the unavailability of a sufficient number of authorized but unissued or
reserved shares of Common Stock, then the Board of Directors of the Company
shall promptly (and in any case, within 30 Business Days from such date) prepare
and mail to the stockholders of the Company proxy materials requesting
authorization to amend the Company's Certificate of Incorporation to increase
the number of shares of Common Stock which the Company is authorized to issue to
at least such number of shares as reasonably requested by the Purchaser in order
to provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion and reservation of
shares obligations as set forth in this Agreement and the Certificate of
Designation (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the Current
Required Minimum, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (c) within five (5) Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's Certificate of Incorporation to evidence such increase.
3.6 LISTING OF UNDERLYING SHARES. The Company shall (a) not later than
the second Business Day following the Closing Date prepare and file with the
NASDAQ (and such other national securities exchange or market or trading or
quotation facility on which the Common Stock is then listed) an additional
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (b) take all steps necessary to cause such
shares of Common Stock to be approved for listing on the NASDAQ (as well as on
any such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (c) provide to the Purchaser evidence of such listing, and the
Company shall maintain the listing of its Common Stock thereon. If the number of
Underlying Shares issuable upon conversion in full of the then
11
outstanding Shares exceed the number of Underlying Shares previously listed on
account thereof with the NASDAQ (and any such other required exchanges), then
the Company shall take the necessary actions to promptly list a number of
Underlying Shares as equals no less than the then Current Required Minimum.
3.7 CONVERSION PROCEDURES. The Transfer Agent Instructions and
Conversion Notice (as defined in EXHIBIT A) set forth the totality of the
procedures with respect to the conversion of the Shares, including the form of
legal opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert Shares as contemplated in the Certificate of
Designation. The Company shall honor conversions of the Shares and shall deliver
Underlying Shares in accordance with the terms, conditions and time periods set
forth in the Certificate of Designation.
3.8 NOTICE OF BREACHES. Each of the Company and the Purchasers shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained therein to be
incorrect or breached as of the Closing Date. However, no disclosure by a party
pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in any Transaction
Document.
3.9 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS. The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities including the issuance of any debt or other instrument is at any time
over life thereof convertible into or exchangeable for Common Stock, or any
other transaction intended to be exempt or not subject to registration under the
Securities Act (a "SUBSEQUENT PLACEMENT") for a period of 180 days after the
Closing Date, except (i) the granting of options or warrants to employees,
officers and directors, and the issuance of shares upon exercise of options
granted, under any stock option plan heretofore or hereinafter duly adopted by
the Company, (ii) shares of Common Stock issuable upon exercise of any currently
outstanding warrants and upon conversion of any currently outstanding
convertible securities of the Company, in each case disclosed in SCHEDULE
2.1(c), and (iii) shares of Common Stock issuable upon conversion of Preferred
Stock in accordance with the Certificate of Designation, unless (A) the Company
delivers to the Purchasers a written notice (the "SUBSEQUENT PLACEMENT NOTICE")
of its intention to effect such Subsequent Placement, which Subsequent Placement
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) the
Purchasers shall not have notified the Company by 6:30 p.m. (New York City time)
on the tenth (10th) Trading Day after their receipt of the Subsequent Placement
Notice of their willingness to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation, financing
to the Company on conversion, reset and pricing terms (including original issue
12
discount, if any) and substantially on such other terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to notify the Company
of their intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; PROVIDED, that the Company shall provide the Purchasers with a
second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this Section, if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on conversion, reset and pricing terms (including
original issue discount, if any) and substantially on such other terms set forth
in such Subsequent Placement Notice within thirty (30) Trading Days after the
date of the initial Subsequent Placement Notice with the Person (or an Affiliate
of such Person) identified in the Subsequent Placement Notice. If the Purchasers
shall indicate a willingness to provide financing in excess of the amount set
forth in the Subsequent Placement Notice, then each Purchaser shall be entitled
to provide financing pursuant to such Subsequent Placement Notice up to an
amount equal to such Purchaser's pro rata portion of the aggregate number of
Shares purchased by such Purchaser under this Agreement, but the Company shall
not be required to accept financing from the Purchasers in an amount less than
or in excess of the amount set forth in the Subsequent Placement Notice.
Except for (x) Underlying Shares, (y) other "Registrable Securities"
(as such term is defined in the Registration Rights Agreement) to be registered,
and securities of the Company permitted pursuant to SCHEDULE 6(b) of the
Registration's Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i) - (iii) of
Section 3.9(a), the Company shall not, without the prior written consent of the
Purchaser (i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) register for resale any securities of the Company for a
period of not less than 90 Trading Days after the date that the Underlying
Shares Registration Statement is declared effective by the Commission. Any days
that a Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 Trading Day period for the
purposes of (i) and (ii) above.
3.10 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) issue a press release acceptable to the Purchasers disclosing the
transactions contemplated hereby on the Closing Date, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions contemplated hereby
within seven (7) Business Days after the Closing Date, and (iii) timely file
with the Commission a Form D promulgated under the Securities Act as required
under Regulation D promulgated under the Securities Act and provide a copy
thereof to the Purchasers promptly after the filing thereof. The Company shall,
no less than two (2) Business Days prior to the filing of any disclosure
required by clauses (ii) and (iii) above, provide a copy thereof to the
Purchasers. No such filing or disclosure may be made that mentions a Purchaser
by name without the prior consent of such Purchaser. Such filings shall be
subject to Section 4.11 hereof.
3.11 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection
with the sale of all or substantially all of the assets of the Company or a bona
fide licensing arrangement in the ordinary course of the Company's business, the
Company shall not transfer, sell or otherwise
13
dispose of any Intellectual Property Rights, or allow any of the Intellectual
Property Rights to become subject to any Liens, or fail to renew such
Intellectual Property Rights (if renewable and it would otherwise lapse if not
renewed), without the prior written consent of the Purchasers.
3.12 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of Company debt or to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceeds
in interest bearing accounts and/or short-term, investment grade interest
bearing securities.
3.13 REIMBURSEMENT. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which a Purchaser is a named party, the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearings,
trials, and other proceedings relating to the subject matter of this Agreement.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the Purchasers or entity in connection with the
transactions contemplated by this Agreement.
3.14 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without
14
limitation the rights arising out of this Agreement or out of the Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
ARTICLE IV.
MISCELLANEOUS
4.1 FEES AND EXPENSES. At the Closing the Company shall reimburse the
Purchasers for $30,000 of their expenses incurred in connection with the
preparation of the Transaction Documents. The amount contemplated by the
immediately preceding sentence shall be retained by the Purchasers, and shall
not be delivered to the Company at the Closing. Other than the amount
contemplated in the immediately preceding sentence, and except as otherwise set
forth in the Registration Rights Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all U.S. stamp and other taxes and duties levied in connection with
the issuance of the Securities.
4.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together
with the Exhibits and Schedules thereto, and the Transfer Agent Instructions
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
4.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: InteliData Technologies Corporation
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
15
With copies to: Hunton & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxx, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), a Purchaser may not assign this Agreement or any of the rights
or obligations hereunder without the consent of the Company.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good
16
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
4.9 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion of the Shares.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 PUBLICITY. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of a Purchaser, or include the name of the Purchaser in any filing with the
Commission, or any regulatory agency, trading facility or stock market (other
than one or more Underlying Shares Registration Statements, or other reports or
applications required by the terms hereof without the prior written consent of
the Purchaser, except to the extent such disclosure (but not any disclosure as
to the controlling Persons thereof) is required by law, in which case the
Company shall provide the Purchaser with prior notice of such disclosure.
4.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
17
IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
INTELIDATA TECHNOLOGIES CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
[REMAINDER OF PAGE LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOWS]
STRONG RIVER INVESTMENTS, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Purchase Price for Shares to be acquired at Closing: $2,000,000
Address for Notice:
Strong River Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Avi Vigder
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Berrman LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx. Esq.
[REMAINDER OF PAGE LEFT BLANK
SIGNATURE PAGE FOR ADDITIONAL PURCHASER FOLLOWS]
COOTES DRIVE LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Purchase Price for Shares to be acquired at Closing: $4,000,000
Address for Notice:
Cootes Drive LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (000) 000-0000
With copies to:
Southridge Capital Management LLC
Executive Pavillon
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx, Esq.
EXHIBIT A
TERMS OF PREFERRED STOCK
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of
preferred stock shall be designated as its Series B Convertible Preferred Stock
(the "PREFERRED STOCK") and the number of shares so designated shall be 600
(which shall not be subject to increase without the consent of the holders of
the Preferred Stock (each, a "HOLDER" and collectively, the "HOLDERS")). Each
share of Preferred Stock shall have a par value of $.001 and a stated value
equal to the sum of $10,000 plus all accrued dividends to the date of
determination to the extent not previously paid in cash in accordance with the
terms hereof (the "STATED VALUE").
Section 2. DIVIDENDS.
(a) Holders shall be entitled to receive, out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the original $10,000 Stated Value per share) of 4%
(the "DIVIDEND RATE") per annum, payable on each Conversion Date (as defined
herein) for such share and on each June 30 and December 31 for so long as such
Preferred Stock shall be outstanding, commencing December 31, 1999 (each of a
Conversion Date and such semi-annual dates are referred to herein as a "DIVIDEND
PAYMENT DATE"), in cash or shares of Common Stock (as defined in Section 7).
Subject to the terms and conditions herein, the decision whether to pay
dividends hereunder in Common Stock or cash shall be at the discretion of the
Company. Dividends on the Preferred Stock shall be calculated on the basis of a
360-day year, shall accrue daily commencing on the Original Issue Date (as
defined in Section 7), and shall be deemed to accrue from such date whether or
not earned or declared and whether or not there are profits, surplus or other
funds of the Company legally available for the payment of dividends. Except as
otherwise provided herein, if at any time the Company pays less than the total
amount of dividends then accrued on account of the Preferred Stock, such payment
shall be distributed ratably among the Holders based upon the number of shares
of Preferred Stock held by each Holder. Any dividends to be paid in cash
hereunder that are not paid within three (3) Trading Days (as defined in Section
7) following a Dividend Payment Date shall continue to accrue and shall entail a
late fee, which must be paid in cash, at the rate of 18% per annum or the lesser
rate permitted by applicable law (such fees to accrue daily, from the date such
dividend is due hereunder through and including the date of payment). The
Company shall provide the Holders written notice of its intention to pay
dividends in cash not less than ten (10) days prior to each Dividend Payment
Date for so long as shares of Preferred Stock are outstanding (the Company may
indicate in such notice the maximum amount of cash dividends that it intends to
pay during such period). Failure to timely provide such notice shall be deemed
an election by the Company to pay dividends for such period in shares of Common
Stock pursuant to the terms hereof.
(b) Notwithstanding anything to the contrary contained herein,
the Company must pay dividends in cash if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to pay such
dividends in shares of Common Stock;
(ii) after the Dividend Effectiveness Date (as
defined in Section 7), Underlying Shares (as defined in Section 7) (x) are not
registered for resale pursuant to an effective Underlying Shares Registration
Statement (as defined in Section 7) or (y) may not be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act (as
defined in Section 7), as
determined by counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent in the form and substance acceptable
to the applicable Holder and such transfer agent (if the Company is permitted
and elects to pay dividends in shares of Common Stock under this clause (ii)
prior to the Dividend Effectiveness Date and thereafter an Underlying Shares
Registration Statement shall be declared effective by the Commission (as defined
in Section 7), the Company shall, within three (3) Trading Days after the date
of such declaration of effectiveness, exchange such Underlying Shares for shares
of Common Stock that are free of restrictive legends of any kind);
(iii) the Common Stock is not then listed or quoted
on the Nasdaq National Market ("NASDAQ"), or on the New York Stock Exchange,
American Stock Exchange or Nasdaq SmallCap Market (each, a "SUBSEQUENT MARKET");
(iv) the Company has failed to timely satisfy its
conversion obligations hereunder; or
(v) the issuance of the Underlying Shares issuable as
payment of such dividend would result in a violation of Section 5(a)(iii) or the
rules of the Nasdaq Stock Market or any other rules and regulations governing
any Subsequent Market on which the Common Stock is then listed or quoted for
trading.
(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 7), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on
preferred stock of the Company at such times when the Company is in compliance
with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities or shares pari passu with the
Preferred Stock.
Section 3. VOTING RIGHTS. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights. However, so long as any shares of Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the Holders of 66% of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock or alter or amend
this Certificate of Designation, (b) authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
in Section 4) senior to the Preferred Stock, (c) prior to the date that an
Underlying Shares Registration Statement relating to the Preferred Stock is
declared effective by the Commission, authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation pari passu
with the Preferred Stock, (d) amend its certificate of incorporation or other
charter documents so as to affect adversely any rights of the Holders, (e)
increase the authorized number of shares of Preferred Stock, or (e) enter into
any agreement with respect to the foregoing.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "LIQUIDATION"),
the Holders shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Stated Value per share before any distribution or payment
shall be made to the holders of any Junior Securities, and if the assets of the
Company shall be insufficient to pay in full such amounts, then the entire
assets to be distributed to the Holders shall be distributed among the Holders
ratably in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full. A sale, conveyance or
disposition of all or substantially all of the assets of the Company or the
effectuation by the Company of a transaction or series of related transactions
in which more than 33% of the voting power of the Company is disposed of, or a
consolidation or merger of the Company with or into any other company or
companies into one or more companies not wholly-owned by the Company shall not
be treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each record
Holder.
Section 5. CONVERSION.
(a)(i) CONVERSIONS AT OPTION OF HOLDER. Each share of
Preferred Stock shall be convertible into shares of Common Stock (subject to the
limitations set forth in Section 5(a)(iii)), at the Conversion Ratio (as defined
in Section 7), at the option of the Holder at any time and from time to time
from and after the earlier to occur of (1) the 120th day following the Original
Issue Date and (2) the date that an Underlying Shares Registration Statement
relating to the Preferred Stock is first declared effective by the Commission
(such earlier date, the "INITIAL CONVERSION DATE"), PROVIDED, that during each
of the first four calendar months from and after the Initial Conversion Date a
Holder shall only be entitled to convert up to 20% of the number of shares of
Preferred Stock issued to it on the Original Issue Date; PROVIDED, FURTHER, that
if the Conversion Price on any Trading Day after the Initial Conversion Date
exceeds the Closing Sales Price on the Original Issue Date, then the Holder
shall be entitled to convert an unlimited amount of the Preferred Stock during
the month on which such Conversion Price is attained and shall, during the next
month (assuming such Conversion Price is not anymore in effect) still be
entitled to convert 20% of the originally issued shares of Preferred Stock. The
conversion rights in this paragraph shall be determined on a cumulative basis,
so that if (x) a Holder converts 15% of its shares of Preferred Stock in month
one, it may convert up to a total of 25% in month two (assuming that the
Conversion Price during each of such months did not exceed the Closing Sales
Price on the Original Issue Date) or (y) if the Conversion Price exceeds the
Closing Sales Price on the Original Issue Date during the first month following
the Initial Conversion Date and the Holder converts 50% of the shares of
Preferred Stock issued to it on the Original Issued Date, then during the second
month following the Initial Conversion Date the Holder may convert up to 20% of
the shares of Preferred Stock issued to it on the Original Issue Date (assuming
that Conversion Price during such second month did not exceed the Closing Sales
Price on the Original Issue Date). Holders shall effect conversions by
surrendering the certificate or certificates representing the shares of
Preferred Stock to be converted to the Company, together with the form of
conversion notice attached hereto as EXHIBIT A (a "CONVERSION NOTICE"). Each
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice by
facsimile (the "CONVERSION DATE"). If no Conversion Date is specified in a
Conversion Notice, the Conversion Date shall be the date that the Conversion
Notice is deemed delivered hereunder. If the Holder is converting less than all
shares of Preferred Stock represented by the certificate or certificates
tendered by the Holder with the Conversion Notice, or if a conversion hereunder
cannot be effected in full for any reason, the Company shall promptly deliver to
such Holder (in the manner and within the time set forth in Section 5(b)) a
certificate representing the number of shares of Preferred Stock as have not
been converted.
(ii) AUTOMATIC CONVERSION. Subject to the provisions of
this paragraph and Section 5(a)(iii)(C), all outstanding shares of Preferred
Stock for which conversion notices have not previously been received or for
which redemption has not been made or required hereunder shall be automatically
converted on the third (3rd) anniversary of the Original Issue Date for such
shares. The
conversion contemplated by this paragraph shall not occur at such time as (a)
(1) an Underlying Shares Registration Statement is not then effective or (2) the
Holder is not permitted to resell Underlying Shares pursuant to Rule 144(k)
promulgated under the Securities Act, without volume restrictions, as evidenced
by an opinion letter of counsel acceptable to the Holder and the transfer agent
for the Common Stock; (b) there are not sufficient shares of Common Stock
authorized and reserved for issuance upon such conversion; or (c) the Company
shall have defaulted on its covenants and obligations hereunder or under the
Purchase Agreement or Registration Rights Agreement (each as defined in Section
7). Notwithstanding the foregoing, the three-year period for conversion under
this Section shall be extended (on a day-for-day basis) for any Trading Days
after the Effectiveness Date that a Holder is unable to resell Underlying Shares
under an Underlying Shares Registration Statement due to (a) the Common Stock
not being listed or quoted for trading on the NASDAQ or any Subsequent Market,
(b) the failure of such Underlying Shares Registration Statement to be declared
effective, or if so declared, to remain effective during the Effectiveness
Period (as defined in the Registration Rights Agreement) as to all Underlying
Shares, or (c) the suspension of the Holder's right to resell Underlying Shares
thereunder. The provisions of Sections 5(a)(iii)(A) and (B) shall not apply to
any automatic conversion pursuant to this Section 5(a)(ii).
(iii) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert shares of Preferred Stock to the
extent such conversion would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act (as defined in Section 7) and the rules thereunder) in excess
of 4.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon conversion of the shares of Preferred Stock held by such
Holder after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in this
Section applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which shares of
Preferred Stock are convertible shall be in the sole discretion of the Holder.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 61 days prior notice to the
Company. Other Holders shall be unaffected by any such waiver.
(B) A Holder may not convert shares of Preferred Stock to the
extent such conversion would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.999% of the then
issued and outstanding shares of Common Stock, including shares issuable upon
conversion of the shares of Preferred Stock held by such Holder after
application of this Section. The Holder shall have the sole authority and
obligation to determine whether the restriction contained in this Section
applies and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which shares of
Preferred Stock are convertible shall be in the sole discretion of the Holder.
The provisions of this Section may be waived by a Holder (but only as to itself
and not to any other Holder) upon not less than 61 days prior notice to the
Company. Other Holders shall be unaffected by any such waiver.
(C) If the Common Stock is then listed for trading on the
NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 6,593,691 shares of Common Stock upon conversions of Preferred Stock,
which number of shares of Common Stock shall be subject to adjustment pursuant
to Sections 5(c)(ii), (iii), (iv), (v), (viii) and (ix) (such number of shares,
the "Issuable Maximum"). The Issuable Maximum equals 19.999% of the number of
shares of Common Stock
outstanding immediately prior to the closing of transactions set forth in the
Purchase Agreement. If on any Conversion Date (A) the shares of Common Stock are
listed for trading on the NASDAQ or the Nasdaq SmallCap Market, (B) the
Conversion Price (as defined herein) then in effect is such that the aggregate
number of shares of Common Stock that would then be issuable upon conversion in
full of all then outstanding shares of Preferred Stock, together with any shares
of Common Stock previously issued upon conversion of shares of Preferred Stock,
would exceed the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders (the "Shareholder Approval"), if any, as may
be required by the applicable rules and regulations of the Nasdaq Stock Market
(or any successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then the
Company shall issue to the Holder requesting a conversion a number of shares of
Common Stock equal to the Issuable Maximum and, with respect to the remainder of
the aggregate Stated Value of the shares of Preferred Stock then held by such
Holder for which a conversion in accordance with the Conversion Price would
result in an issuance of shares of Common Stock in excess of the Issuable
Maximum (the "Excess Stated Value"), the Company shall, upon written notice
delivered to the Holder no later than three (3) Trading Days from the Conversion
Date triggering this provision, indicate that it will either (I) pay cash to the
converting Holder in an amount equal to the Optional Redemption Price (as
defined in Section 6) for the Excess Stated Value, which amount shall be paid on
or prior to the third (3rd) Trading Day following the date the Company provides
the Holder with written notice of its intention to pay such amount or (II) use
its best efforts to obtain the Shareholder Approval applicable to the issuance
of the shares of Preferred Stock represented by the Excess Stated Value as soon
as is possible, but in any event not later than the 75th day after the Trading
Day immediately following the Conversion Date triggering this provision (such
75th day, the "Target Date"). In the event the Company has elected to seek the
Shareholder Approval pursuant to clause (II) of the immediately preceding
sentence and does not obtain the Shareholder Approval on or prior to the Target
Date, then (i) from and after the Target Date, the Dividend Rate shall
automatically be increased to 15% per annum and (ii) from and after the Target
Date until the tenth (10th) year anniversary following the Target Date, within
three (3) days of the filing by the Company with the Commission of each of the
Company's Quarterly Reports on Form 10-Q (or, in the event the Company fails to
so file any Quarterly Report with the Commission, the date that such Quarterly
Report was required to have been filed by the Company, in which event the
Company shall provide the converting Holder with a copy of its balance sheet for
the applicable quarterly period), the Company shall pay to the converting Holder
an amount in cash equal to the product of (A) the quotient obtained by dividing
(I) the aggregate number of shares of Preferred Stock then owned by the
converting Holder by (II) the aggregate number of shares of Preferred Stock then
outstanding and (B) the amount which equals 20% OF the Company's net income as
reported in the Company's Quarterly Reports on Form 10-Q or the balance sheet
provided to the Holder by the Company (as applicable) for the applicable
quarterly period (such quarterly payments, the "Quarterly Payments"). If the
Company fails to pay either the Optional Redemption Price or any of the
Quarterly Payments (as applicable) in full pursuant to this Section within seven
(7) days after the date payable, the Company will pay interest on such amount at
a rate of 18% per annum, or such lesser maximum amount that is permitted to be
paid by applicable law, to the converting Holder, accruing daily from the date
payable until such amount, plus all such interest thereon, is paid in full.
(b)(i) Not later than three (3) Trading Days after each
Conversion Date, the Company will deliver to the Holder (A) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those required by Section 3.1(b) of the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the
conversion of shares of Preferred Stock (subject to the limitations set forth in
Section 5(a)(iii) hereof), (B) one or more certificates representing the number
of shares of Preferred Stock not converted and (C) a bank check in the amount of
accrued and
unpaid dividends (if the Company has elected or is required to pay accrued
dividends in cash). Notwithstanding the foregoing or anything to the contrary
contained herein, the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of
Preferred Stock until one (1) Trading Day after certificates evidencing such
shares of Preferred Stock are delivered for conversion to the Company, or the
Holder of such Preferred Stock notifies the Company that such certificates have
been lost, stolen or destroyed and provides a bond (or other adequate security)
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. The Company shall, upon request of the
Holder, if available, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the applicable Holder by the third (3rd) Trading Day after the
Conversion Date, the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred Stock
tendered for conversion.
(ii) If the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 5(b)(i), by the third (3rd)
Trading Day after the Conversion Date, the Company shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day
after such third (3rd) Trading Day until such certificates are delivered.
Nothing herein shall limit a Holder's right to pursue actual damages for the
Company's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
(iii) In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), by the third (3rd) Trading Day after the Conversion
Date, and if after such third (3rd) Trading Day the Holder purchases (in an open
market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was entitled to
receive upon such conversion (a "BUY-IN"), then the Company shall (A) pay in
cash to the Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Common Stock so purchased
exceeds (y) the product of (1) the aggregate number of shares of Common Stock
that such Holder was entitled to receive from the conversion at issue multiplied
by (2) the market price of the Common Stock at the time of the sale giving rise
to such purchase obligation and (B) at the option of the Holder, either return
the shares of Preferred Stock for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 5(b)(i). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of shares of Preferred Stock with respect to which the
market price of the Underlying Shares on the date of conversion totaled $10,000,
under clause (A) of the immediately preceding sentence the Company shall be
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
Nothing herein shall limit a Holder's right to pursue actual damages for the
Company's failure to deliver certificates representing shares of Common Stock
upon conversion within the period specified herein and such Holder shall have
the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.
(c)(i) The conversion price for each share of Preferred Stock
(the "CONVERSION PRICE") in effect on any Conversion Date shall be the lesser of
(a) $5.09 (the "INITIAL CONVERSION PRICE") or (b) 85% (the "DISCOUNT RATE") of
the average of the three (3) lowest Per Share Market Values during the
twenty-two (22) Trading Days immediately preceding the applicable Conversion
Date (which, at the Holder's option, may include Trading Days prior to the
Initial Conversion Date), PROVIDED, that such twenty-two (22) Trading Day period
shall be extended for the number of Trading Days, if any, during such period in
which (A) trading in the Common Stock is suspended from the NASDAQ or a
Subsequent Market on which it is listed for trading prior to such suspension, or
(B) after the date declared effective by the Commission, the Underlying
Securities Registration Statement is not effective, or (C) after the date
declared effective by the Commission, the Prospectus included in the Underlying
Securities Registration Statement may not be used by the Holder for the resale
of Underlying Shares.
If (1) the Underlying Shares Registration Statement is not
filed on or prior to the Filing Date (if the Company files such Underlying
Shares Registration Statement without affording the Holder the opportunity to
review and comment on the same as required by Section 3(a) of the Registration
Rights Agreement, the Company shall not be deemed to have satisfied this clause
(a)), or (2) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Exchange Act
within five (5) days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that an Underlying Shares
Registration Statement will not be "reviewed," or not subject to further review
or comment, or (3) the Underlying Shares Registration Statement is not declared
effective by the Commission on or prior to the Effectiveness Date, or (4) such
Underlying Shares Registration Statement is filed with and declared effective by
the Commission but thereafter ceases to be effective as to all Registrable
Securities (as defined in the Registration Rights Agreement) at any time prior
to the expiration of the Effectiveness Period without being succeeded within ten
(10) days by a subsequent Underlying Shares Registration Statement filed with
and declared effective by the Commission, or (5) trading in the Common Stock
shall be suspended from the NASDAQ or a Subsequent Market for more than three
(3) Business Days (which need not be consecutive days), (6) the conversion
rights of the Holders are suspended for any reason, or (7) an amendment to the
Underlying Shares Registration Statement is not filed by the Company with the
Commission within twenty (20) days of the Commission's notifying the Company
that such amendment is required in order for the Underlying Shares Registration
Statement to be declared effective (if the Company files such amendment without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) of the Registration Rights Agreement, the Company shall
not be deemed to have satisfied this clause (7)) (any such failure or breach
being referred to as an "EVENT," and for purposes of clauses (1), (3) and (6)
the date on which such Event occurs, or for purposes of clause (2) the date on
which such five (5) day period is exceeded, or for purposes of clauses (4) and
(7) the date which such 10 day-period is exceeded, or for purposes of clause (5)
the date on which such three (3) Business Day-period is exceeded, being referred
to as "EVENT DATE"), then, on the Event Date and each monthly anniversary
thereof until the earlier to occur of the second month anniversary after the
Event Date and such time as the applicable Event is cured, each of the Discount
Rate and the Initial Conversion Price shall be decreased by 2% (i.e., the
Discount Rate would decrease to 83% as of the Event Date and 81% as of the one
month anniversary of such Event Date). Commencing on the second month
anniversary after the Event Date and on each monthly anniversary thereof, until
such time as the applicable Event is cured, the Holder shall have the option to
either (x) require further cumulative 2% discounts to continue or (y) require
the Company to pay to the Holder 2% of the aggregate Stated Values of the shares
of Preferred Stock then held by such Holder (which, for purposes hereof shall
include all shares of Preferred Stock tendered for conversion by such Holder but
for which Underlying Shares due in respect thereof shall not have been received
by such Holder) , in cash, as liquidated damages and not as a penalty. Any
decrease in the Discount Rate and the Initial Conversion Price pursuant to this
Section
shall remain in effect notwithstanding the fact that the Event causing such
decrease has been subsequently cured and further monthly decreases have ceased.
The provisions of this Section are not exclusive and shall in no way limit the
Company's obligations under the Registration Rights Agreement.
(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall (a) pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities or pari
passu securities payable in shares of Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification and exchange of the Common Stock any shares of capital stock of
the Company, then the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 5(c)(ii) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights, warrants or options to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value at the
record date mentioned below, then the Initial Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such rights,
warrants or options, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares so offered would purchase
at such Per Share Market Value, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any right, warrant or option to purchase shares
of Common Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant
or option shall expire and shall not have been exercised, the Conversion Price
shall immediately upon such expiration shall be recomputed and effective
immediately upon such expiration shall be increased to the price which it would
have been (but reflecting any other adjustments in the Conversion Price made
pursuant to the provisions of this Section 5 upon the issuance of other rights
or warrants) had the adjustment of the Conversion Price made upon the issuance
of such rights, warrants, or options been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights, warrants or options actually
exercised.
(iv) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
any shares of Preferred Stock are outstanding, shall issue shares of Common
Stock or rights, warrants, options or other securities or debt that is
convertible into or exchangeable for shares of Common Stock ("COMMON STOCK
EQUIVALENTS") other than issuances pursuant to any stockholder approved stock
option plan solely to employees of the Company, entitling any Person to acquire
shares of Common Stock at a price per share less than the Conversion Price (if
the holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights issued in connection with such issuance at a price
less than the prevailing Conversion Price, such issuance shall be deemed to have
occurred for less than the Conversion Price), then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such Common
Stock or such Common Stock Equivalents plus the number of shares of Common Stock
which the offering price for such shares of Common Stock or Common Stock
Equivalents would purchase at the Conversion Price, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding immediately
prior to such issuance plus the number of shares of Common Stock so issued or
issuable, PROVIDED, that for purposes hereof, all shares of Common Stock that
are issuable upon conversion, exercise or exchange of Common Stock Equivalents
shall be deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. However, upon the expiration of any Common Stock
Equivalents the issuance of which resulted in an adjustment in the Conversion
Price pursuant to this Section, if any such Common Stock Equivalents shall
expire and shall not have been exercised, the Conversion Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to the provisions of
this Section after the issuance of such Common Stock Equivalents) had the
adjustment of the Conversion Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such Common Stock Equivalents actually exercised.
(v) If the Company, at any time while shares of Preferred
Stock are outstanding, shall distribute to all holders of Common Stock (and not
to Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iv) above), then in each such case the Initial Conversion Price at
which each share of Preferred Stock shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value determined as of the record date mentioned above, and of
which the numerator shall be such Per Share Market Value on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
shares of Common Stock as determined by the Board of Directors in good faith;
PROVIDED, that in the event of a distribution exceeding ten percent (10%) of the
net assets of the Company, if the Holders of a majority in interest of the
Preferred Stock dispute such valuation, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "APPRAISER") selected in good faith by the Holders of a majority in
interest of the shares of Preferred Stock then outstanding; and PROVIDED,
FURTHER, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in good faith, in which
case the fair market value shall be equal to the average of the determinations
by each such Appraiser. In either case the adjustments shall be described in a
statement provided to the Holders of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share
of Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.
(vi) All calculations under this Section 5 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Conversion Price is adjusted pursuant to
Section 5(c)(ii),(iii),(iv), or (v) the Company shall promptly mail to each
Holder, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(viii) In case of any reclassification of the Common Stock, or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property (other than compulsory share exchanges
which constitute Change of Control Transactions), the Holders of the Preferred
Stock then outstanding shall have the right thereafter to convert such shares
only into the shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such
reclassification or share exchange, and the Holders of the Preferred Stock shall
be entitled upon such event to receive such amount of securities, cash or
property as a holder of the number of shares of Common Stock of the Company into
which such shares of Preferred Stock could have been converted immediately prior
to such reclassification or share exchange would have been entitled. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(ix) In case of any (1) merger or consolidation of the Company
with or into another Person that would constitute a Change of Control
Transaction, or (2) sale by the Company of more than one-half of the assets of
the Company (on an as valued basis) in one or a series of related transactions,
or (3) tender or other offer or exchange (whether by the Company or another
Person) pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, stock, cash or property of the
Company or another Person, a Holder shall have the right thereafter to (A)
convert its shares of Preferred Stock into the shares of stock and other
securities, cash and property receivable upon or deemed to be held by holders of
Common Stock following such merger, consolidation or sale, and such Holder shall
be entitled upon such event or series of related events to receive such amount
of securities, cash and property as the shares of Common Stock into which such
shares of Preferred Stock could have been converted immediately prior to such
merger, consolidation or sales would have been entitled, (B) in the case of a
merger or consolidation, (x) require the surviving entity to issue shares of
convertible preferred stock or convertible debentures with such aggregate stated
value or in such face amount, as the case may be, equal to the Stated Value of
the shares of Preferred Stock then held by such Holder, plus all accrued and
unpaid dividends and other amounts owing thereon, which newly issued shares of
preferred stock or debentures shall have terms identical (including with respect
to conversion) to the terms of the Preferred Stock (except, in the case of
debentures, as may be required to reflect the differences between debt and
equity) and shall be entitled to all of the rights and privileges of a Holder of
Preferred Stock set forth herein and the agreements pursuant to which the
Preferred Stock was issued (including, without limitation, as such rights relate
to the acquisition, transferability, registration and listing of such shares of
stock other securities issuable upon conversion thereof), and (y) simultaneously
with the issuance of such convertible preferred stock or convertible debentures,
shall have the right to convert such instrument only into shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger or consolidation, or (C) in the
event of an exchange or tender offer or other transaction contemplated by clause
(3) of this Section, tender or exchange its shares of Preferred Stock for such
securities, stock, cash and other property receivable upon or deemed to be held
by holders of Common Stock that have tendered or exchanged their shares of
Common Stock following such tender or exchange, and such Holder shall be
entitled upon such exchange or tender to receive such amount of securities, cash
and property as the shares of Common Stock into which such shares of Preferred
Stock could have been converted (taking into account all then accrued and unpaid
dividends) immediately prior to such tender or exchange would have been entitled
as would have been issued. In the case of clause (B), the conversion price
applicable for the newly issued shares of convertible preferred stock or
convertible debentures shall be based upon the amount of securities, cash and
property that each share of Common Stock would receive in such transaction, the
Conversion Ratio immediately prior to the effectiveness or closing date
for such transaction and the Conversion Price stated herein. The terms of any
such merger, sale, consolidation, tender or exchange shall include such terms so
as continue to give the Holders of Preferred Stock the right to receive the
securities, cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events.
(x) If (a) the Company shall declare a dividend
(or any other distribution) on the Common Stock, (b) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock, (c)
the Company shall authorize the granting to all holders of Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights, (d) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property, or (e) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Preferred Stock, and shall cause to
be mailed to the Holders at their last addresses as they shall appear upon the
stock books of the Company, at least 20 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange. Holders are entitled to convert shares of Preferred Stock during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock
solely for the purpose of issuance upon conversion of Preferred Stock and
payment of dividends on Preferred Stock, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the Holders, not less than such number of shares of Common Stock as
shall be issuable (taking into account the provisions of Section 5(a) and
Section 5(c)) upon the conversion of all outstanding shares of Preferred Stock.
The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the Holder of
a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or
redeemed in accordance with the terms hereof shall be canceled and may not be
reissued.
(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to the attention of the Chief Financial Officer of the
Company addressed to 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000 or
to facsimile number (000) 000-0000, or to such other address or facsimile number
as shall be specified in writing by the Company for such purpose. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile or sent by
a nationally recognized overnight courier service, addressed to each Holder at
the facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
Section 6. OPTIONAL REDEMPTION.
(a) Subject to the provisions of Section 5(a)(iii)(C) and this
Section 6, from and after the date that an Underlying Shares Registration
Statement shall have been declared and remained effective under the Securities
Act and the prospectus thereunder been available without restriction to the
Holders for the resale of Underlying Shares for, in each case, forty (40)
Trading Days, the Company shall have the right, upon thirty (30) Trading Days'
notice (an "OPTIONAL REDEMPTION NOTICE") to the Holders of the Preferred Stock,
to redeem all or any portion of the shares of Preferred Stock which have not
previously been redeemed or for which Conversion Notices shall not have been
delivered or the Excess Stated Value, at a price equal to the Optional
Redemption Price (as defined below). In addition to the requirements set forth
in the first sentence of this section, the Company may only deliver an Optional
Redemption Notice: (i) if the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is sufficient to satisfy
the Company's conversion obligations of all shares of Preferred Stock then
outstanding, (ii) if the Underlying Shares then outstanding are registered for
resale pursuant to an effective Underlying Shares Registration Statement
pursuant to which the Holders are permitted to utilize to sell Underlying
Shares, (iii) if the Common Stock is listed for trading on the NASDAQ or on a
Subsequent Market and (iv) if the Company shall have elected to seek Shareholder
Approval pursuant to Section 5(a)(iii)(C) and shall have failed to obtain such
Shareholder Approval on or prior to the Target Date, after the Company shall
have reported positive annual net income in each of the Company's Annual Report
on Form 10-K for three (3) consecutive years following the Target Date (or, in
the event the Company fails to so file any such Annual Report with the
Commission, as reported in the Company's balance sheet for the applicable annual
period which shall be delivered by the Company to the Holder). Each of clauses
(i) - (iii) of the immediately preceding sentence must be true during the entire
thirty (30) Trading Days between the date of delivery of an Optional Redemption
Notice and the
date of payment of the Optional Redemption Price. The entire Optional Redemption
Price shall be paid in cash. A Holder may, subject to Section 5(a)(i) hereof,
convert (and the Company shall honor such conversions in accordance with the
terms hereof) any or all of the shares of Preferred Stock subject to an Optional
Redemption Notice, provided that the Conversion Notice for such shares is
delivered prior to the 29th Trading Day following the receipt by such Holder of
such an Optional Redemption Notice.
(b) Failure by the Company to pay any portion of the Optional
Redemption Price by the 30th Trading Day following the date of an Optional
Redemption Notice shall result in the invalidation AB INITIO of the unpaid
portion of such optional redemption, and, notwithstanding anything herein to the
contrary, the Company shall thereafter have no further rights to optionally
redeem any shares of Preferred Stock. In such event, the Company shall, at the
option of the Holder, either, (i) not later than three (3) Trading Days from
receipt of Holder's request for such election, return to the Holder all of the
shares of Preferred Stock for which such Optional Redemption Price has not been
paid in full (the "UNPAID REDEMPTION SHARES") or (ii) convert of all or any
portion of the Unpaid Redemption Shares in which event the Per Share Market
Value for such shares shall be the lower of the Per Share Market Value
calculated on the date the Optional Redemption Price was originally due and the
Per Share Market Value as of the Holder's written demand for conversion. If the
Holder elects option (ii) above, the Company shall within three (3) Trading Days
of its receipt of such election deliver to the Holder the shares of Common Stock
issuable upon conversion of the Unpaid Redemption Shares subject to such Holder
conversion demand and otherwise perform its obligations hereunder with respect
thereto.
(c) The "OPTIONAL REDEMPTION PRICE" shall equal the sum of the
sum of (i) the greater of (A) 115% of the aggregate of the Stated Value of the
shares of Preferred Stock to be redeemed and (B) the product of (x) the number
of shares of Preferred Stock to be redeemed and (y) the product of (1) the
Closing Sales Price on (I) the date of the Optional Redemption Notice or (II)
the date of payment in full by the Company of the Optional Redemption Price,
whichever is greater, and (2) the Conversion Ratio calculated on the date of the
Optional Redemption Notice, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such shares of Preferred Stock.
Section 7. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity, consolidation or sale of all or substantially all of the assets
of the Company in one or a series of related transactions, or (iv) solely with
respect to Section 5(c)(ix), the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii) or (iii).
"CLOSING SALES PRICE" means on any particular date (a) the
closing sales price per share of Common Stock on such date on the NASDAQ or on
the Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing sales price on the NASDAQ
or on the Subsequent Market on the date nearest preceding such date, or (b) if
the Common
Stock is not then listed or quoted on the NASDAQ or on a Subsequent Market, the
closing sales price for a shares of Common Stock in the OTC Bulletin Board, as
reported by the National Quotation Bureau Incorporated or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or if there is no such price on such date, then the
closing sales price on the OTC Bulletin Board on the date nearest preceding such
date, or (c) if the Common Stock is not then reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the Holder, or
(d) if the Common Stock is not then publicly traded the fair market value of a
shares of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority of the shares of the Preferred Stock.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, par value
$.001 per share, and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, the numerator of
which is Stated Value and the denominator of which is the Conversion Price at
such time.
"DIVIDEND EFFECTIVENESS DATE" means the earlier to occur of (x) the
Effectiveness Date (as defined in the Registration Rights Agreement) and (y) the
date that an Underlying Shares Registration Statement relating to the Preferred
Stock is declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"JUNIOR SECURITIES" means the Common Stock and all other equity
securities of the Company other than those securities that are outstanding on
the Original Issue Date and which are explicitly senior in rights or liquidation
preference to the Preferred Stock.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"PER SHARE MARKET VALUE" means on any particular date (a) the closing
sales price per share of Common Stock on such date on the NASDAQ or on the
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing sales price on the NASDAQ
or on such Subsequent Market on the date nearest preceding such date, or (b) if
the Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent
Market, the closing sales price for a shares of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting prices),
then the average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the Holder, or (d) if the Common Stock are not
then publicly traded the fair market value of a Common Share as determined by an
Appraiser selected in good faith by the Holders of a majority of the shares of
the Preferred Stock.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase
Agreement, dated the Original Issue Date, between the Company and the original
Holder.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated the Original Issue Date, between the Company and the original
Holder.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) a day on which the Common Stock is traded on
the NASDAQ or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock s not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"UNDERLYING SHARES" means, collectively, the shares of Common Stock
into which the Shares are convertible and the shares of Common Stock issuable
upon payment of dividends thereon in accordance with the terms hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the Holder, who shall be named
as a "selling stockholder" thereunder.
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.001 per share (the "COMMON STOCK"), of InteliData Technologies
Corporation, a Delaware corporation (the "COMPANY"), according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the Holder for any conversion, except for such transfer
taxes, if any.
Conversion calculations: ----------------------------
Date to Effect Conversion
Number of shares of Preferred Stock to be Converted
Stated Value of shares of Preferred Stock to be
Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Signature
Name
Address
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of July 22, 1999, among InteliData Technologies Corporation, a
Delaware corporation (the "COMPANY"), and the investors signatory hereto (each
such investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
This Agreement is made pursuant to the Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof among the Company and the
Purchasers (the "PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
I. DEFINITIONS
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"ADVICE" shall have meaning set forth in Section 6(f).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "CONTROL," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "AFFILIATED," "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York or the state of Virginia generally are authorized or required by law or
other government actions to close.
"CLOSING DATE" means July 22, 1999.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value $.001 per
share, or such securities that such stock shall hereafter be reclassified into.
"EFFECTIVENESS DATE" means the 90th day following the Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILING DATE" means the 30th day following the Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"PREFERRED STOCK" means the Company's Series B Convertible Preferred
Stock issued to the Purchasers in accordance with the Purchase Agreement.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"REGISTRABLE SECURITIES" means the shares of Common Stock issuable upon
conversion in full of the Preferred Stock.
"REGISTRATION STATEMENT" means the registration statement and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"RULE 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SPECIAL COUNSEL" means one special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
II. SHELF REGISTRATION
A. On or prior to the Filing Date, the Company shall prepare and
file with the Commission a shelf Registration Statement covering the number of
Registrable Securities contemplated by Section 2(b) for an offering to be made
on a continuous basis pursuant to Rule 415. The Registration Statement shall be
on Form S-3 (or on another appropriate form in the event that the Company is not
eligible to file a Registration Statement on Form S-3 for the resale of the
Registrable Securities). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and shall use its best efforts to keep such Registration
Statement continuously effective under the Securities Act until the date which
is two (2) years after the date that such Registration Statement is declared
effective by the Commission or such earlier date when all Registrable Securities
covered by such Registration Statement have been sold or may be sold without
volume restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"EFFECTIVENESS PERIOD"), PROVIDED, that the Company shall not be deemed to have
used its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in the
Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the Commission has not declared it
effective.
B. The initial Registration Statement required to be filed hereunder
shall include (but not be limited to) 6,000,000 shares of Common Stock
registered for the benefit of the Holders.
C. If the Holders of a majority of the Registrable Securities then
outstanding so elect, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an Underwritten Offering.
In such event, and, if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such
Underwritten Offering the amount of such Registrable Securities which in the
opinion of such managing underwriters can be sold, and such amount shall be
allocated pro-rata among the Holders proposing to sell Registrable Securities in
such Underwritten Offering.
D. If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Holder
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
III. REGISTRATION PROCEDURES
In connection with the Company's registration obligations hereunder,
the Company shall:
A. Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on the form contemplated by Section 2(a) which
Registration Statement shall contain (except if otherwise directed by the
Holders) the "Plan of Distribution" attached hereto as ANNEX A, and cause the
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that not less than three (3) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, their Special Counsel and such
managing underwriters, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to such Holders
and such underwriters, to conduct a reasonable investigation within the meaning
of the Securities Act. The Company shall not file the Registration Statement or
any such Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities, their Special Counsel, or
any managing underwriters, shall reasonably object.
(i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep
the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order
to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond
as promptly as reasonably possible, and in any event within twenty (20)
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Holders
true and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth
in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(ii) File additional Registration Statements if the number of
Registrable Securities at any time exceeds 85% of the number of shares of
Common Stock then registered in a Registration Statement. The Company
shall have twenty (20) days to file such additional Registration
Statements after such requirement notice of which may be given by the
Holders). In such event, the Registration Statement required to be filed
by the Company shall include a number of shares of Common Stock equal to
no less than 200% of the number of shares of Common Stock into which all
then outstanding shares of Preferred Stock are convertible (assuming such
conversion occurred on the Filing Date for such Registration Statement or
the date of the filing of the final acceleration request therefor,
whichever date yields a lower Conversion Price) and any other Registrable
Securities not then registered in a Registration Statement.
(iii) File such supplements or attach "stickers" to the Registration
Statement or Prospectus as and when required by the Commission to
evidence a material amount of resales by a Holder pursuant to a
Prospectus. In connection therewith, if such supplements or such
"stickers" are periodically required by the Commission, the Company
shall, within four (4) Business Days, file such supplements or "stickers"
whenever a Holder has sold 50% of the Registrable Securities covered by
the then outstanding Prospectus (as last supplemented or "stickered") in
order to cover 100% of the number of the outstanding Registrable
Securities.
B. Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters as promptly as reasonably possible
(and, in the case of (i)(A) below, not less than five (5) Business Days (or, in
the case of a supplement or "sticker" required to be filed pursuant to Section
3(c)(ii), within one Business Day) prior to such filing) and (if requested by
any such Person) confirm such notice in writing no later than one (1) Business
Day following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) when the Commission notifies the Company whether there will be a "review" of
such Registration Statement and whenever the Commission comments in writing on
such Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (vi) of the occurrence of
any event or passage of time that makes the financial statements included in the
Registration Statement ineligible for inclusion therein or any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
C. Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
D. If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection with
an Underwritten Offering, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as such
managing underwriters, such Holders and the Company reasonably agree should be
included therein, and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that the
Company shall not be required to take any action pursuant to this Section 3(f)
that would, in the opinion of counsel for the Company, violate applicable law or
be materially detrimental to the business prospects of the Company.
E. Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
F. Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
G. Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; PROVIDED, HOWEVER, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
H. Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchaser Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such managing underwriters or Holders may request.
I. Upon the occurrence of any event contemplated by Section 3(d)(vi),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
J. Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the Nasdaq National Market
("NASDAQ") or on any other stock market or trading facility on which the shares
of Common Stock are traded, listed or quoted (each a "SUBSEQUENT MARKET") as and
when required pursuant to the Purchase Agreement.
K. Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to underwriters
in underwritten public offerings (subject to the scheduling of appropriate
exceptions to insure such representations and warranties are accurate), and
confirm the same if and when requested; (ii) in the case of an Underwritten
Offering obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates thereof
addressed to each Holder and each such underwriter, in form, scope and substance
reasonably satisfactory to any such managing underwriters and Special Counsel to
the selling Holders covering the matters customarily covered in opinions
requested in Underwritten Offerings and such other matters as may be reasonably
requested by such Special Counsel and underwriters; (iii) immediately prior to
the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of
delivery of any Registrable Securities sold pursuant thereto, use its best
reasonable efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such Underwritten Offering); and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and any
managing underwriters to evidence the continued validity of the representations
and warranties made pursuant to Section 3(m)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
L. Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; PROVIDED, HOWEVER, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
M. Comply with all applicable rules and regulations of the Commission.
N. The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
O. If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
IV. REGISTRATION EXPENSES
A. All fees and expenses incident to the performance of or compliance
with this Agreement by the Company, except as and to the extent specified in
Section 4(b), shall be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the NASDAQ and any Subsequent Market on
which the Common Stock is then listed for trading, and (B) in compliance with
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriters, if any, or the Holders of a
majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and Special Counsel for the Holders,
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
B. If the Holders require an Underwritten Offering pursuant to the
terms hereof and there shall be at such time an effective Registration Statement
covering all of the Registrable Securities pursuant to which the Holders are
both named Selling Securityholders thereunder and permitted to utilize the
Prospectus thereunder to resell such Registrable Securities held by them, then
the Company shall be responsible for all costs, fees and expenses in connection
therewith, except for the fees and disbursements of the Underwriters (including
any underwriting commissions and discounts) and their legal counsel and
accountants. By way of illustration which is not intended to diminish from the
provisions of Section 4(a), the Holders shall not be responsible for, and the
Company shall be required to pay, the fees or disbursements incurred by the
Company (including by its legal counsel and accountants) in connection with, the
preparation
and filing of a Registration Statement and related Prospectus for such offering,
the maintenance of such Registration Statement in accordance with the terms
hereof, the listing of the Registrable Securities in accordance with the
requirements hereof, and printing expenses incurred to comply with the
requirements hereof. If the Holders require an Underwritten Offering at a time
when all of the circumstances specified in the opening clause to the first
sentence of this Section 4(b) are present, then such Holders shall bear all the
fees and disbursements of the Underwriters, including those costs specified in
this Section 4(b).
V. INDEMNIFICATION
A. INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (2) in the case of an occurrence of an event
of the type specified in Section 3(d)(ii)-(vi), the use by such Holder of an
outdated or defective Prospectus after the Company has notified such Holder in
writing that the Prospectus is outdated or defective and prior to the receipt by
such Holder of the Advice contemplated in Section 6(f). The Company shall notify
the Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions contemplated
by this Agreement.
B. INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus, or in
any amendment or supplement thereto. In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
C. CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; PROVIDED, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
D. CONTRIBUTION. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
VI. MISCELLANEOUS
A. REMEDIES. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in
addition to being entitled to exercise all rights granted by law and under this
Agreement, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company and each Holder
agree that monetary damages would not provide adequate compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
B. NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specified in SCHEDULE 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
C. NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
specified in SCHEDULE 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
D. PIGGY-BACK REGISTRATIONS. If at any time when there is not an
effective Registration Statement covering all of the Registrable Securities and
the Underlying Shares, the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within twenty (20) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered; PROVIDED, HOWEVER,
that the Company shall not be required to register any Registrable Securities
pursuant to this Section 6(d) that are eligible for sale pursuant to Rule 144(k)
of the Commission.
E. PROSPECTUS DELIVERY REQUIREMENTS. Each Holder covenants and agrees
that (i) it will not sell any Registrable Securities under the Registration
Statement until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(h) and notice from the Company that
such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(d) and (ii) it and
its officers, directors or Affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to any of them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
F. DISCONTINUED DISPOSITION. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 3(d)(ii),
3(d)(iii), 3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(k), or until it is
advised in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
G. AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; PROVIDED, HOWEVER, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
H. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 5:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: InteliData Technologies Corporation
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Hunton & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxx, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature
pages hereto.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
I. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
J. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.
K. GOVERNING LAW. All questions concerning the construction, validity
,enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
L. CUMULATIVE REMEDIES. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
M. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
N. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
O. SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
P. INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INTELIDATA TECHNOLOGIES CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS TO FOLLOW]
STRONG RIVER INVESTMENTS, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Address for Notice:
Strong River Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Avi Vigder
With copies to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxx X. Xxxxx. Esq.
[REMAINDER OF PAGE LEFT BLANK
SIGNATURE PAGE FOR ADDITIONAL PURCHASER FOLLOWS]
COOTES DRIVE LLC
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Address for Notice:
Cootes Drive LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (000) 000-0000
With copies to:
Southridge Capital Management LLC
Executive Pavillon
00 Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx, Esq.
ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
EXHIBIT E
Strong River Investments, Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Cootes Drive LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands, British West Indies
July 22, 1999
InteliData Technologies Corporation
0000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Chief Financial Officer
Re: INTELIDATA TECHNOLOGIES CORPORATION (THE "COMPANY").
Gentlemen:
Reference is made to the Convertible Preferred Stock Purchase
Agreement (the "PURCHASE AGREEMENT"), of even date hereof, among the Company and
the undersigned (collectively, the "PURCHASERS"), pursuant to which the Company
will issue and sell to the Purchasers 600 shares of the Company's 4% Series B
Convertible Preferred Stock, par value $.001 per share, which are convertible
into shares of the Company's common stock, $.001 par value per share, for an
aggregate purchase price of $6,000,000. Capitalized terms used and not otherwise
defined in this letter that are defined in the Purchase Agreement shall have the
meanings set forth in the Purchase Agreement.
Each Purchaser hereby, severally and not jointly, commits,
subject to and upon the terms, conditions and conditions hereof, to purchase
from the Company, and the Company commits, subject to and upon the terms,
conditions and conditions hereof, to sell to the Purchasers, shares of the
Company's to be created Series C Convertible Preferred Stock, par value $.001
per share (the "SERIES C STOCK"), which are convertible into shares of Common
Stock.
The commitments set forth in this letter are subject to the terms,
conditions and qualifications set forth below:
1. TERMS OF SERIES C STOCK. The certificate of designation
governing the rights, preferences and privileges of the Series C Stock (the
"SERIES C CERTIFICATE OF DESIGNATION") shall be identical to the Certificate of
Designation, MUTATIS MUTANDIS and shall rank pari passu with the Preferred Stock
with regard to dividends, liquidation, voting rights and any other preferential
rights designated therein, except that the Initial Conversion Price (as defined
in the Certificate of Designation) shall equal 130% of the average of the Per
Share Market Values (as defined in the Certificate of Designation) for the five
(5) Trading Days immediately preceding the Series C Closing Date (as defined
herein). No later than one (1) Business Day prior to the Series C Closing Date,
the Series C Certificate of Designation shall be filed by the Company with the
Secretary of State of the State of Delaware, in the form and substance mutually
agreed to by the Company and the Purchasers.
2. ADDITIONAL DOCUMENTATION. In order to effectuate the
purchase and sale of the shares of Series C Stock, prior to the Series C Closing
Date, the Company and the Purchasers shall enter into the following agreements:
(a) a convertible preferred stock purchase agreement substantially identical to
the Purchase Agreement, and (b) a registration rights agreement substantially
identical to the Registration Rights Agreement (collectively, the "SERIES C
TRANSACTION DOCUMENTS"). The Purchasers shall prepare the Series C Transaction
Documents.
3. THE SERIES C STOCK CLOSING. (i) Subject to the terms and
conditions set forth in this letter, the Company and the Purchasers shall each
have the right to deliver a written notice to the other (a "SERIES C FINANCING
NOTICE") requiring such other party to either sell or buy (severally and not
jointly), as the case may be, up to 400 shares of the Series C Stock (the
"SERIES C SHARES") for an aggregate purchase price of $4,000,000. The Series C
Financing Notice may be delivered no earlier than 90 days following the date the
Underlying Shares Registration Statement is declared effective by the Commission
(such date of effectiveness, the "TARGET DATE") and no later than 130 days
following the Target Date, PROVIDED, that such 90th day following the Target
Date (but not the 130th day following the Target Date) shall be extended for the
number of days during which the prospectus included in the Underlying Shares
Registration Statement may not be used by the Purchasers for the resale of
Registrable Securities (as defined in the Registration Rights Agreement), or as
otherwise agreed to by the parties hereto. The closing of the purchase and sale
of the Series C Shares (the "SERIES C CLOSING") shall take place at the offices
of Xxxxxxxx Xxxxxxxxx,1290 Avenue of the Americas, Xxx Xxxx, Xxx Xxxx 00000, on
the fifth (5th) Business Day after the Series C Financing Notice is received by
the Purchasers or the Company, as the case may be, or on such other date as
otherwise agreed to by the parties hereto; PROVIDED, HOWEVER, that in no case
shall the Series C Closing take place unless and until all of the conditions
listed in Section 4 of this letter shall have been satisfied by the Company or
waived by the Purchasers (it being understood that each Purchaser may, as to
itself, elect to waive or enforce such conditions in its own discretion). The
date of the Series C Closing is hereinafter referred to as the "SERIES C CLOSING
DATE." Notwithstanding anything to the contrary contained in this letter, each
of the Purchasers may designate an Affiliate thereof to acquire the Series C
Shares.
(ii) At the Series C Closing, the parties shall deliver or shall
cause to be delivered the following: (a) the Company shall deliver to (x)
each Purchaser or its designated Affiliate, (1)
the stock certificates registered in the name of such Purchaser or its
designated Affiliate, representing a number of Series C Shares equal to the
quotient obtained by dividing the purchase price indicated next to such
Purchaser's name on the signature page of this letter by 10,000; (2) a legal
opinion in form and substance acceptable to such Purchaser, and (3) executed
Series C Transaction Documents and the Transfer Agent Instructions relating to
the Series C Closing, and (y) Xxxxxxxx Xxxxxxxxx, $20,000 as reimbursement of
the legal fees and expenses incurred by the Purchasers to prepare the Series C
Transaction Documents, which amount shall be deducted by the Purchasers (on a
pro-rata basis) from the amount due to the Company for the sale of the Series C
Shares and shall be paid directly to Xxxxxxxx Xxxxxxxxx and (b) each of the
Purchasers shall deliver to the Company (1) the purchase price set forth next to
such Purchaser's name on the signature page of this letter, in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose prior to the Series C Closing Date
and (2) the executed Series C Transaction Documents.
4. CONDITIONS PRECEDENT TO THE SERIES C CLOSING.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to acquire the Series C Shares is subject to the
satisfaction by the Company or waiver by the Purchasers of each of the following
conditions:
(a) CLOSING OF PREFERRED STOCK. The Closing shall have
occurred;
(b) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date of the Series C Closing, as
evidenced by an Officer's certificate attesting to such effect to be delivered
by the Company to the Purchasers at the Series C Closing;
(c) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company between the Closing Date and the Series C Closing and no
Event or Triggering Event (each as defined in the Certificate of Designation)
shall have occurred;
(d) UNDERLYING SHARES REGISTRATION STATEMENT. The Underlying
Shares Registration Statement shall have been declared effective under the
Securities Act by the Commission and shall have remained effective at all times,
not subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Series C Closing Date;
(e) NO INJUNCTION. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Series C Transaction Documents or makes
impracticable the transactions contemplated thereby;
(f) ADVERSE CHANGES. Since the Closing Date, no event or series
of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred;
(g) NO SUSPENSIONS OF TRADING IN COMMON STOCK. Trading in the
Common Stock shall not have been suspended by the Commission or the NASDAQ at
any time since the Closing Date;
(h) LISTING OF COMMON STOCK. The Common Stock shall have been
at all times since the Closing Date listed for trading on the NASDAQ;
(i) SHARES OF COMMON STOCK. The Company shall have duly
reserved the number of shares of Common Stock as required by the Series C
Transaction Documents to be reserved for issuance upon conversion of the Series
C Shares;
(j) PERFORMANCE OF CONVERSION OBLIGATIONS. The Company shall
have timely complied with its conversion and delivery requirements under the
Certificate of Designation;
(k) CLOSING THRESHOLD. For the ten (10) Trading Days
immediately preceding the date of the Series C Financing Notice, the average
daily trading volume of the Common Stock on the NASDAQ shall be at least
$150,000 and the average of the Per Share Market Value for such ten (10) Trading
Day period shall be greater than $1.50 (subject to stock splits and similar
adjustments);
(l) SHAREHOLDER APPROVAL. No approval of the shareholders of the
Company shall be required under the rules of the Nasdaq Stock Market or such
other exchange or trading facility or which the Common Stock is then traded or
listed for trading in order to issue a minimum of 200% of the shares of Common
Stock upon conversion of the Series C Shares (assuming such conversion occurred
on the Series C Closing Date); and
(m) DELIVERIES PURSUANT TO SERIES C TRANSACTION DOCUMENTS. At the
Series C Closing, the Company shall deliver the Series C Shares, executed
Series C Transaction Documents and Transfer Agent Instructions relating to the
Series C Shares.
5. INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser or Purchasers hereunder. Nothing contained herein or in any other
agreement or document delivered at the Series C Closing, if any, and no action
taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this letter. Each Purchaser shall be entitled to protect and
enforce its rights, including, without limitation, the rights arising out of
this letter or out of the Series C
Transaction Documents, if any, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
6. GOVERNING LAW. This letter shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof.
7. EXECUTION. This letter may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
Please indicate your agreement with the foregoing by executing a
countersigned copy of this letter and returning the same to our attention,
whereupon effective immediately thereafter this letter shall become a legally
valid and binding agreement between the Purchasers and the Company.
We look forward to our continuing relationship.
Sincerely,
Strong River Investments, Inc. Purchase Price: $1,333,333
By:
-----------------------
Name:
Title:
Cootes Drive LLC Purchase Price: $2,666,666
By:
-----------------------
Name:
Title:
Agreed and accepted:
InteliData Technologies Corporation
By:
-----------------------
Name:
Title:
