EXHIBIT 10.5
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement"), made and entered into this
12th day of June, 1998, by and between Infosafe Systems, Inc., a Delaware
corporation, having a principal place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (the "Company"), and Summerwind Restructuring, Inc. (the
"Consultant"), a New York corporation having its principal office and place of
business at 00 Xxxxxxx Xxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx 00000.
Article I
TERM AND TERMINATION
1.1 Term. This Agreement will become effective on the date first shown
above and will continue in effect until the earlier of: (a) the date the Company
formally engages the services of an investment banker to serve as the Company's
solicitation agent and private placement agent, or (b) six months from the date
hereof, unless sooner terminated or extended by written agreement signed by both
parties. Notwithstanding the foregoing, the Consultant agrees that he will
continue in an advisory capacity only until the transactions contemplated by the
Infosafe Reorganization Plan approved by the Board of Directors are completed or
abandoned by the Company.
1.2 Termination. Either party may terminate this Agreement in the event
of a material breach by the other party of any obligation provided herein. Any
such termination may be made only by written notice to the other party,
specifically identifying the breach or breaches on which termination is based.
Following receipt of such notice, the party in breach shall have fifteen (15)
days to cure such breach or breaches, and this Agreement shall terminate in the
event that such cure is not made by the end of such period.
1.3 Return of Materials. Upon the termination of this Agreement, the
Consultant shall promptly return to the Company all "Confidential Information"
(as hereinafter defined) of the Company.
1.4 Survival. In the event of any termination of this Agreement,
Articles 5, 6, 7 and 8 hereof shall survive and continue in effect.
Article 2
INDEPENDENT CONSULTANT STATUS
2.1 Independent Consultant. It is the intention of the parties that the
Consultant be an independent contractor and not an agent, joint venturer, or
partner of the Company.
Article 3
SERVICES TO BE PERFORMED BY THE CONSULTANT
3.1 Scope of Services. The scope of the services to be performed by the
Consultant hereunder are set forth in Exhibit A.
Article 4
COMPENSATION
4.1 Consideration for Services Rendered. The compensation payable by the
Company to the Consultant for the work performed pursuant to this Agreement
shall be 1,000,000 warrants (the "Consultant Warrants") to purchase the Class A
Common Stock (the "Class A Stock") of the Company. Each of the Consultant
Warrants shall be exercisable to purchase one share of Class A Stock at a price
of $0.50 per share and shall have a term of five (5) years. It is understood by
the parties hereto that the present value of the Consultant Warrants will be
determined by the investment banker engaged by the Company. In connection
therewith, the Company will be responsible for the federal and state income tax
consequences arising from the Consultant receipt of the Warrants. The form of
Consultant Warrants Certificate is attached hereto as Exhibit B.
4.2 Expenses. Except as otherwise provided herein, the Consultant shall
be responsible for payment of all ordinary and necessary expenses incident to
the performance of services hereunder.
Article 5
EMPLOYMENT TAXES AND BENEFITS
5.1 Compensation of the Consultant's Personnel. The Consultant shall
bear sole responsibility for payment of compensation to its employees. The
Consultant shall pay and report, for all personnel assigned to the Company's
work, federal and state income tax withholding, workers' compensation, social
security taxes, and unemployment insurance applicable to such personnel as
employees of the Consultant. The Consultant shall bear sole responsibility for
any health or disability insurance, retirement benefits, or other welfare or
pension benefits, if any, to which such personnel may be entitled. The
Consultant agrees to defend, indemnify, and hold harmless the Company, its
officers, directors, employees and agents, and the administrators of the
Company's benefit plans, from and against any claims, liabilities, or expenses
relating to such compensation, tax, insurance, or benefit matters, provided that
the Company shall notify the Consultant of each such claim and cooperate with
the Consultant in the defense and resolution of such claim.
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5.2 Workers' Compensation. Notwithstanding any other workers'
compensation or insurance policies that may be maintained by the Company, the
Consultant shall procure and maintain workers' compensation coverage sufficient
to meet the statutory requirements of every jurisdiction in which the
Consultant's personnel are engaged in work for the Company.
Article 6
INTELLECTUAL PROPERTY RIGHTS
6.1 Confidentiality.
(a) The Consultant shall maintain in strict confidence, and shall not,
without the prior written consent of the Company, disclose or distribute to
third parties any "Confidential Information" (as defined below) of the Company.
The Consultant shall use such information solely to further the performance of
its obligations under this Agreement, and for no other purpose. In addition, the
Consultant shall disclose the foregoing information only to those employees and
agents with a need for such information to perform the Consultant's obligations
hereunder. The Consultant shall protect the foregoing information with the same
degree of care as it protects its own proprietary information, but in no event
less than a reasonable degree of care.
(b) The foregoing restrictions shall not be construed to apply to (1)
information generally available to the public; (2) information released by the
Company generally without restriction; (3) information independently developed
or acquired by the Consultant or its personnel without reliance in any way on
other protected information of the Company; or (4) information approved for the
use and disclosure of the Consultant without restriction. Notwithstanding the
foregoing restrictions, the Consultant may use and disclose any information to
the extent required by an order of any court or other governmental authority,
but only after the Company has been so notified and has had the opportunity, if
possible, to obtain reasonable protection for such information in connection
with such disclosure.
(c) As used herein, "Confidential Information" means all of the
following information and materials belonging to the Company (or to third
parties that have furnished such information to the Company in confidence),
which are specifically, physically and conspicuously marked as such:
(i) Applications, operating systems, tools, communication and
other computer software, developed or used by the Company, and all versions and
enhancements of same and all future products developed or derived therefrom;
(ii) All source and object code, flowcharts, algorithms, coding
sheets, compilers, assemblers, design concepts, routines and subroutines,
documents and manuals for the software described in subparagraph (i) above;
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(iii) Production processes, marketing techniques, mailing lists,
purchasing information, price lists, pricing policies, quoting procedures,
financial information, legal information, customer prospect names and
requirements, customer data, customer site information and other materials or
information relating to the manner in which the Company conducts business;
(iv) Discoveries, concepts and ideas, whether or not patentable
or protectable by copyright, including without limitation the nature and results
of research and development activities, technical information on product or
program performance and reliability, processes, formulas, techniques,
"know-how", source codes, object codes, designs, drawings and specifications;
and
(v) Any other materials or information related to the business or
activities of the Company which are not generally known to others engaged in
similar businesses or activities.
Article 7
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Consultant as follows:
7.1 Corporate Authority. The Company and Internet Commerce Corporation
("ICC") have the full authority to execute and to perform this Agreement in
accordance with its terms; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including the issuance of
the Consultant Warrant Agreement, the Consultant Warrants and Class A Common
Stock underlying such Warrants, does not and will not result in a breach,
violation or default or give rise to an event which, with the giving of notice
or after the passage of time, or both, would result in a breach, violation or
default of any of the terms or provisions of the Articles of Incorporation,
By-Laws or of any indenture, agreement, judgment, decree or other instrument or
restriction to which either the Company or ICC is a party of by which their
assets may be bound or affected; the execution and delivery of this Agreement
has been and, as of the date of delivery of the Consultant Warrant Agreement and
the Consultant Warrants Certificate, the consummation of the transactions
contemplated hereby will have been, duly authorized by all requisite corporate
action on the part of the Company and ICC, as of the date of delivery; no
further authorization or approval, whether of the stockholders or directors of
either the Company or ICC or governmental bodies or otherwise, will be necessary
in order to enable the Company to enter into and perform the same; and this
Agreement and the Consultant Warrant Certificate constitute valid and binding
obligations enforceable against the Company in accordance with its terms.
7.2 Authorization; Enforcement Capitalization. The authorized capital
stock of the Company consists of 40,000,000 shares of Class A Common Stock,
2,000,000 shares of Class B Common Stock, 2,000,000 shares of Class E-1 Common
Stock, 2,000,000 shares Class E-2 Common Stock and 5,000,000 shares of Preferred
Stock; there are 4,720,419 shares of Class
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A Common Stock, 1,372,566 shares of Class B Common Stock, 1,432,137 shares of
Class E-l Common Stock, 1,432,137 shares Class E-2 Common Stock and 0 shares of
Preferred Stock issued and outstanding as of the date hereof. The Company has
furnished to the Consultants true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof (the "Charter"),
and the Company's By-Laws, as in effect on the date hereof (the "By-Laws").
7.3 Issuance of Shares. The Class A Common Stock issuable upon the
exercise of the Consultant Warrants has been duly authorized and reserved for
issuance and, upon exercise of the Consultant Warrants, such shares will be
validly issued, fully paid and non-assessable and the holders shall be entitled
to all rights and preferences accorded to a holder of the Class A Common Stock.
7.4 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) result in a violation of the
Company's Charter of By-Laws or (ii) conflict with, or constitute a default (or
an event which with notice of lapses of time of both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any federal,
state, local or foreign law, rule, regulation, order, judgment or any of its
subsidiaries or by which any property or assets of the Company or any of its
subsidiaries is bound on. The Company is not required under Federal, state or
local law, rule or regulation in the United States to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue the Consultant Warrants in accordance
with their terms.
7.5 SEC Documents Financial Statements. The Class A Common Stock of the
Company is registered pursuant to Section 12(g) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and the Company has filed on a timely
basis all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d), in
addition to one or more registration statements and amendments thereto
heretofore filed by the Company with the SEC under the Securities Act of 1933,
as amended (the "Act"), (all of the foregoing including filings incorporated by
reference therein being referred to herein as the "SEC Documents"). The Company,
through its agent, has delivered to the Consultant true and complete copies of
the SEC Documents (except for exhibits and incorporated documents). The Company
has not provided to the Consultant any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Act or the Exchange Act as the case may be
and the rules and regulations of the SEC promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
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or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows of the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
7.6 No Material Adverse Change. Since the date through which the most
recent quarterly report of the Company on Form 10-Q has been prepared and filed
with the SEC, a copy of which is included in the SEC Documents, no events have
occurred which have had an adverse effect on the business, operations,
properties or financial condition of the Company and which is material to the
Company or any of its subsidiaries.
7.7 No Undisclosed Liabilities. The Company and its subsidiaries have no
material liabilities or obligations not disclosed in the SEC Documents, other
than those incurred in the ordinary course of the Company's or any of its
subsidiaries' respective businesses since the date of the most recently filed
SEC Documents which, individually or in the aggregate, do not or would not have
a material adverse effect on the Company or any of its subsidiaries.
7.8 No Undisclosed Events or Circumstances. Except the receipt of a
delisting notice of hearing which is to be disclosed in the next Form 10-QSB, no
material event or circumstances has occurred or exists with respect to the
Company or any of its subsidiaries or their respective businesses, properties,
prospects, operations or financial condition which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
7.9 Books and Records. All of the books and records of the Company and
ICC are true, complete and accurate in all material respects.
7.10 Compliance With Law. Except for the current noncompliance with
NASDAQ listing requirements, neither the Company nor ICC is in material
violation of any laws, governmental orders, rules, regulations or ordinances to
which any of their property, real, personal, mixed, tangible or intangible, or
their businesses related to such properties, are subject.
7.11 No Other Agreements. Except as disclosed in the SEC Documents, and
as contemplated under this Agreement, there are no material contracts,
instruments, commitments or agreements, whether oral or written, presently in
effect to which either the Company or ICC is a party or to which either or any
of their respective properties is subject, including, without limitation, the
following:
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(a) any instrument or arrangement evidencing or relating in any way to
(i) indebtedness for borrowed money by way of direct loan, purchase money
obligation, conditional sale, lease purchase arrangement, guarantee or
otherwise, (ii) liens, encumbrances or security interests, (iii) guaranties or
indemnification or (iv) investments in any person;
(b) any contract containing provisions limiting the freedom of either
the Company or ICC to engage in any business;
(c) any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses; or
(d) agreements providing for disposition of the business or any assets
or shares of the capital stock of either the Company or ICC; agreements of
merger or consolidation to which either the Company or ICC is a party; or any
letters of intent with respect to the foregoing;
7.12 Litigation. Except as set forth and described in the SEC Documents,
there are no actions, suits, proceedings or investigations (including any
purportedly on behalf of either the Company or ICC) pending or threatened
against or affecting the business or properties, real, personal, mixed, tangible
or intangible, of either the Company or ICC whether at law or in equity or
admiralty or before or by any governmental department, commission, board,
agency, court or instrumentality, domestic or foreign; nor is either the Company
or ICC operating under, subject to, in violation of or in default with respect
to, any judgment, order, writ, injunction or degree of any court or other
governmental department, commission, board, agency or instrumentality, domestic
or foreign.
7.13 Taxes. The Company and ICC have each filed, or caused to be filed,
with all appropriate governmental agencies all required tax and information
returns and have paid, caused to be paid or accrued all taxes (including,
without limitation, all income, franchise, sales, excise and use taxes),
assessments, charges, penalties and interest shown to be due and payable;
neither the Company nor ICC has any liability, contingent or otherwise, for any
taxes, assessments, charges, penalties or interest, other than amounts
adequately reserved for. Except as disclosed in the SEC Documents, neither the
Company nor ICC has received directly or indirectly notice of, nor is it
otherwise aware of an audit or examination; nor is either a party directly or
indirectly to any action or proceeding by any governmental authority for
assessment or collection of taxes, charges, penalties or interest; nor has any
claim for assessment and collection been asserted against either directly or
indirectly; nor has either executed a waiver of any statute of limitations with
respect thereto. The Company and ICC have paid, or caused to be paid, or
adequately reserved for, all applicable corporate franchise taxes, unemployment
taxes, payroll taxes, social security taxes, ad valorem taxes, property taxes,
excise taxes and imposts, sales and use taxes, and all other taxes of every
kind, character or description required to be paid to the date hereof, and has
received no notices and is not otherwise aware, of any deficiencies, adjustments
or changes in assessments with respect to any such taxes. The Company and ICC
have duly filed, or caused to be filed, all reports or returns relating to or
covering any such taxes or other charges which are due or required to be filed
at the date hereof and no extensions of time are in effect for the assessment of
deficiencies for such taxes in respect of any fiscal period.
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7.14 No Untrue Representation or Warranty. No representation or warranty
contained in this Agreement or any attachment, statement, schedule, exhibit,
certificate or instrument furnished or to be furnished to the Consultant by or
on behalf of the Company or ICC pursuant hereto, or in connection with the
transactions contemplated hereby or in connection therewith, contains any untrue
statement of a material fact, or omits to state any material fact necessary to
make the statements contained herein or therein not misleading.
Article 8
INDEMNIFICATION; LIMITATION OF DAMAGES
8.1 Indemnification from the Consultant. The Consultant hereby
indemnifies and agrees to hold harmless the Company from and against any and all
claims, demands, and actions, and any liabilities, damages, or expenses
resulting therefrom, arising out of or relating to the services performed by the
Consultant hereunder or any breach of the covenant made by the Consultant
pursuant to Paragraph 8.1 hereof. The Consultant's obligations under this
Paragraph 8.1 shall survive the termination of this Agreement for any reason.
The Company agrees to give the Consultant prompt notice of any such claim,
demand, or action and shall, to the extent the Company is not adversely
affected, cooperate fully with the Consultant in defense and settlement of such
claim, demand, or action.
8.2 Indemnification from the Company. The Company hereby indemnifies and
agrees to hold harmless the Consultant from and against any and all claims,
demands, and actions, and any liabilities, damages, or expenses resulting
therefrom, arising out of or relating to any breach by the Company of its
covenants, representations and warranties made hereunder. The Company's
obligations under this Paragraph 8.2 shall survive the termination of this
Agreement for any reason. The Consultant agrees to give the Company prompt
notice of any such claim, demand, or action and shall, to the extent the
Consultant is not adversely affected, cooperate fully with the Company in
defense and settlement of such claim, demand, or action.
8.3 Limitation of Damages. In no event shall either party be liable to
the other party for any incidental, indirect, special or consequential damages,
regardless of the nature of the claim, even if such party knew or should have
known of the possibility of such damages or claims. In no event shall either
party be liable for damages in excess of the fees paid by the Company to the
Consultant hereunder.
Article 9
GENERAL PROVISIONS
9.1 Notices. Any notices to be given hereunder by any party to the
another party may be effected either by personal delivery in writing or by
registered or certified mail (postage prepaid with return receipt requested),
overnight delivery service or facsimile (with a copy by registered mail). Mailed
notices shall be addressed to the parties at the addresses appearing in
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the introductory paragraph of this Agreement, but each party may change such
address by written notice in accordance with this paragraph. The date upon which
any such notice is received at the designated address shall be deemed to be the
date of such notice.
9.2 No Discrimination. The Consultant agrees that in the performance of
this Agreement it will not discriminate or permit discrimination against any
person or group of persons on the grounds of sex, race, color, religion, or
natural origin in any manner prohibited by the applicable law.
9.3 Assignment. Neither party may assign its rights or obligations under
this Agreement without the prior written consent of the other.
9.4 Waivers. Any delay or forbearance by either party in exercising any
right hereunder shall not be deemed a waiver of that right.
9.5 Entire Agreement of the Parties. This Agreement supersedes any and
all agreements, either oral or written, between the parties hereto with respect
to the rendering of services by the Consultant for the Company and contains all
the covenants and agreements between the parties with respect to the rendering
of such services in any manner whatsoever. Each party to this Agreement
acknowledges that no representations, inducements, promises, or agreements,
orally or otherwise, have been made by any party, or anyone acting on behalf of
any party, that are not embodied herein, and that no other agreement, statement,
or promise not contained in this agreement shall be valid or binding. Any
modification of this Agreement will be effective only if it is in writing signed
by the party to be charged.
9.6 Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions will nevertheless continue in full force without being
impaired or invalidated in any way.
9.7 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without regard to its laws
relating to choice of laws.
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9.8 Headings. The headings in this Agreement are inserted merely for the
purpose of convenience and shall not affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
INFOSAFE SYSTEMS, INC.
By:
-------------------------------
Name:
Title:
SUMMERWIND RESTRUCTURING, INC.
By:
-------------------------------
Name:
Title:
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EXHIBIT A
Scope of Services
1. The Consultant will advise the Company on restructuring itself and
Internet Commerce Corporation in accordance with a reorganization plan
to be approved by both companies' Board of Directors.
2. The Consultant will assist the Company in structuring a bridge loan with
an independent investment banker in the amount of up to $2 million with
terms and conditions for repayment agreeable to the Company. Twenty-five
percent (25%) of the loan is expected to be completed and available to
the Company within ten (10) business days of the date of this Agreement.
3. The Consultant will assist the Company in the selection of a placement
agent for the proposed bridge loan financing and to serve as a warrant
solicitation agent.
4. The Consultant agrees that he will continue in an advisory capacity only
until the transactions contemplated by the Infosafe Reorganization Plan
approved by the Board of Directors are completed or abandoned by the
Company.
INFOSAFE SYSTEMS, INC.
By:
-------------------------------
Name:
Title:
SUMMERWIND RESTRUCTURING, INC.
By:
-------------------------------
Name:
Title:
Exhibit B
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
REGISTRATION UNDER, OR THE AVAILABILITY OF AN EXEMPTION FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
1,000,000 Shares
FOR VALUE RECEIVED, INFOSAFE SYSTEMS, INC. (the "Company"), hereby
certifies that SUMMERWIND RESTRUCTURING, INC., or an assign thereof, is entitled
to purchase from the Company, at any time or from time to time commencing June
__, 1998 and prior to 5:00 P.M., New York City time, on June _, 2003 One Million
(1,000,000) fully paid and nonassessable shares of the Class A Common Stock,
$.01 par value (the "Common Stock"), of the Company for an aggregate purchase
price of $500,000 (computed on the basis of $.50 per share). (Hereinafter, (i)
said common stock, together with any other equity securities which may be issued
by the Company with respect thereto or in substitution therefor, is referred to
as the "Common Stock," (ii) the shares of the Common Stock purchasable hereunder
or under any other Warrant (as hereinafter defined) are referred to as the
"Warrant Shares," the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the "Aggregate Warrant Price," (iv) the price payable
hereunder for each of the Warrant Shares is referred to as the "Per Share
Warrant Price," (v) this Warrant, all identical warrants issued on the date
hereof and all warrants hereafter issued in exchange or substitution for this
Warrant or such other warrants are referred to as the "Warrants" and (vi) the
holder of this Warrant is referred to as the "Holder" and the holder of this
Warrant and all other Warrants are referred to as the "Holders"). The Aggregate
Warrant Price is not subject to adjustment. The Per Share Warrant Price is
subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. Exercise of Warrant.
a) Exercise for Cash
This Warrant may be exercised, in whole at any time or in part from time
to time, commencing June __, 1998 and prior to 5:00 P.M., New York City
time, on June __, 2003 by the Holder by the surrender this Warrant (with
the subscription form at the end hereof duly executed) at the address
set forth in Subsection 9(a) hereof, together with proper payment of the
Aggregate Warrant Price, or the proportionate part thereof if this
Warrant is exercised in part. Payment for Warrant Shares shall be made
by certified or official bank check payable to the order of the Company.
If this Warrant is exercised
in part, this Warrant must be exercised for a number of whole shares of
the Common Stock, and the Holder is entitled to receive a new Warrant
Covering the Warrant Shares which have not been exercised and setting
forth the proportionate part of the Aggregate Warrant Price applicable
to such Warrant Shares. Upon such surrender of this Warrant the Company
will (a) issue a certificate or certificates in the name of the Holder
for the largest number of whole shares of the Common Stock to which the
Holder shall be entitled and, if this Warrant is exercised in whole, in
lieu of any fractional share of the Common Stock to which the Holder
shall be entitled, pay to the Holder cash in an equal to the fair value
of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine), and (b) deliver the
other securities and properties receivable upon the exercise of this
Warrant, or the proportionate part thereof if this Warrant is exercised
in part, pursuant to the provisions of this Warrant.
b) Cashless Exercise
In lieu of exercising this Warrant in the manner set forth in paragraph
1(a) above, the Warrant may be exercised in whole or in part by
surrender of the Warrant without payment of any other consideration,
commission or remuneration, by execution of the cashless exercise
subscription form (at the end hereof, duly executed). The number of
shares to be issued in exchange for the Warrant will be computed by
subtracting the Warrant Exercise Price from the closing bid price of the
common stock on the date of receipt of the cashless exercise
subscription form, multiplying that amount by the number of shares being
exercised under the Warrant, and dividing by the closing bid price as of
the same date.
2. Reservation of Warrant Shares.
The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times have authorized and in reserve, and will keep
available, solely for issuance or delivery upon the exercise of this
Warrant, the shares of the Common Stock and other securities and
properties as from time to time shall be receivable upon the exercise of
this Warrant, free and clear of all restrictions on sale or transfer
(except for applicable state or federal securities law restrictions) and
free and clear of all pre-emptive rights.
3. Protection Against Dilution.
a) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute (for no
consideration) to the holders of shares of Common Stock
evidences of its indebtedness, any other securities of the
Company or any cash, property or other assets (excluding a
subdivision, combination or reclassification, or dividend or
distribution payable in shares of Common Stock, referred to in
Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor
if the full amount thereof, together with the value of other
dividends and distributions made substantially concurrently
therewith or pursuant to a plan which includes payment thereof,
is equivalent to not more than 5% of the Company's net worth)
(any such
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nonexcluded event being herein called a "Special Dividend"), the
Per Share Warrant Price shall be adjusted by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator
of which shall be the then current market price of the Common
Stock (defined as the average for the thirty consecutive
business days immediately prior to the record date of the daily
closing price of the Common Stock as reported by the NASDAQ
system less the fair market value (as determined by the
Company's Board or Directors) of the evidences or indebtedness,
securities or property, or other assets issued or distributed in
such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be such then current market
price per share of Common Stock. An adjustment made pursuant to
this Subsection 3(a) shall become effective immediately after
the record date of any such Special Dividend.
b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
greater number or shares, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares or (iv) issue by
reclassification of its Common Stock any shares of capital stock
of the Company, the Per Share Warrant Price shall be adjusted so
that the Holder of any Warrant upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or
other capital stock of the Company which he would have owned
immediately prior thereto. An adjustment made pursuant to this
Subsection 3(b) shall become effective immediately after the
record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the
case of a subdivision, combination or reclassification. If, as a
result of an adjustment made pursuant to this Subsection 3(b),
the Holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive shares of two or more classes
of capital stock or shares of Common Stock and other capital
stock of the Company, the Board of Directors (whose
determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per
Share Warrant Price between or among shares of such classes or
capital stock or shares of Common Stock and other capital stock.
c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a
consideration per share less than the Per Share Warrant Price on
the date of such issuance or sale, the Per Share Warrant Price
shall be adjusted as of the date of such issuance or sale so
that the same shall equal the consideration per share received
by the Company upon such issuance or sale; provided, however,
that no adjustment of the Per Share Warrant Price shall be
required in connection with the issuance of shares upon the
exercise of presently outstanding warrants or options.
d) Except as provided in Subsection 3(a) and 3(c), in case the
Company shall hereafter issue or sell any rights, options,
warrants or securities convertible into Common Stock entitling
the holders thereof to purchase Common Stock or to
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convert such securities into Common Stock at a price per share
(determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or
sale of such rights, options, warrants or convertible securities
plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "Total Consideration")
by (ii) the number of additional shares of common stock issuable
upon exercise or conversion of such securities) less than the
then current Per Share Warrant Price in effect on the date of
such issuance or sale, the Per Share Warrant Price shall be
adjusted as of the date of such issuance or sale so that the
same shall equal the price determined by dividing (i) the sum of
(a) the number of shares of Common Stock outstanding on the date
of such issuance or sale multiplied by the Per Share Warrant
Price plus (b) the Total Consideration by (ii) the number of
shares of Common Stock outstanding on the date of such issuance
or sale plus (iii) the maximum number or additional shares of
Common Stock issuable upon exercise or conversion of such
securities.
e) In case of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to
another entity of the property of the Company as an entirety or
substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any
exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall
have the right thereafter to convert such Warrant into the kind
and amount of securities, cash or other property which he would
have owned or have been entitled to receive immediately after
such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance had this Warrant been
converted immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the
application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder of
this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of
stock or other securities or be, in relation to any shares of
stock or other securities or property thereafter deliverable on
the conversion of this Warrant. The above provisions of this
Subsection 3(e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers,
statutory exchanges, sales or conveyances. The issuer of any
shares of stock or other securities or property thereafter
deliverable on the conversion of this Warrant shall be
responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange,
sale or conveyance and of said provisions so proposed to be
made, shall be mailed to the Holders of the Warrants not less
than 10 days prior to such event. A sale of all or substantially
all of the assets of the Company for
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a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
f) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of
at least $0.05 per share of Common Stock; provided, however,
that any adjustments which by reason of this ------------------
Subsection 3(f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment;
provided further, however, that ----------------- adjustments
shall be required and made in accordance with the provisions of
this Section 3 (other than this Subsection 3(f)) not later than
such time as may be required in order to preserve the tax-free
nature of a distribution to the Holder of this Warrant or Common
Stock issuable upon exercise hereof. All calculations under this
Section 3 shall be made to the nearest cent. Anything in this
Section 3 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Per Share Warrant Price,
in addition to those required by this Section 3, as in its
discretion shall deem to be advisable in order that any stock
dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable (for
stock hereafter made by the Company to its shareholders shall
not be taxable.
g) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a
Holder of Warrants in accordance with this Section 3, the
Company shall promptly obtain, at its expense, a certificate of
a firm of independent public accountants of recognized standing
selected by the Board of Directors (who may be the regular
auditors of the Company) setting forth the Per Share Warrant
Price and the number of Warrant Shares after such adjustment or
the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of
computing the same and cause copies of such certificate to be
mailed to the Holders of the Warrants.
h) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock,
other than a cash distribution out of earned surplus, the
Company shall mail notice thereof to the Holders of the Warrants
not less than (10) days prior to the record date fixed for
determining shareholders entitled to participate in such
dividend or other distribution.
4. Fully Paid Stock, Taxes.
The Company agrees that the shares of the common Stock represented by
each and every certificate for Warrant Shares delivered on the exercise
of this Warrant shall, at the time of such delivery, be validly issued
and outstanding, fully paid and nonassessable, and not subject to
preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per
share of the Common Stock is at all times equal to or less than the then
Per Share Warrant Price. The Company further covenants and agrees that
it will pay, when due and payable, any and
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all Federal and state stamp, original issue or similar taxes which may
be payable in respect of the issue of any Warrant Share or certificate
therefor.
5. Transferability.
The Company may treat the registered Holder of this Warrant as he or it
appears on the Company's books at any time as the Holder for all
purposes. The Company shall permit any Holder of a Warrant or his duly
authorized attorney, upon written request during ordinary business
hours, to inspect and copy or make extracts from its books showing the
registered holders of Warrants. All warrants issued upon the transfer or
assignment or this Warrant will be dated the same date as this Warrant,
and all rights of the Holder thereof shall be identical to those of the
Holder. The holder shall have the right to assign all or any part of
this Warrant, subject to compliance with applicable federal and/or state
securities laws.
6. Loss, etc., of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and of indemnity reasonably
satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation for this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
7. Warrant Holder Not Shareholders.
Except as otherwise provided herein, this Warrant does not confer upon
the Holder any right to vote or to consent to or receive notice a
shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. Communication.
No notice or other communication under this Warrant shall be effective
unless, but any notice or other communication shall be effective and
shall be deemed to have been given if, the same is in writing and is
mailed by first-class mail, postage prepaid, or sent by overnight
courier or facsimile, addressed to:
a) the Company at:
Infosafe Systems. Inc.
000 Xxxxx Xxxxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
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or such other address as the Company has designated in writing
to the Holder; or
b) the Holder at:
Summerwind Restructuring, Inc.
00 Xxxxxxx Xxxx Xxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as the Holder has designated in writing to
the Company.
9. Headings.
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
10. Applicable Law.
This Warrant shall be governed by and construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of law thereof.
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IN WITNESS WHEREOF, Infosafe Systems, Inc. has caused this Warrant to be signed
by its President and its corporate seal to be hereunto affixed by its Secretary
this 12th day of June, 1998.
INFOSAFE SYSTEMS, INC.
By:______________________
President
ATTEST:
Secretary
[Corporate Seal]
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SUBSCRIPTION
The undersigned, __________________, pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe for and purchase shares of the Common Stock
of covered by said Warrant, and makes payment therefor in full at the price per
share provided by said Warrant.
Dated:______________________ Signature:___________________
Address:_____________________
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto ______________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint attorney, to
transfer said Warrant on the books of . e
Dated: Signature:___________________
Address:_____________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______ hereby assigns and transfers unto ________ the right
to purchase _______ shares of the Common Stock of ________ by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
hereby, and does irrevocably constitute and appoint ____________ attorney, to
transfer that part of said Warrant on the books of _________________.
Dated: Signature:___________________
Address:_____________________
CASHLESS EXERCISE SUBSCRIPTION
The undersigned ____________ pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe to that number of shares of stock ________
_______________ as are issuable in accordance with the formula set forth in
paragraph 1(b) the of the Warrant, and makes payment therefore in full by
surrender and delivery of this Warrant.
Dated: Signature:___________________
Address:_____________________
