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EXHIBIT 10.18
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Among
SERANOVA, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of September 26, 2000
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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of September 26, 2000, among SeraNova, Inc., a New Jersey
corporation (the "Company"), and the investors signatory hereto (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 and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), as amended, 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 6% Series A Convertible Preferred
Stock, par value $.01 per share (the "Preferred Stock"), which are
convertible into shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), and certain other securities of the Company as
more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
(a) The Closing (i) 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 an aggregate of
800 shares of Preferred Stock ("Shares") and certain Common Stock purchase
warrants as described below in this Section for an aggregate purchase price
of $8,000,000. The closing of the purchase and sale of such securities (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."
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(ii) At the Closing, the parties shall deliver or shall cause to
be delivered the following: (A) the Company shall deliver to each Purchaser
(1) a stock certificate 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) a Common Stock purchase warrant, in the
form of Exhibit D-1, registered in the name of such Purchaser, pursuant to
which such Purchaser shall have the right to acquire the number of Warrant
Shares (as defined in the Warrant) indicated below such Purchaser's name on
the signature page to this Agreement, pursuant to the terms thereof
(collectively, the "Closing Warrants"), (3) a Common Stock purchase warrant,
in the form of Exhibit D-2, registered in the name of such Purchaser,
pursuant to which, in the event that the Company shall redeem the Shares,
such Purchaser shall have the right to acquire the number of Warrant Shares
indicated below such Purchaser's name on the signature page to this
Agreement, pursuant to the terms thereof (collectively, the "Redemption
Warrants", and together with the Closing Warrants, the "Warrants"),(3) the
legal opinion of Xxxxxx, Xxxxxxx & Xxxxxxx, outside counsel to the Company in
the form of Exhibit C, (4) an executed Registration Rights Agreement, dated
as of the date hereof, among the Company and the Purchasers, in the form of
Exhibit B (the "Registration Rights Agreement"), and (5) Transfer Agent
Instructions, in the form of Exhibit E, executed by the Company and delivered
to and acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions"); 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) an
executed Registration Rights 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") to be filed prior to the Closing by the Company with the
Secretary of State of New Jersey, in form and substance mutually agreed to by
the parties.
1.3 Certain Defined Terms. For purposes of this Agreement, "Original
Issue Date" and "Trading Day" shall have the meanings set forth in Exhibit A
and "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 State of New Jersey are authorized or
required by law or other governmental action to close. 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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:
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(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of New Jersey, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
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 in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign
corporation or other entity 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 Registration Rights
Agreement, the Certificate of Designation, the Transfer Agent Instructions or
the Warrants (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").
(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 and no further action is required by 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 or articles of incorporation,
by-laws or other organizational or charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c).
Except as disclosed in Schedule 2.1(c), the Company owns all of the capital
stock of each Subsidiary. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the securities of the
Company or any Subsidiary entitled to preemptive or similar rights arising
out of any agreement or understanding with the Company or any Subsidiary by
virtue of any of the Transaction Documents. Except as a result of the
purchase and sale of the Shares and the Warrants 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
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Stock. The issue and sale of the Shares, Warrants or Underlying Shares (as
hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other securities to any Person other than the Purchaser and will not
result in a right of any holder of Company's securities to adjust the exercise
or conversion or reset price under such securities.
(d) Issuance of the Shares and the Warrants. The Shares and
the Warrants 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") other than liens created by the
holders thereof. The Company has on the date hereof and will, at all times
while the Shares and the Warrants are outstanding, maintain an adequate
reserve of duly authorized shares of Common Stock, reserved for issuance to
the holders of the Shares and the Warrants, to enable it to perform its
conversion, exercise and other obligations under this Agreement, the
Certificate of Designation and the Warrants. Such number of reserved and
available shares of Common Stock is not less than the sum of (i) the number
of shares of Common Stock issuable upon conversion in full of the outstanding
Shares, assuming for such purposes that such Shares are outstanding for five
years, and that all accrued dividends are added to the Stated Value (as
defined in the Certificate of Designation), and (ii) the number of shares of
Common Stock issuable upon exercise in full of the Warrants, assuming for
such purposes that (1) the Closing Warrants are exercised in full on the
Closing Date at an exercise price equal to 50% of the closing sales price of
the Common Stock (as reported by Bloomberg L.P. or the successor to its
function of reporting share prices) on the Closing Date, the Filing Date or
the Trading Day preceding the date the Company files an acceleration request
with the Commission relating to the Registration Statement, whichever is
lowest, and (2) the Redemption Warrants fully vest and are exercisable in
full on the Closing Date.(such number of shares of Common Stock as
contemplated in clauses (i)-(ii), the "Initial Minimum"). All such
authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Shares and the Warrants. The shares of Common Stock issuable
upon conversion of the Shares and upon exercise of the Warrants are
collectively referred to herein as the "Underlying Shares." The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as,
the "Securities." When issued in accordance with the Certificate of
Designation and the Warrants, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens
other than liens created by the holders thereof.
(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 the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other charter documents
(each as amended through the date hereof), or (ii) subject to obtaining the
Required Approvals (as defined below), conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument or other
understanding 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
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which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary 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 New Jersey, (ii)
the filings required pursuant to Section 3.9, (iii) the filing with the
Securities and Exchange Commission (the "Commission") of a registration
statement 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 National Market ("NASDAQ") for the listing of the Underlying
Shares for trading on the NASDAQ (and with any other national securities
exchange or market on which the Common Stock is then listed) in the time and
manner required thereby, (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. There is no action, suit,
inquiry, 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, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect. Except as described
in the SEC Documents, (i) neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action
involving (A) a claim of violation of or liability under federal or state
securities laws or (B) a claim of breach of fiduciary duty; (ii) the Company
does not have pending before the Commission any request for confidential
treatment of information and the Company has no knowledge of any expected
such request that would be made prior to the Effectiveness Date (as defined
in the Registration Rights Agreement); and (iii) there has not been, and to
the best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or
former director or officer of the Company.
(h) No Default or Violation. 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
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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, in each case
of clauses (i), (ii) or (iii) above, 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 Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers
as contemplated hereby are exempt from the registration requirements of the
Securities Act. Neither the Company nor any Person acting on its behalf has
taken or is, to the knowledge of the Company, contemplating taking any action
which could subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act including soliciting any
offer to buy or sell the Securities by means of any form of general
solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC
Documents" and, together with the Schedules to this Agreement, 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 have been filed as
exhibits to the SEC Documents as required under the Exchange Act. 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 June
30, 2000, except as specifically disclosed in the SEC Documents, (a) there
has been no event, occurrence or development that has or that could result in
a Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to
GAAP or otherwise required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of
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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.
(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 to Oswestry
Research Co. by the Company, no fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person 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 the Purchasers,
their 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) Form S-1 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-1 promulgated under
the Securities Act.
(n) 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.
(o) Listing and Maintenance Requirements. Except as set forth
in the SEC Documents, the Company has not, in the two years preceding the
date hereof received notice (written or oral) from the NASDAQ, any 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,
market or trading facility. 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 listing and maintenance requirements.
(p) Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the
failure to so have would have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any
Person. To the best knowledge of the Company, all such Intellectual Property
Rights are
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enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
(q) Registration Rights; Rights of Participation. Except as
disclosed in Section 6(c) of 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 have
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.
(r) 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.
(s) 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 of which the Company and
its Subsidiaries are in compliance and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(t) Labor Relations. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(u) Shareholders Rights Plan. Neither the consummation of the
transactions contemplated hereby nor the issuance of the Underlying Shares
will cause the Purchasers to be deemed an "Acquiring Person" under any
existing or hereafter adopted shareholders rights plan or similar arrangement.
(v) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided any of the Purchasers 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 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 in all material respects and
do not contain any untrue statement of a material fact or omit to state any
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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:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
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 action on the part of
such Purchaser. Each of this Agreement and the Registration Rights Agreement
has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute 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 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, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement, the Registration Rights Agreement and
the Warrants, 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 or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. Such Purchaser
does not have any agreement or understanding, directly or indirectly, with
any Person to distribute the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and at each exercise
date under its respective Warrants, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of such 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 such 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 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
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the Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. 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. (a) 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, and in
compliance with any applicable federal and state securities laws. 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. Any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have
the rights and obligations of a Purchaser under this Agreement and a Holder
under the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
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NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO THE COMPANY.
Underlying Shares shall not contain the legend set forth above
nor any other legend at any time while an Underlying Shares Registration
Statement is effective under the Securities Act or the holder of any such
security is relying on Rule 144 promulgated under the Securities Act ("Rule
144") in connection with the resale of such Underlying Shares or, in the
event there is not an effective Underlying Shares Registration Statement, at
such time and Rule 144 is not then available, if, 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 "Effective Date").
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 (i) conversion of the Shares in
accordance with the terms of the Certificate of Designation, and (ii)
exercise of the Warrants in accordance with their terms, will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares upon (x)
conversion of the Shares in accordance with the terms of the Certificate of
Designation, and (y) exercise of the Warrants in accordance with their terms,
is unconditional and absolute, subject to the limitations set forth herein,
in the Certificate of Designation or pursuant to the Warrants, regardless of
the effect of any such dilution.
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3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own
Securities, if the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
such information as is required for the 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 without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including in circumstances where an
exemption is available to the holder under the Securities Act causing its
attorneys to render and deliver any legal opinion required in order to permit
a Purchaser to receive Underlying Shares free of all restrictive legends and
to subsequently sell Underlying Shares under Rule 144 upon receipt of a
notice of an intention to sell or other form of notice having a similar
effect and related Form 144, brokers representation letter, sellers
representation letter and other documentation reasonably requested by such
counsel. 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 of the Company 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, or that would be integrated with the offer or
sale of the Securities for the purposes of the rules and regulations of
NASDAQ.
3.5 Increase in Authorized Shares. If on any date the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from issuing (a) the number of Underlying
Shares as would then be issuable upon a conversion in full of the Shares, and
(b) the number of Underlying Shares as would then be issuable upon exercise
of the Warrants, assuming an exercise price of 75% of the then current
exercise price (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 prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate or articles 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 Purchasers in order to provide for such number of
authorized and unissued shares of Common Stock to enable the Company to
comply with its issuance, conversion, exercise and reservation of shares
obligations as set forth in this Agreement, the Certificate of Designation
and the Warrants (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
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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 earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Securities to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company
shall (i) in the time and manner required by the NASDAQ and any such other
exchange, market or quotation facility on which the Common Stock is traded,
prepare and file with the NASDAQ (and such national securities exchange,
market or trading or quotation facility on which the Common Stock is then
traded) an additional shares listing application covering a number of shares
of Common Stock which is not less than the Initial Minimum, (ii) take all
steps necessary to cause such shares of Common Stock to be approved for
listing 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 (iii) provide to the
Purchasers evidence of such listing, and the Company shall maintain the
listing of its Common Stock thereon. If the number of Underlying Shares
issuable upon conversion in full of the then outstanding Shares and upon
exercise of the then unexercised portion of the Warrants exceeds 85% of the
number of Underlying Shares previously listed on account thereof with NASDAQ
(and any such other required exchanges, then the Company shall take the
necessary actions to immediately list a number of Underlying Shares as equals
no less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Shares in full and upon exercise in
full of the Warrants in accordance with this Agreement, the Certificate of
Designation and the Warrants, respectively, in such amount as may be required
to fulfill its obligations in full under the Transaction Documents, which
reserve shall equal no less than the then Current Required Minimum.
3.7 Conversion and Exercise Obligations and Procedures. The Company
shall honor conversion of the Shares and exercise of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the Certificate of Designation and Warrants.
The Transfer Agent Instructions, Conversion Notice (as defined in the
Certificate of Designation) and Notice of Exercise under the Warrants set
forth the totality of the procedures with respect to the conversion of the
Shares and exercise of the Warrants, 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 their Shares and exercise their Warrants as
contemplated in the Certificate of Designation and the Warrants (as
applicable).
3.8 Subsequent Financing; Limitation on Registrations. (a) Subject
to Section 3.8(c) and (d), from the date hereof through the 180th Trading Day
following the Effective Date, the Company shall not, directly or indirectly,
offer, sell, grant any option to purchase, or otherwise
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dispose of (or announce any offer, sale, grant or any option to purchase or
other disposition) (i) any of its equity or equity-equivalent securities or
securities of any of its Affiliates that are exchangeable or convertible
(directly or indirectly) for shares of Common Stock, including the issuance of
any debt or other instrument at any time over the life thereof convertible into
or exchangeable for Common Stock entitling any Person to acquire shares of
Common Stock that is senior or pari passu in right of payment, whether upon
liquidation or dissolution or otherwise to the Shares, (ii) any of its
non-derivative equity securities, at a price that is either (x) less than 80% of
the Per Share Market Value (as defined in the Certificate of Designation) on the
date of issuance thereof or (y) established by reference to the Per Share Market
Value or another market valuation to be determined at any date after the
issuance thereof or (iii) securities pursuant to an equity line of credit or
similar financing (collectively, a "Subsequent Placement") from the date hereof
until the expiration of the 180th Trading Day after the Effective Date, unless
(A) the Company delivers to each of 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) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the tenth Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to provide (or to cause its sole
designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same 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 paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within 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 in excess of the amount set forth in the
Subsequent Placement Notice.
(b) Except for (w) Underlying Shares, (x) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered, and securities of the Company permitted pursuant to Section
6(c) of the Registration Rights Agreement to be registered, in the Underlying
Shares Registration Statement in accordance with the Registration Rights
Agreement, (y) Common Stock issued pursuant to a primary offering by the
Company (which shall not include an equity line of credit or similar
financing), and (z) Common Stock permitted to be issued pursuant to Section
3.8 (d), the Company shall not, for a period of not less than 90 days after
the Effective Date, without the prior written consent of the Purchasers (i)
issue
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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 any securities of the Company. Any days after the Effective Date
that a Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 day period.
(c) With respect to Section 3.8(a) and (b), the 90 days and 180
Trading Day periods shall be extended for the number of Trading Days during
such period (A) in which trading in the Common Stock is suspended by any
securities exchange or market or quotation system on which the Common Stock
is then listed, or (B) during which the Underlying Shares Registration
Statement is not effective, or (C) during which the prospectus included in
the Underlying Shares Registration Statement may not be used by the holders
thereof for the resale of Underlying Shares.
(d) The restrictions contained in Section 3.8(a) and (b) above,
shall not apply to (i) the issuance of securities upon the exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof and to the extent specifically listed in
Schedule 2.1(c) (but not the repricing of any such outstanding security),
(ii) the granting of additional options or warrants to employees, officers
and directors of the Company, and the issuance of Common Stock upon exercise
of such options or warrants granted under any stock option plan heretofore or
hereinafter duly adopted by the Company and (iii) issuances of Common Stock
pursuant to a Strategic Transaction (as defined herein). A "Strategic
Transaction" shall mean (i) any merger, consolidation or the acquisition of
assets, a business, products or a license by the Company, or (ii) a
transaction or relationship in which the Company issues shares of Common
Stock to a Person which is, itself or through its subsidiaries, an operating
company in a business related to the business of the Company and in which the
Company receives material benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
3.9 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on the Closing Date issue a press release reasonably acceptable to
the Purchasers disclosing the transactions contemplated hereby, (ii) file
with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby within ten Business Days after the Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the
Securities Act. The Company shall, no less than two Business Days prior to
the filing of any disclosure required by clauses (ii) and (iii) above,
provide a copy thereof to the Purchasers for their review. The Company and
the Purchasers shall consult with each other in issuing any other 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, except if such disclosure is required by law or stock
market or trading facility regulation, in which such case the disclosing
party shall promptly 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 names of the Purchasers, or include
the names of the Purchasers in any filing with the Commission or any
regulatory agency, trading facility or stock market without the prior
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written consent of the Purchasers, except to the extent such disclosure (but not
any disclosure as to the controlling Persons thereof) is required by law or
stock market regulations, in which case the Company shall provide the Purchasers
with prior notice of such disclosure.
3.10 Use of Proceeds. The Company may use up to $4,000,000 of the net
proceeds from the sale of the Securities hereunder for the satisfaction of
the Company's debt and the rest of the net proceeds shall be used for general
working capital purposes. The Company shall not use any of the net proceeds
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
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 in
connection with the transfer or licensing arrangements in the ordinary course
of the Company's business, the Company shall not transfer, sell or otherwise
dispose of any Intellectual Property Rights, or allow any of the Intellectual
Property Rights to become subject to any Liens, or fail to renew such
Intellectual Property Rights (if renewable and it would otherwise lapse if
not renewed), without the prior written consent of the Purchasers.
3.12 Reimbursement. If any Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse such Purchaser
for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any Affiliates of the 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 solely as a result of acquiring the Securities under
this Agreement.
3.13 Exclusivity. The Company shall not issue and sell the Shares to
any Person other than the Purchasers without specific prior written consent
of the Purchasers.
3.14 Shareholder Rights Plan. No claim will be made or enforced by
the Company or any other Person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement in effect
or hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities or shares of Common Stock under the Transaction
Documents.
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ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with
the preparation and negotiation of the Transaction Documents by paying to
Xxxxxxxx Xxxxxxxxx $30,000 for the preparation and negotiation 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 herein, 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 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 6:30 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 6:30
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: SeraNova, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx, Xxxxxxx & Xxxxxxx
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
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If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of 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), the Purchasers may not assign this
Agreement or any of the rights or obligations hereunder without the consent
of the Company. This provision shall not limit any Purchaser's right to
transfer securities or transfer or assign rights under the Registration
Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
4.8 Governing Law. 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
(including with respect to the enforcement 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 via registered or certified mail or overnight delivery (with evidence
of delivery) 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.
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4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Shares and of the
Warrants.
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 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.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance of each
other's obligations under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant 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 the Transaction
Document. Each Purchaser shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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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.
SERANOVA, INC.
By: /s/XXXX XXXXX
---------------------------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW]
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STRONG RIVER INVESTMENTS, INC.
By: /s/ XXXXXXX X. XXXXXXXXX
--------------------------------------------
Xxxxxxx X. Xxxxxxxxx
Attorney-in-Fact
Purchase Price: $4,000,000
Number of Closing Warrants: 75,000
Number of Redemption Warrants: 80,000
Address for Notice:
Strong River Investments, Inc.
c/o Xxxxxxxx-Xxxx Xxxxxx (BVI) Limited
Wickhams Cay I, Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xxxx Xxxx, Xxxxxxxx, B.V.I.
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: Xxxx X. Xxxxx, Esq.
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MONTROSE INVESTMENTS LTD.
By: /s/ Xxxxx X'Xxxx
_____________________________________
Name: Xxxxx X'Xxxx
Title:
Purchase Price: $4,000,000
Number of Closing Warrants: 75,000
Number of Redemption Warrants: 80,000
Address for Notice:
Montrose Investments Ltd.
c/o HBK Investments L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxx and Xxx Xxxxxx
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: Xxxx X. Xxxxx, Esq.
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SCHEDULE 2.1(a)
LIST OF SUBSIDIARIES OF SERANOVA, INC.
Azimuth Consulting Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
Azimuth Consulting Philippines, Inc., a corporation
formed pursuant to the laws of the Philippines and a
wholly-owned subsidiary of Azimuth Consulting Limited.
Azimuth Corporation Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
New Zealand Public Information Management Limited, a
corporation formed pursuant to the laws of New
Zealand and a wholly-owned subsidiary of Azimuth
Corporation Limited.
Azimuth Holdings Limited, a corporation formed pursuant to the laws of
New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
Azimuth Holdings Pty Limited, a corporation formed
pursuant to the laws of Australia and a wholly-owned
subsidiary of Azimuth Holdings Limited.
Azimuth Consulting Australia Pty Limited, a
corporation formed pursuant to the laws of Australia
and a wholly-owned subsidiary of Azimuth Holdings
Limited.
Xxxxxxxxxxx Richmond Limited, a corporation formed pursuant to the laws
of New Zealand and a wholly-owned subsidiary of SeraNova, Inc.
Network Publishing, Inc., a Utah corporation and a wholly-owned
subsidiary of SeraNova, Inc.
SeraNova Limited, a corporation formed pursuant to the laws of England
and Wales and a wholly-owned subsidiary of SeraNova, Inc.
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EXHIBIT A
TERMS OF PREFERRED STOCK
Section 1. Designation, Amount and Par Value. The series of preferred
stock shall be designated as its 6% Series A Convertible Preferred Stock (the
"Preferred Stock") and the number of shares so designated shall be 800 (which
shall not be subject to increase without the consent of the holders of the
Preferred Stock (each, a "Holder" and collectively, the "Holders")). Each
share of Preferred Stock shall have a par value of $.01 per share and a
stated value equal to the sum of $10,000 plus all accrued and unpaid
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 Stated Value per share) of 6% per
annum, payable on each Conversion Date (as defined herein) for such share, in
cash or by accretion of the Stated Value. Subject to the terms and
conditions herein, the decision whether to accrete dividends hereunder to the
Stated Value or to pay for dividends in cash shall be at the discretion of
the Company. The Company shall provide the Holders written notice of its
intention to accrete dividends hereunder to the Stated Value or pay dividends
in cash not less than ten days prior to each Conversion Date for so long as
shares of Preferred Stock are outstanding (the Company may indicate in such
notice that the election contained in such notice shall continue for later
periods until revised). Failure to timely provide such written notice shall
be deemed (if permitted hereunder) an election by the Company to accrete
dividends hereunder to the Stated Value. Dividends on the Preferred Stock
shall be calculated on the basis of a 360-day year, shall accrue daily
commencing on the Original Issue Date (as defined in Section 8), and shall be
deemed to accrue from such date whether or not earned or declared and whether
or not there are profits, surplus or other funds of the Company legally
available for the payment of dividends. 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 Trading Days (as defined in Section 8) following a
Conversion 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).
(b) Notwithstanding anything to the contrary contained herein
and subject to applicable legal requirements, the Company must pay dividends
in cash if:
(i) the number of shares of Common Stock (as defined in
Section 8) at the time authorized, unissued and unreserved for all purposes
is insufficient to accrete such dividends to the Stated Value to permit
conversion in full of all outstanding Stated Value;
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(ii) after the Dividend Effectiveness Date (as defined in
Section 8), Underlying Shares (as defined in Section 8) (x) are not
registered for resale pursuant to an effective Underlying Shares Registration
Statement (as defined in Section 8) and (y) may not be sold without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act (as
defined in Section 8), (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 8), the Company shall, within three 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 (the "Nasdaq"), or on the New York Stock Exchange,
American Stock Exchange or Nasdaq SmallCap Market (each, a "Subsequent
Market"); or
(iv) the accretion of such dividends to the Stated Value
and subsequent conversions of all then outstanding Stated Value would result
in a violation of Section 5(a)(iii) or the rules of the Nasdaq 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 8), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on
preferred stock of the Company at such times when the Company is in
compliance with its payment and other obligations hereunder) upon, nor shall
any distribution be made in respect of, any Junior Securities, nor shall any
monies be set aside for or applied to the purchase or redemption (through a
sinking fund or otherwise) of any Junior Securities or shares pari passu with
the Preferred Stock.
Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights. However, so long as any shares of Preferred Stock are outstanding,
the Company shall not, without the affirmative vote of the Holders of a
majority of the shares of the Preferred Stock then outstanding, (a) alter or
change adversely the powers, preferences or rights given to the Preferred
Stock or alter or amend this Certificate of Designation, (b) authorize or
create any class of stock ranking as to dividends or distribution of assets
upon a Liquidation (as defined in Section 4) senior to or otherwise pari
passu with the Preferred Stock, (c) amend its certificate or articles of
incorporation or other charter documents so as to affect adversely any rights
of the Holders, (d) increase the authorized number of shares of Preferred
Stock, or (e) enter into any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the Holders shall be entitled to
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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 50% or more 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 (a)(iii)) at the Conversion Ratio (as
defined in Section 8), at the option of the Holder, at any time and from time
to time from and after the Original Issue Date. Holders shall effect
conversions by providing the Company with the form of conversion notice
attached hereto as Exhibit A (a "Holder Conversion Notice"). Each Holder
Conversion Notice shall specify the number of shares of Preferred Stock to be
converted, the number of shares of Preferred Stock owned prior to the
conversion at issue, number of shares of Preferred Stock owned subsequent to
the conversion at issue 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 "Holder Conversion Date"). The number of
shares of Preferred Stock shown as owned by the Holder prior to and giving
effect to a conversion shall control absent manifest or mathematical error.
If no Holder Conversion Date is specified in a Holder Conversion Notice, the
Holder Conversion Date shall be the date that such Holder Conversion Notice
is deemed delivered hereunder. To effect conversions of Preferred Stock, a
Holder shall not be required to surrender the certificate(s) representing
such shares of Preferred Stock to the Company unless all of the shares of
Preferred Stock represented thereby are so converted.
(ii) Conversion At Option of the Company. If at any time
after the Effective Date, the Closing Price for 20 consecutive Trading Days
exceeds 130% of Conversion Price on the Original Issue Date (subject to
equitable adjustment for stock splits, recombinations and similar events
pursuant to Section 4(c)(ii)), the Company may require the Holder to convert
all or any portion of the Preferred Stock (subject to the limitations set
forth in Section 5(a)(iii)) at the Conversion Ratio. provided, that the
Company shall not be permitted to deliver a Company Conversion Notice (as
defined below) at any time when the Underlying Securities Registration
Statement is not then effective or shares of Common Stock are not actively
traded on the Nasdaq National Market ("NASDAQ") or listed or quoted for
trading on the New York Stock Exchange, American Stock Exchange or Nasdaq
SmallCap Market (each, a "Subsequent Market") and provided further that the
Closing Price must equal or exceed the price required pursuant to this
sentence on
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the Company Conversion Date. The Company shall effect such conversion by
delivering to the Holder a written notice in the form attached hereto as Exhibit
B (the "Company Conversion Notice"), which Company Conversion Notice, once
given, shall be irrevocable. Each Company Conversion Notice shall specify the
number of shares of Preferred Stock to be converted. The date of delivery of the
Company Conversion Notice is referred to herein as the "Company Conversion
Date". A Holder Conversion Notice and a Company Conversion Notice may sometimes
be referred to as a "Conversion Notice". A Holder Conversion Date and a Company
Conversion Date may sometimes be referred to as a "Conversion Date".
(iii) Certain Conversion Restrictions.
(A) A Holder may not convert or be required to convert
shares of Preferred Stock or receive shares of Common Stock as payment of
dividends hereunder to the extent such conversion or receipt of such dividend
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act (as defined in Section 8) and the rules promulgated thereunder)
in excess of 4.999% of the then issued and outstanding shares of Common
Stock, including shares issuable upon conversion of, and payment of dividends
on, the shares of Preferred Stock held by such Holder after application of
this Section. Since the Holder will not be obligated to report to the
Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which
may be beneficially owned by the Holder or an affiliate thereof, the Holder
shall have the authority and obligation to determine whether the restriction
contained in this Section will limit any particular conversion hereunder and
to the extent that the Holder determines that the limitation contained in
this Section applies, the determination of which portion of the shares of
Preferred Stock are convertible shall be the responsibility and obligation of
the Holder. If the Holder has delivered a Conversion Notice for shares of
Preferred Stock that, without regard to any other shares that the Holder or
its affiliates may beneficially own, would result in the issuance in excess
of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall honor the conversion for the maximum number of shares of
Preferred Stock permitted to be converted on such Conversion Date in
accordance with the periods described in Section 5(b) and, at the option of
the Holder, either retain shares of Preferred Stock tendered for conversion
in excess of the permitted amount hereunder for future conversions or return
such excess shares of Preferred Stock permitted to 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 or be required to convert
shares of Preferred Stock or receive shares of Common Stock as payment of
dividends hereunder to the extent such conversion or receipt of such dividend
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon conversion of, and payment of dividends on, the shares of Preferred
Stock held by such Holder after application of this Section.
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Since the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of a conversion hereunder, unless
the conversion at issue would result in the issuance of shares of Common Stock
in excess of 9.999% of the then outstanding shares of Common Stock without
regard to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular conversion hereunder and to the extent that the Holder determines
that the limitation contained in this Section applies, the determination of
which portion of the shares of Preferred Stock are convertible shall be the
responsibility and obligation of the Holder. If the Holder has delivered a
Conversion Notice for shares of Preferred Stock that, without regard to any
other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the conversion for the
maximum number of shares of Preferred Stock permitted to be converted on such
Conversion Date in accordance with the periods described in Section 5(b) and, at
the option of the Holder, either retain shares of Preferred Stock tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess shares of Preferred Stock permitted to 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 3,492,001.9 shares of Common Stock (which equals 19.999% of the
number of shares of Common Stock outstanding on the Trading Day immediately
preceding the Original Closing Date) upon conversions of Preferred Stock and
exercise of Redemption Warrants and Closing Warrants (each as defined in the
Purchase Agreement), in either case, at a price per share that is less than
the Per Share Market Value on the Trading Day immediately preceding the
Original Issue Date (such number of shares, the "Issuable Maximum"). Each
Holder shall be entitled to a portion of the Issuable Maximum equal to the
quotient obtained by dividing (x) the number of shares of Preferred Stock
issued and sold to such Holder on the Original Issue Date by (y) the number
of shares of Preferred Stock issued and sold by the Company on the Original
Issue Date. If any Holder shall no longer hold shares of Preferred Stock,
then such Holder's remaining portion of the Issuable Maximum shall be
allocated pro-rata among the remaining Holders. If on any Conversion Date
(A) the shares of Common Stock are listed for trading on the Nasdaq or Nasdaq
SmallCap Market, (B) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding shares of Preferred Stock and
exercise in full of the Redemption Warrants and Closing Warrants, together
with any shares of Common Stock previously issued upon conversion of shares
of Preferred Stock and exercise in full of the Redemption Warrants and
Closing Warrants 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 (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 such
Holder's pro-rata portion (which shall be calculated pursuant to the
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terms hereof) of 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 such Holder's pro-rata
portion (which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum (the "Excess Stated Value"), the converting Holder shall have the option
to require the Company to either: (1) use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is possible, but in
any event not later than the 60th day after such request, or (2) pay cash to the
converting Holder in an amount equal to the Mandatory Redemption Amount (as
defined in Section 8) for the Excess Stated Value. If the converting Holder
shall have elected the first option pursuant to the immediately preceding
sentence and the Company shall have failed to obtain the Shareholder Approval on
or prior to the 60th day after such request, then within three (3) days of such
60th day, the Company shall pay cash to the converting Holder an amount equal to
the Mandatory Redemption Amount for the Excess Stated Value. If the Company
fails to pay the Mandatory Redemption Amount in full pursuant to this Section
within seven days after the date payable, the Company will pay interest thereon
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
Conversion Date until such amount, plus all such interest thereon, is paid in
full. The Company and the Holder understand and agree that shares of Common
Stock issued to and then held by the Holder as a result of conversions of
Preferred Stock shall not be entitled to cast votes on any resolution to obtain
Shareholder Approval pursuant hereto.
(b)(i) Not later than five 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, and (B) 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). 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 fifth 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 fifth 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 fifth 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.
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(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 fifth Trading Day after the
Conversion Date, and if after such fifth 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 (with respect
to which the Holder was unable to utilize borrowed shares for such purpose
due to the inability or unwillingness of the broker of such Holder to loan
such shares to such Holder) 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
any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief
with respect to the Company's failure to timely deliver certificates
representing shares of Common Stock upon conversion of the shares of
Preferred Stock as required pursuant to the terms hereof.
(c)(i) The conversion price for each share of Preferred Stock
in effect on any Conversion Date shall be $7.00 (the "Conversion Price").
(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 (including by way of reverse stock split) 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 Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
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.
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(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 (and not to Holders) 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 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 (including the issuance of shares
of Common Stock upon exercise of warrants issued to the Purchasers under the
Purchase Agreement), options or other securities or debt that is convertible
into or exchangeable for shares of Common Stock ("Common Stock Equivalents")
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, be entitled to receive shares of Common
Stock at a price less than the Conversion Price, such issuance shall be
deemed to have occurred for less than the Conversion Price), then, at the
option of the Holder, the Conversion Price shall be replaced with the
conversion, exchange or purchase price for such Common Stock or Common Stock
Equivalents (including any reset provisions thereof) for all subsequent
conversions of Preferred Stock or such conversions as shall be indicated by
the Holder on its Conversion Notice. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. The Company shall
notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent subject to this
section, of the issuance of such Common Stock or Common Stock Equivalent (or
of such agent pursuant to which such Common Stock or Common Stock Equivalent
may be issued, indicating therein the applicable issuance price, or of
applicable reset price, exchange price, exercise
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price, conversion price and other pricing terms. Notwithstanding to the contrary
anything herein, this Section shall not apply to: (i) issuance of options and
warrants to employees, officers and directors of the Company, and the issuance
of Common Stock upon exercise of such options and warrants granted under any
stock option agreements and stock option plans heretofore issued or adopted by
the Company and any stock option plan hereinafter duly adopted by the Company,
(ii) issuance of Common Stock or Common Stock Equivalents as part payment of the
purchase price in (A) the acquisition of assets or a business by the Company or
(B) in connection with the acquisition of goods or a license by the Company and
(iii) as royalty payments in connection with or under a firm underwritten
primary offering of the Company's stock in which the full purchase price is paid
upon the first closing thereof (which shall not include equity lines of credit
or any similar financing structure).
(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
Conversion Price at which each share of Preferred Stock shall thereafter be
convertible shall be determined by multiplying the 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 share of Common Stock as determined by the
Board of Directors in good faith. 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.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.
(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 Fixed Conversion Price or the Conversion
Price (as applicable) 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
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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 merger or consolidation of the Company
with or into another Person, or 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, 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 or (B)
in the case of a merger or consolidation, require the Company to pay to the
Holder, in cash,120% of the Stated Value of the shares of Preferred Stock
then held by such Holder. The terms of any such merger, sale or
consolidation shall include such terms so as continue to give the Holders 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. The rights set forth in this
Section 5(c)(ix) shall not alter the rights of a Holder set forth in Section
7, provided, that, a Holder may only exercise the rights set forth in this
Section 5(c)(ix) or the rights set forth in Section 7 with respect to a
single event giving rise to such rights.
(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, or 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 notify 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
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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, 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 and 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 any fraction of an Underlying Share would, except for the
provisions of this Section, be issuable upon a conversion hereunder, the
Company shall pay an amount in cash equal to the Conversion Ratio multiplied
by such fraction.
(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 000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxx Xxxxxx 00000 Facsimile
No.: 000-000-0000, attention Chief Financial Officer, 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 6:30
p.m. (New York City time) (with confirmation of transmission), (ii) the date
after the date of transmission, if such notice or
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communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 6:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date (with confirmation
of transmission), (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) The Company shall have the right, subject to the provisions
of this Section 6, upon a 30 Trading Day prior written notice (an "Optional
Redemption Notice" and the date such Optional Redemption Notice is received
by a Holder, an "Optional Redemption Date") to the Holders, 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, at a
price equal to the Optional Redemption Price (as defined in Section 8). The
Company may only deliver an Optional Redemption Notice if: (i) 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) 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 sell Underlying Shares or the Underlying Shares may be resold
without volume restrictions pursuant to Rule 144(k) promulgated under the
Securities Act, and (iii) the Common Stock is listed for trading on the
Nasdaq or on a Subsequent Market. In order for an Optional Redemption Notice
to remain in effect subsequent to the Optional Redemption Date, each of
clauses (i) - (iii) of the immediately preceding sentence must be true during
the entire 30 Trading Days between the Optional Redemption Date and the date
of payment of the Optional Redemption Price. The entire Optional Redemption
Price shall be paid in cash. A Holder may convert (and the Company shall
honor such conversions in accordance with the terms hereof) any or all of the
shares of Preferred Stock subject to an Optional Redemption Notice delivered
for conversion on or prior to the 30th Trading Day following the Optional
Redemption Date.
(b) Failure by the Company to pay any portion of the Optional
Redemption Price on the 30th Trading Day following an Optional Redemption
Date shall, at the option of the Holder subject thereto, 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 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 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 Trading Days of its
receipt of such election deliver to the Holder the shares of Common Stock
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issuable upon conversion of the Unpaid Redemption Shares subject to such
Holder conversion demand and otherwise perform its obligations hereunder with
respect thereto.
Section 7. Redemption Upon Triggering Events.
(a) Upon the occurrence of a Triggering Event, each Holder
shall (in addition to all other rights it may have hereunder or under
applicable law), have the right, exercisable at the sole option of such
Holder, to require the Company to redeem all or a portion of the Preferred
Stock and such shares of Common Stock as described below then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying
Shares issued in respect of conversions of shares of Preferred Stock
hereunder within thirty Trading Days of the Holder's demand for redemption
pursuant to this Section 6, and then held by the Holder and (B) the Closing
Price on the date such redemption is demanded or the date the redemption
price hereunder is paid in full, whichever is greater (such sum, the
"Redemption Price"). The Redemption Price shall be due and payable within
five Trading Days of the date on which the notice for the payment therefor is
provided by a Holder. If the Company fails to pay the Redemption Price
hereunder in full pursuant to this Section on the date such amount is due in
accordance with this Section, the Company will pay interest thereon at a rate
of 18% per annum (or the lesser amount permitted by applicable law), accruing
daily from such date until the Redemption Price, plus all such interest
thereon, is paid in full. For purposes of this Section, a share of Preferred
Stock is outstanding until such date as the Holder shall have received
Underlying Shares upon a conversion (or attempted conversion) thereof that
meets the requirements hereof.
A "Triggering Event" means any one or more of the following
events (whatever the reason and whether it shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order
of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) the failure of an Underlying Shares Registration
Statement to be declared effective by the Commission on or prior to the 180th
day after the Original Issue Date;
(ii) if, during the Effectiveness Period, the
effectiveness of the Underlying Shares Registration Statement lapses for any
reason for more than an aggregate of twenty Trading Days (which need not be
consecutive Trading Days), or the Holder shall not be permitted to resell
Registrable Securities under the Underlying Shares Registration Statement for
more than an aggregate of twenty Trading Days (which need not be consecutive
Trading Days);
(iii) the Company shall fail for any reason to deliver
certificates representing Underlying Shares issuable upon a conversion
hereunder that comply with the provisions hereof prior to the tenth Trading
Days after the Conversion Date or the Company shall provide notice to any
Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of any shares of
Preferred Stock in accordance with the terms hereof;
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(iv) the Company shall be a party to any Change of Control
Transaction, shall agree to sell (in one or a series of related transactions)
more than 33% of its assets or shall redeem more than a de minimis number of
Common Stock or other Junior Securities (other than redemptions of Underlying
Shares);
(v) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holders prior
to the expiration of 60 days from the Event Date (as defined in the
Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration Statement to be
declared effective by the Commission on or prior to the 180th day after the
Original Issue Date, which shall be covered by Section 6(a)(i));
(vi) the Company shall fail for any reason to pay in full
the amount of cash due pursuant to a Buy-In within twenty-one days after
notice therefor is delivered hereunder or shall fail to pay all amounts owed
on account of an Event within twenty-one days of the date due;
(vii) the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to such
Holder upon a conversion hereunder; or
(viii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit any
breach of the Transaction Documents (as defined in Section 8) that may result
in a Material Adverse Effect (as defined in the Purchase Agreement), and such
failure or breach shall not, if subject to the possibility of a cure by the
Company, have been remedied within ten Business Days after the date on which
written notice of such failure or breach shall have been given.
Section 8. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Change of Control Transaction" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(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 40%
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 that is not
wholly-owned by the Company, consolidation or sale of 33% or more of the
assets of the Company in one or a series of related transactions, or (iv) the
execution by the Company of an agreement to which the
A-14
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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 Price" means on any particular date (a) the closing sale
price per share of Common Stock on such date on the Nasdaq or on such
Subsequent Market on which the shares of Common Stock are then listed or
quoted, or if there is no such price on such date, then the closing sale
price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the shares of Common Stock are not then listed
or quoted on the Nasdaq or a Subsequent Market, the closing sale price for a
share 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 shares of Common Stock are 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 share 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 $.01
per share, and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the numerator
of which is Stated Value (or Excess Stated Value, as the case may be) 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 Effective Date.
"Effective Date" means the date that the Underlying Shares
Registration Statement 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
or equity equivalent 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.
"Mandatory Redemption Amount" for each share of Preferred Stock
means the sum of (i) the greater of (A) 120% of the Stated Value and (B) the
product of (a) the Closing Price on the Trading Day immediately preceding (x)
the date of the Triggering Event or the Conversion Date, as the case may be,
or (y) the date of payment in full by the Company of the applicable
redemption price, whichever is greater, and (b) the Conversion Ratio
calculated on the date of the Triggering
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Event, or the Conversion Date, as the case may be, and (ii) all other amounts,
costs, expenses and liquidated damages due in respect of such share of Preferred
Stock.
"Optional Redemption Price" shall be sum of (i) 105% of the
Stated Value of the shares of Preferred Stock to be redeemed pursuant to
Section 6 and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such shares of Preferred Stock.
"Original Issue Date" shall mean the date of the first issuance
of any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the Nasdaq or on
such Subsequent Market on which the shares of Common Stock are then listed or
quoted, or if there is no such price on such date, then the closing bid
price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the shares of Common Stock are not then listed
or quoted on the Nasdaq or a Subsequent Market, the closing bid price for a
share 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 shares of Common Stock are 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 share 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.
"Person" means a corporation, an association, a partnership, an
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 as of the Original Issue Date, to which the Company
and the original Holders are parties, as amended, modified or supplemented
from time to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holders are parties, as amended, modified or supplemented from time
to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the shares of Common Stock
are traded on the Nasdaq or on such Subsequent Market on which the shares of
Common Stock are then listed or quoted, or (b) if the shares of Common Stock
are not listed on the Nasdaq or a Subsequent Market, a day on which the
shares of Common Stock are traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (c) if the shares of Common Stock are not
quoted on the OTC Bulletin Board, a day on which the shares of Common Stock
are quoted in the over-the-counter
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market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
that in the event that the shares of Common Stock are 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.
"Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
"Underlying Shares" means, collectively, the shares of Common
Stock into which the shares of Preferred Stock are convertible 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.
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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 6% Series A
Convertible Preferred Stock indicated below, into shares of common stock, par
value $.01 per share (the "Common Stock"), of SeraNova, Inc., a New Jersey
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 owned prior to
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
-----------------------------------------------------
Number of shares of Preferred Stock subsequent to
Conversion
-----------------------------------------------------
Signature
-----------------------------------------------------
Name
-----------------------------------------------------
Address
ACCEPTED AND AGREED:
SeraNova, Inc.
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By:_____________________________________
Name:
Title:
X-00
00
XXXXXXX X
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of September 29, 2000, among SeraNova, Inc., a New Jersey
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:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries, 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 in the State of New York or New Jersey or a
day on which banking institutions in the State of New York or New Jersey are
authorized or required by law or other government actions to close.
"Certificate of Designation" shall have the meaning set forth
in the Purchase Agreement.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par
value per share, or such securities into which that such stock shall hereafter
be reclassified.
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45
"Effectiveness Date" means, (1) with respect to the
Registration Statement required to be filed in respect of the Common Stock
underlying the Shares and Warrants issued at the Closing, the 90th day following
the Closing Date and (2) with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 90th day following the date
that notice of the requirement to file such additional Registration Statement is
provided.
"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 (1) with respect to the Registration
Statement required to be filed in respect of the Shares and Warrants issued at
the Closing, the 45th day following the Closing Date and (2) with respect to any
additional Registration Statements which may be required pursuant to Section
3(c), the 45th day following the date that notice of the requirement to file
such additional Registration Statement is provided.
"Holder" or "Holders" means the holder or holders of record,
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 6% Series A Convertible
Preferred Stock issued or issuable 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 constituting Part I of any
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 a 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.
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46
"Registrable Securities" means the shares of Common Stock
issuable upon conversion in full of the Preferred Stock and exercise in full of
the Warrants, until the end of the Effectiveness Period.
"Registration Statement" means the registration statement
under the Securities Act covering the resale by the Holders of any Registrable
Securities, and any additional registration statements contemplated by Section
3(c), 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 under
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 under
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 under
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.
"Warrants" shall mean the Common Stock purchase warrants
issued to the Purchasers pursuant to the Purchase Agreement.
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47
2. Shelf Registration
(a) On or prior to each Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
resale of all then unregistered Registrable Securities for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-1 or other permissible form and shall contain (except if
otherwise directed by the Holders) the "Plan of Distribution" attached hereto as
Annex A. 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
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) (the "Effectiveness Period").
Notwithstanding the foregoing, the Company shall not be liable to the Holders
for any liquidated damages pursuant to Section 2(c) hereof if the Registration
Statement is not declared effective prior to the 30th day following the
Effectiveness Date.
(b) The initial Registration Statement to be filed hereunder
(as contemplated by clause (1) of the definition of Filing Date and
Effectiveness Date) shall include no less than 3,150,000 shares of Common Stock
which is equal to the sum of: (i) the number of shares of Common Stock issuable
upon conversion in full of the outstanding Preferred Stock, assuming for such
purposes that such shares of Preferred Stock are outstanding for five years,
that all accrued dividends are added to the Stated Value (as defined in the
Certificate of Designation) and that the applicable Conversion Price (as defined
in the Certificate of Designation) is $3.50, and (ii) the number of shares of
Common Stock issuable upon exercise in full of the Warrants, assuming for such
purposes that (1) the Closing Warrants are exercised in full on the Closing Date
and (2) the Redemption Warrants fully vest and are exercisable in full on the
Closing Date.
(c) If (a) a Registration Statement is not filed on or prior
to its Filing Date (if the Company files such Registration Statement without
affording the Holder the opportunity to review and comment on the same as
required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (a)), or (b) the Company fails to file or make with the
Commission an acceleration request in accordance with Rule 461 promulgated under
the Securities Act, within five Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not subject to further review,
or (c) a Registration Statement filed hereunder is not declared effective by the
Commission on or prior to the 30th day following the Effectiveness Date, or (d)
after a Registration Statement is filed with and declared effective by the
Commission, such Registration Statement ceases to be effective as to all
Registrable Securities to which it is required to relate at any time prior to
the expiration of the Effectiveness Period without being succeeded within ten
Business Days by an amendment to such Registration Statement or by a subsequent
Registration Statement filed with and declared effective by the Commission, or
(e) the Common Stock shall be delisted or suspended from trading on the Nasdaq
National Market ("NASDAQ"), the New York Stock Exchange, the American Stock
Exchange or the Nasdaq Smallcap Market (each, a "Subsequent Market") for more
than three
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Trading Days (which need not be consecutive Trading Days), or (f) the conversion
or exercise rights of the Holders pursuant to Certificate of Designation and the
Warrants are suspended for any reason, (any such failure or breach being
referred to as an "Event," and for purposes of clauses (a), (c), (f) the date on
which such Event occurs, or for purposes of clause (b) the date on which such
five Business Day period is exceeded, or for purposes of clause (d) the date
which such ten Business Day-period is exceeded, or for purposes of clause (e)
the date on which such three Trading Day-period is exceeded, being referred to
as "Event Date"), then, on each such Event Date and every monthly anniversary
thereof until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
2.0% of the purchase price paid by such Holder pursuant to the Purchase
Agreement. If the Company fails to pay any liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will pay
interest thereon at a rate of 18% per annum (or such lesser maximum amount that
is permitted to be paid by applicable law) to the Holder, accruing daily from
the date such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The liquidated damages pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event.
(d) For a period not exceeding either (i) 10 consecutive
Trading Days or (ii) an aggregate of 25 Trading Days in any 12 month period, the
Company may suspend the ability of the Holders to make dispositions under a
Registration Statement or Prospectus by providing the Holders with written
notification (a "Blocking Notice") if the Company's board of directors
determines in its good faith judgment that the Company's obligation to ensure
that such Registration Statement and Prospectus contain current and complete
information would require the Company to make a public disclosure regarding a
material non-public transaction, provided, that the Company shall not be
entitled to deliver a Blocking Notice within 10 Trading Days of the expiration
of any Blocking Notice previously delivered. Each Blocking Notice shall contain
a general statement of the reasons for such postponement and an approximation of
the anticipated delay. Notwithstanding anything to the contrary herein, in the
event of a merger of the Company with or into another entity that is not
wholly-owned by the Company and is reportable under Item 2 of Form 8-K under the
Exchange Act, the Company may deliver a Blocking Notice for a period of up to 25
consecutive Trading Days in any 12 month period, in which case, the number of
consecutive Trading Days available to the Company pursuant to clause (ii) of
this Section shall be reduced by such number of Trading Days. Each Holder agrees
by acquisition of the Registrable Securities that, upon receipt of a Blocking
Notice from the Company, such Holder shall not dispose of, sell or offer for
sale the Registrable Securities pursuant to the Registration Statement until
such Holder receives (i) copies of the supplemented or amended Prospectus, or
until counsel for the Company shall have determined that such disclosure is not
required due to subsequent events, (ii) notice in writing from the Company that
the use of the Prospectus may be resumed and (iii) copies of any additional or
supplemental filings that are incorporated by reference to in the Prospectus. In
the event the Company shall provide any Blocking Notice pursuant to this
Section, the Effectiveness Date and the Effectiveness Period shall be extended
for a number of days equal to the number of days during which such Blocking
Notice is in effect.
(e) Each Holder of Registrable Securities agrees to furnish to
the Company with
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its name, number of shares now owned and offered in the Registration Statement,
its address, the name of the natural person who controls the disposition and
investment of the registered securities and changes to the Plan of Distribution.
Without limiting the foregoing, the Company may exclude a Holder's Registrable
securities from any Registration Statement, or suspend the preparation of a
Registration Statement, if such Holder has not furnished to the Company in
writing the information with respect to such Holder and its intended plan of
distribution set forth in the first sentence of this paragraph. However, the
Company shall (i) promptly include in such Registration Statement the
Registrable Securities of any such Holder who subsequently provides such
information, and (ii) file the Registration Statement or an appropriate
amendment thereto on or prior to the date that is ten days after the Company
receives such information. Each Holder agrees to notify the Company as promptly
as practicable of any inaccuracy or change in information previously furnished
by such Holder to the Company and to promptly furnish to the Company any
additional information required to correct and update any previously furnished
information or required so that such Prospectus shall not contain, with respect
to such Holder or the distribution of such Holder's Registrable Securities, 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 not misleading in
light of the circumstances then existing.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Not less than five Business Days prior to the filing of
each 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 and their Special Counsel 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 and
their Special Counsel, 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 Special Counsel 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 and their Special Counsel shall reasonably object,
provided, the Company is notified of such objection no later than 3 Business
Days after the Holders have been so furnished copies of such documents.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period; (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, if required thereby;
(iii) respond as promptly as reasonably possible, and in any event within ten
Business 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
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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.
(c) File additional Registration Statements upon the Company's
receipt of notice from the Holders that the number of Registrable Securities
exceeds 85% of the number of shares of Common Stock then registered for the
account of the Holders in all existing Registration Statements hereunder.
(d) Notify the Holders of Registrable Securities to be sold
and their Special Counsel as promptly as reasonably possible (and, in the case
of (i)(A) below, not less than five Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
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 contemplated hereby cease 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.
(e) Promptly deliver to each Holder and their Special Counsel,
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. Except as otherwise provided in Section 2(d) and Section
6(e) of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
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(f) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders 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 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, that the Company shall not be required to qualify generally to do
business or to qualify as a securities dealer 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.
(g) Cooperate with the Holders 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 Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Holders may request.
(h) 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.
(i) Comply with all applicable rules and regulations of the
Commission.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company 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 applicable
state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Company 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 requested by the Holders )), (ii) printing or photocopying
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing or photocopying prospectuses requested by
the Holders), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) fees and disbursements of Special
Counsel for the Holders in an amount not to exceed $7,500 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.
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5. 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, 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(e). 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 any 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 such Registration
Statement or such Prospectus or 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 pro-
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posed 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(e). 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 Business Days of written notice thereof to the Indemnifying
Party (regardless
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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 promptly 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.
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.
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0. Miscellaneous
(a) 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 outstanding
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.
(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 would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflict 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 that have not been satisfied in
full.
(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) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(e) 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(h),
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.
(f) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the
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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 written notice of such determination and, if within
fifteen 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 unregistered Registrable Securities such holder requests to be
registered. In the case of a registration statement for an underwritten public
offering by the Company (which shall not include a equity line of credit or
similar financing), the right of any Holder to registration pursuant to this
Section 6(f) shall be conditioned upon the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall (together with the Company and other shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter(s) selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 6(f), if the underwriter(s) determine(s) that marketing factors require
limitation of the number of the number of shares of Common Stock to be
underwritten, the underwriter(s) may limit the number of Registrable Securities
to be included in the registration and the underwriting; provided, that (i) all
other selling shareholders participating in such registration and underwriting
shall be limited pro-rata and (ii) the underwriter may not limit the amount of
Registrable Securities included in such registration and underwriting to less
than an amount equal to 10% of the amount of all the shares of Common Stock
included within such registration and underwriting. The Company shall so advise
all Holders which would otherwise be registered and underwritten pursuant
hereto, and the number of Registrable Securities that may be included in the in
the registration and underwriting shall be allocated among all Holders and other
shareholders distributing their securities through such underwriting thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities (as applicable) entitled to inclusion in such
registration held by such Holders at the time of filing of the registration
statement. If any Holder disapproves of the terms of terms of any such
underwriting, he may elect to withdraw therefrom and from the registration by
written notice to the Company.
(g) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 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 6:30 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: SeraNova, Inc.
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57
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx, Xxxxxxx & Miburn
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. 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.
(h) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights hereunder in the manner and to
the Persons as permitted under Sections 4.6 and 3.1(a) of the Purchase
Agreement.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law. 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, or 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
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58
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder is several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder 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 Holder to be
joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
SERANOVA, INC.
By: /s/Xxxx Xxxxx
---------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE OF PURCHASER FOLLOWS]
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STRONG RIVER INVESTMENTS, INC.
By:/s/Xxxxxxx X. Xxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxx
Attorney-in-Fact
Address for Notice:
Strong River Investments, Inc.
c/o Xxxxxxxx-Xxxx Xxxxxx (BVI) Limited
Wickhams Cay I, Xxxxxxxxxx Xxxxx
X.X. Xxx 000
Xxxx Xxxx, Xxxxxxxx, B.V.I.
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: Xxxx X. Xxxxx, Esq. and Xxxxxxx X. Xxxxxxxxx, Esq.
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61
MONTROSE INVESTMENTS LTD.
By: /s/ Xxxxx X'Xxxx
--------------------------------------
Name: Xxxxx X'Xxxx
Title:
Address for Notice:
Montrose Investments Ltd.
c/o HBK Investments L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx Xxxxx and Xxx Xxxxxx
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: Xxxx X. Xxxxx, Esq.
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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 Company will receive no part of the proceeds from the
sale of the Shares by the Selling Stockholders. 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 or special offering in accordance with the
rules of the applicable exchange;
- privately negotiated transactions;
- short sales;
- sales by broker-dealers of 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. The Selling Stockholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary course brokerage arrangements, nor is there an underwriter or
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63
coordinating broker acting in connection with the proposed sale of shares by the
Selling Stockholders.
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.
If any Selling Stockholder notifies the Company that the Selling
Stockholder has entered into any material arrangement with a broker-dealer for
the sale of shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, the
Company will file a supplement to this prospectus, if required, pursuant to Rule
424(b) under the Securities Act, disclosing:
- the name of the participating broker-dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commission paid or discounts or concessions allowed to the broker-
dealer(s), where applicable;
- whether the broker-dealer(s) conducted any investigations to verify the
information in or incorporated by reference in this prospectus; and
- other material facts of the transaction.
Also, if a Selling Stockholder notifies the Company that a donee,
pledgee, transferee, or other successor-in-interest of the shares intends to
sell more than 500 shares, the Company will file an appropriate supplement to
this prospectus.
X-00
00
XXXXXXX X-0
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
SERANOVA, INC.
WARRANT
Warrant No.[ ] Dated: September [ ], 2000
SeraNova, Inc., a New Jersey corporation (the "Company"), hereby
certifies that, for value received, [ ] or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company up
to a total of [150,000] shares of common stock, $.01 par value per share (the
"Common Stock"), of the Company (each such share, a "Warrant Share" and all such
shares, the "Warrant Shares") at the Exercise Price set forth in Section 3, at
any time and from time to time from and after the date hereof and through and
including September [ ], 2005 (the "Expiration Date"), and subject to the
following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
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65
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at its address for notice set forth in Section 12. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company at its address for notice set forth in
Section 12 for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 6:30 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant.
(b) Upon delivery of a duly completed and signed Form of
Election to Purchase attached hereto (and the grid attached hereto as Annex A)
duly completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in the manner
provided hereunder, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business days
after the Date of Exercise (as defined herein)) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either in
the event that a registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant. The Company
shall, upon request of the Holder, if available, use its best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation
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66
performing similar functions. To effect an exercise hereunder, the Holder shall
not be required to physically surrender this Warrant to the Company unless all
the Warrant Shares have been exercised. Exercises hereunder shall have the
effect of lowering the number of Warrant Shares in an amount equal to the
applicable exercise, which shall be evidenced by entries set forth in the
Exercise Schedule. The Holder and the Company shall maintain records showing the
number of Warrant Shares exercised and the date of such exercises . In the event
of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following exercise of a portion of this Warrant,
the number of shares issuable upon exercise of this Warrant may be less than the
amount stated on the face hereof.
A "Date of Exercise" means the date on which the Company shall
have received (i) the Form of Election to Purchase completed and duly signed,
and (ii) payment of the Exercise Price for the number of Warrant Shares so
indicated by the Holder to be purchased.
(c) The "Exercise Price" for the Warrant Shares equals the
lesser of $7.00 (subject to equitable adjustment for stock splits, reverse stock
splits, and similar events) and the average of the Per Share Market Values for
the five Trading Days immediately preceding the date of the exercise, provided,
that, for the first 90 days following the Closing Date (as defined in the
Purchase Agreement), the Exercise Price may not be less than $7.00 (subject to
equitable adjustment for stock splits, reverse stock splits, and similar
events). The Exercise Price shall be subject to adjustment in accordance with
Section 8.
4. Piggyback Registration Rights. This Warrant is subject to
the piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until all of the
Holder's Warrant Shares have been sold in accordance with an effective
registration statement or upon the Expiration Date. The Company will pay all
registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
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67
7. Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for
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68
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(d) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
this Warrant is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities, including securities issued to the Holder
as of the date hereof, or debt that are convertible into or exchangeable for
shares of Common Stock ("Common Stock Equivalents"), entitling any Person to
acquire shares of Common Stock at a price per share less than the greater of the
Closing Price on such date of issuance and the Exercise 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, be entitled to
receive shares of Common Stock at a price less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then, at the sole option of the Holder, the Exercise Price shall be adjusted to
mirror the conversion, exchange or purchase price for such Common Stock
Equivalents (including any reset provisions thereof), 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 shares of Common Stock or Common Stock Equivalents
are issued. Notwithstanding to the contrary anything herein, this Section shall
not apply to: (i) issuance of options and warrants to employees, officers and
directors of the Company, and the issuance of Common Stock upon exercise of such
options and warrants granted under any stock option plan hereinafter duly
adopted by the Company, (ii) issuance of Common Stock or Common Stock
Equivalents as part payment of the purchase price in (A) the acquisition of
assets or a business by the Company or (B) in connection with the acquisition of
goods or a license by the Company and (iii) as royalty payments in connection
with or under a firm underwritten primary offering of the Company's stock in
which the full purchase price is paid upon the first closing thereof (which
shall not include equity lines of credit or any similar financing structure).
(e) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for 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 the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled or (B) in the case of a merger or consolidation, require the Company to
pay to the Holder, in cash, 120% of the Black Scholes value of this Warrant. The
terms of any such merger, sale or
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69
consolidation shall include such terms so as continue to give the Holder 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.
(f) For the purposes of this Section 8, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(h) Whenever the Exercise Price is adjusted pursuant to
Section 8(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(i) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
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70
(iv) 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, or any compulsory share
exchange whereby the Common Stock is
converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of
the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 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 shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately
available funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be
issued to the Holder.
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
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A = the average of the closing sale prices
of the Common Stock for the five (5) trading
days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon such exercise and held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of an exercise hereunder, unless the exercise at issue would
result in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular exercise hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount hereunder,
the Company shall notify the Holder of this fact and shall honor the exercise
for the maximum portion of this Warrant permitted to be exercised on such Date
of Exercise in accordance with the periods described herein and, at the option
of the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to 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 exercise this Warrant to the extent such
exercise 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 promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon such exercise and held by such Holder after application of this Section.
Since the Holder will not be obligated to report to the Company the number of
shares of Common Stock it may hold at the time of an exercise hereunder, unless
the exercise at issue would result in the issuance of shares of Common Stock
in excess of 9.999% of the then outstanding shares of Common
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72
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular exercise hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to 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 Company 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 3,492,001.9 shares of Common Stock (which equals 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately preceding
the date hereof) upon exercise of this Warrant, the Redeemable Warrants (as
defined in the purchase agreement dated the date hereof pursuant to which this
Warrant was issued) or conversion of the Preferred Stock (as defined in the
purchase agreement dated the date hereof pursuant to which this Warrant was
issued), in any case, at a price per share that is less than the Closing Price
on the Trading Day immediately preceding the date hereof (such number of shares,
the "Issuable Maximum"). Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the number of
shares of Common Stock issued and sold to such Holder on the Date hereof by (y)
the number of shares of Common Stock issued and sold by the Company on the Date
hereof. If any Holder shall no longer hold Warrants then such Holder's remaining
portion of the Issuable Maximum shall be allocated pro-rata among the remaining
Holders. If on any Date of Exercise: (A) the Company Stock is listed for trading
on the Nasdaq or the Nasdaq SmallCap Market, (B) the Exercise Price then in
effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon exercise in full of this Warrant, the Redemption Warrants
and conversion in full of the Preferred Stock, together with any shares of
Common Stock previously issued upon exercise of this Warrant, the Closing
Warrants and conversion of the Series A Stock, would equal or exceed the
Issuable Maximum, and (C) the Company shall not have previously obtained the
vote of shareholders, if any, as may be required by the applicable rules and
regulations of the Nasdaq Stock Market to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum pursuant to the terms hereof (the
"Shareholder Approval"), then the Company shall issue to the Holder a number of
shares of Common Stock equal to the Issuable Maximum and, with respect to the
shares whose issuance would result in an issuance of shares of Common Stock in
excess of the Issuable Maximum, (the "Excess Warrant Shares"), the Holder shall
have the option to require the Company to either (1) use its best efforts to
obtain the Shareholder Approval applicable to such issuance as soon as possible,
but in any event no later than 60 days after such request (such 60th day, the
"Target Date") or (2) pay to the Holder, within one (1)
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73
Trading Day from the request therefor, an amount in cash equal to the product of
(x) the Excess Warrant Shares multiplied by (y) the closing sales price of the
Common Stock on (a) the Target Date or (b) the Date of Exercise giving rise to
the obligation to seek Shareholder Approval, whichever is greater (the "Cash
Payment"). In the event the Holder has elected to require the Company to seek
the Shareholder Approval pursuant to clause (1) of the immediately preceding
sentence and the Company does not obtain the Shareholder Approval on or prior to
the Target Date, then, on the Target Date, the Company shall pay the Cash
Payment to the Holder. If the Company fails to pay the Cash Payment 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
Holder, accruing daily from the date payable until such amount, plus all such
interest thereon, is paid in full. The Company and the Holder understand and
agree that shares of Common Stock issued upon exercise of this Warrant and then
held by the Holder or an affiliate thereof may not cast votes or be deemed
outstanding for purposes of any vote to obtain the Shareholder Approval.
11. Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.
12. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxx Xxxxxx, 00000, facsimile: (000) 000-0000,
attention Chief Financial Officer, or (ii) if to the Holder, to the Holder at
the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
13. Warrant Agent. The Company shall serve as warrant agent
under this Warrant. Upon thirty days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice
D-1-10
74
of its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder's last address as shown on the Warrant
Register.
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) The corporate laws of the State of New Jersey shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
SERANOVA, INC.
By:
-------------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
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76
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To SeraNova, Inc.:
The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of SeraNova, Inc. (the "Common
Stock") and , if such Holder is not utilizing the cashless exercise provisions
set forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
-------------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
Dated: , Name of Holder:
------------ -----
(Print)
------------------------------
(By:)
--------------------------------
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
D-1-13
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FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of SeraNova, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of SeraNova, Inc. with full power of
substitution in the premises.
Dated:
---------------, ----
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
--------------------------
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Annex A
Date Number of Warrant Shares Number of Warrant Shares Number of Warrant
Available to be Exercised Exercised Shares Remaining to
be Exercised
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
X-0-00
00
XXXXXXX X-0
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
SERANOVA, INC.
REDEMPTION WARRANT
Warrant No.[ ] Dated: September __, 2000
SeraNova, Inc., a New Jersey corporation (the "Company"), hereby
certifies that, for value received, [ ] or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company
[160,000] shares of common stock, $.01 par value per share (the "Common Stock"),
of the Company (each such share, a "Warrant Share" and all such shares, the
"Warrant Shares") at the Exercise Price set forth in Section 3, at any time and
from time to time from and after the date on which the Company delivers an
Optional Redemption Notice under the Certificate of Designation (as defined in
the Purchase Agreement) issued to the original Holder, in accordance with the
Certificate of Designation filed by the Company on the date hereof with respect
to the Company's 6% Series A Convertible Preferred Stock (the "Series A Stock")
issued to the original Holder, and through and including the fifth year
following the vesting of this Warrant anniversary of the date of the Company
delivers such Optional Redemption Notice (the "Expiration Date"), and subject to
the following terms and conditions:
1. Registration of Warrant. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to time.
The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, and the Company shall not be affected
by notice to the contrary.
D-2-1
80
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Transfer
Agent or to the Company at its address for notice set forth in Section 12. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company at its address for notice set forth in
Section 12 for one or more New Warrants, evidencing in the aggregate the right
to purchase the number of Warrant Shares which may then be purchased hereunder.
Any such New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date the Company delivers an Optional Redemption
Notice with respect to the A Series Stock issued to the original Holder under
and including the Expiration Date. At 6:30 P.M., New York City time on the
earlier to occur of (i) Expiration Date, or (ii) the date on which the Series A
Stock issued to the original Holder is converted to Common Stock or otherwise
redeemed or retired in any manner prior to delivery of an Optional Redemption
Notice, the portion of this Warrant not exercised prior thereto shall be and
become void and of no value. Prior to the Expiration Date, the Company may not
call or otherwise redeem this Warrant.
(b) Upon delivery of a duly completed and signed Form of
Election to Purchase attached hereto (and the grid attached hereto as Annex A)
duly completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise Price multiplied by the number of
Warrant Shares that the Holder intends to purchase hereunder, in the manner
provided hereunder, all as specified by the Holder in the Form of Election to
Purchase, the Company shall promptly (but in no event later than 3 business days
after the Date of Exercise (as defined herein)) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends except (i) either in
the event that a registration statement covering the resale of the Warrant
Shares and naming the Holder as a selling stockholder thereunder is not then
effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) if this Warrant shall have been
issued pursuant to a written agreement between the original Holder and the
Company, as required by such agreement. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become
D-2-2
81
holder of record of such Warrant Shares as of the Date of Exercise of this
Warrant. The Company shall, upon request of the Holder, if available, use its
best efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions. To effect an exercise hereunder, the Holder shall
not be required to physically surrender this Warrant to the Company unless all
the Warrant Shares have been exercised. Exercises hereunder shall have the
effect of lowering the number of Warrant Shares in an amount equal to the
applicable exercise, which shall be evidenced by entries set forth in the
Exercise Schedule. The Holder and the Company shall maintain records showing the
number of Warrant Shares exercised and the date of such exercises . In the event
of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder and any assignee,
by acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following exercise of a portion of this Warrant,
the number of shares issuable upon exercise of this Warrant may be less than the
amount stated on the face hereof.
A "Date of Exercise" means the date on which the Company shall
have received (i) the Form of Election to Purchase completed and duly signed,
and (ii) payment of the Exercise Price for the number of Warrant Shares so
indicated by the Holder to be purchased.
(c) The "Exercise Price" for the Warrant Shares equals the
lesser of $7.00 (subject to equitable adjustment for stock splits, reverse stock
splits, and similar events) and the Closing Price on the Trading Day immediately
preceding the date of the exercise, provided, that, for the first 90 days
following the Closing Date (as defined in the Purchase Agreement), the Exercise
Price may not be less than $7.00 (subject to equitable adjustment for stock
splits, reverse stock splits, and similar events). The Exercise Price shall be
subject to adjustment in accordance with Section 8.
4. Piggyback Registration Rights. This Warrant is subject to
the piggyback registration rights granted under the Registration Rights
Agreement and such piggyback registration rights shall continue until all of the
Holder's Warrant Shares have been sold in accordance with an effective
registration statement or upon the Expiration Date. The Company will pay all
registration expenses in connection therewith.
5. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
D-2-3
82
7. Reservation of Warrant Shares. The Company covenants that
it will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other actual
contingent purchase rights of persons other than the Holder (taking into account
the adjustments and restrictions of Section 8). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 8.
(a) 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, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or share exchange, and the Holder
shall be entitled upon such event to receive such amount of securities or
property equal to the amount of Warrant Shares such Holder would have been
entitled to had such Holder exercised this Warrant immediately prior to such
reclassification or share exchange. The terms of any such reclassification or
share exchange shall include such terms so as to continue to give to the Holder
the right to receive the securities or property set forth in this Section 8(b)
upon any exercise following any such reclassification or share exchange.
(b) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's independent certified public accountants that regularly examines
the financial statements of the Company (an "Appraiser").
(c) If the Company or any subsidiary thereof, as applicable
with respect to Common Stock Equivalents (as defined below), at any time while
this Warrant is outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities, including securities issued to the Holder
as of the date hereof, or debt that are convertible into or exchangeable for
shares of Common Stock ("Common Stock Equivalents"), entitling any Person to
acquire shares
D-2-4
83
of Common Stock at a price per share less than the greater of the Closing Price
on such date of issuance and the Exercise 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, be entitled to receive shares of Common
Stock at a price less than the Exercise Price, such issuance shall be deemed to
have occurred for less than the Exercise Price), then, at the sole option of the
Holder, the Exercise Price shall be adjusted to mirror the conversion, exchange
or purchase price for such Common Stock Equivalents (including any reset
provisions thereof), 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 shares of
Common Stock or Common Stock Equivalents are issued. Notwithstanding to the
contrary anything herein, this Section shall not apply to: (i) issuance of
options and warrants to employees, officers and directors of the Company, and
the issuance of Common Stock upon exercise of such options and warrants granted
under any stock option plan hereinafter duly adopted by the Company, (ii)
issuance of Common Stock or Common Stock Equivalents as part payment of the
purchase price in (A) the acquisition of assets or a business by the Company or
(B) in connection with the acquisition of goods or a license by the Company and
(iii) as royalty payments in connection with or under a firm underwritten
primary offering of the Company's stock in which the full purchase price is paid
upon the first closing thereof (which shall not include equity lines of credit
or any similar financing structure).
(d) In case of any (1) merger or consolidation of the Company
with or into another Person, or (2) sale by the Company of more than one-half of
the assets of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to (A) exercise this
Warrant for 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 the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled or (B) in the case of a merger or consolidation, require the Company to
pay to the Holder, in cash, 120% of the Black Scholes value of this Warrant. The
terms of any such merger, sale or consolidation shall include such terms so as
continue to give the Holder 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.
For the purposes of this Warrant, "Closing Price" shall mean on any
particular date (a) the closing sale price per share of Common Stock on such
date on the Nasdaq or on such Subsequent Market on which the shares of Common
Stock are then listed or quoted, or if there is no such price on such date, then
the closing sale price on the Nasdaq or on such Subsequent Market on the date
nearest preceding such date, or (b) if the shares of Common Stock are not then
listed or quoted on the Nasdaq or a Subsequent Market, the closing sale price
for a share 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 shares of Common Stock are not then reported by the
National Quotation
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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
share of Common Stock as determined by an Appraiser selected in good faith by
the Holders of a majority of the Warrants.
(e) For the purposes of this Section 8, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to
Section 8(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which shall
be a nationally recognized accounting firm), in which case the adjustment shall
be equal to the average of the adjustments recommended by each of the Appraiser
and such appraiser. The Holder shall promptly mail or cause to be mailed to the
Company, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
adjustment shall become effective immediately after the record date mentioned
above.
(h) If:
(i) the Company shall declare a dividend (or
any other distribution) on its Common Stock;
or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(iii) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe
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85
for or purchase any shares of capital stock
of any class or of any rights; or
(iv) the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock,
any consolidation or merger to which the
Company is a party, any sale or transfer of
all or substantially all of the assets of
the Company, or any compulsory share
exchange whereby the Common Stock is
converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of
the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 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 shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately
available funds; or
(b) Cashless Exercise. The Holder may surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be
issued to the Holder.
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86
Y = the number of Warrant Shares with
respect to which this Warrant is being
exercised.
A = the average of the closing sale prices
of the Common Stock for the five (5) trading
days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
10. Certain Exercise Restrictions.
(a) A Holder may not exercise this Warrant to the extent such
exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
promulgated thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon such exercise and held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of an exercise hereunder, unless the exercise at issue would
result in the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular exercise hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of this Warrant is exercisable shall
be the responsibility and obligation of the Holder. If the Holder has delivered
a Form of Election to Purchase for a number of Warrant Shares that, without
regard to any other shares that the Holder or its affiliates may beneficially
own, would result in the issuance in excess of the permitted amount hereunder,
the Company shall notify the Holder of this fact and shall honor the exercise
for the maximum portion of this Warrant permitted to be exercised on such Date
of Exercise in accordance with the periods described herein and, at the option
of the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to 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 exercise this Warrant to the extent such
exercise 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 promulgated thereunder) in excess of 9.999% of the
then issued and outstanding shares of Common Stock, including shares issuable
upon such exercise and held by such Holder after application of this Section.
Since the
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87
Holder will not be obligated to report to the Company the number of shares of
Common Stock it may hold at the time of an exercise hereunder, unless the
exercise at issue would result in the issuance of shares of Common Stock in
excess of 9.999% of the then outstanding shares of Common Stock without regard
to any other shares which may be beneficially owned by the Holder or an
affiliate thereof, the Holder shall have the authority and obligation to
determine whether the restriction contained in this Section will limit any
particular exercise hereunder and to the extent that the Holder determines that
the limitation contained in this Section applies, the determination of which
portion of this Warrant is exercisable shall be the responsibility and
obligation of the Holder. If the Holder has delivered a Form of Election to
Purchase for a number of Warrant Shares that, without regard to any other shares
that the Holder or its affiliates may beneficially own, would result in the
issuance in excess of the permitted amount hereunder, the Company shall notify
the Holder of this fact and shall honor the exercise for the maximum portion of
this Warrant permitted to be exercised on such Date of Exercise in accordance
with the periods described herein and, at the option of the Holder, either keep
the portion of the Warrant tendered for exercise in excess of the permitted
amount hereunder for future exercises or return such excess portion of the
Warrant to 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 Company 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 3,492,001.9 shares of Common Stock (which equals 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately preceding
the date hereof) upon exercise of this Warrant, the Closing Warrants (as defined
in the Purchase Agreement or conversion of the Series A Stock, in any case, at a
price per share that is less than the Closing Price on the Trading Day
immediately preceding the date hereof (such number of shares, the "Issuable
Maximum"). Each Holder shall be entitled to a portion of the Issuable Maximum
equal to the quotient obtained by dividing (x) the number of shares of Common
Stock issued and sold to such Holder on the Date hereof by (y) the number of
shares of Common Stock issued and sold by the Company on the Date hereof. If any
Holder shall no longer hold Warrants then such Holder's remaining portion of the
Issuable Maximum shall be allocated pro-rata among the remaining Holders. If on
any Date of Exercise: (A) the Company Stock is listed for trading on the Nasdaq
or the Nasdaq SmallCap Market, (B) the Exercise Price then in effect is such
that the aggregate number of shares of Common Stock that would then be issuable
upon exercise in full of this Warrant, the Closing Warrants and conversion in
full of the Series A Stock, together with any shares of Common Stock previously
issued upon exercise of this Warrant, the Closing Warrants and conversion of the
Series A Stock, would equal or exceed the Issuable Maximum, and (C) the Company
shall not have previously obtained the vote of shareholders, if any, as may be
required by the applicable rules and regulations of the Nasdaq Stock Market to
approve the issuance of shares of Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "Shareholder Approval"), then the Company
shall issue to the Holder a number of shares of Common Stock equal to the
Issuable Maximum and, with respect to the shares whose issuance would result in
an issuance of shares of Common Stock in excess of the Issuable Maximum, (the
"Excess Warrant Shares"), the Holder shall have the option to require the
Company to either (1) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as possible, but in any event no later than
D-2-9
88
60 days after such request (such 60th day, the "Target Date") or (2) pay to the
Holder, within one (1) Trading Day from the request therefor, an amount in cash
equal to the product of (x) the Excess Warrant Shares multiplied by (y) the
closing sales price of the Common Stock on (a) the Target Date or (b) the Date
of Exercise giving rise to the obligation to seek Shareholder Approval,
whichever is greater (the "Cash Payment"). In the event the Holder has elected
to require the Company to seek the Shareholder Approval pursuant to clause (1)
of the immediately preceding sentence and the Company does not obtain the
Shareholder Approval on or prior to the Target Date, then, on the Target Date,
the Company shall pay the Cash Payment to the Holder. If the Company fails to
pay the Cash Payment 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 Holder, accruing daily from the date payable until such
amount, plus all such interest thereon, is paid in full. The Company and the
Holder understand and agree that shares of Common Stock issued upon exercise of
this Warrant and then held by the Holder or an affiliate thereof may not cast
votes or be deemed outstanding for purposes of any vote to obtain the
Shareholder Approval.
11. Fractional Shares. The Company shall not be required to
issue or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of this Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.
12. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 6:30 p.m. (New York City time) on any date and earlier than
11:59 p.m. (New York City time) on such date, (iii) the business day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The addresses for such communications shall be: (i) if to the Company, to
000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxx Xxxxxx, 00000, facsimile: (000) 000-0000,
attention Chief Financial Officer, or (ii) if to the Holder, to the Holder at
the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.
13. Warrant Agent. The Company shall serve as warrant agent
under this Warrant. Upon thirty days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under
D-2-10
89
this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder's last address as shown
on the Warrant Register.
14. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) The corporate laws of the State of New Jersey shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. The Company and the Holder hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, or that such suit,
action or proceeding is improper. Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by receiving a copy thereof sent
to the Company at the address in effect for notices to it under this instrument
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed by its authorized officer as of the date first indicated above.
SERANOVA, INC.
By:
--------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
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91
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To SeraNova, Inc.:
The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of SeraNova, Inc. (the "Common
Stock") and , if such Holder is not utilizing the cashless exercise provisions
set forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
Dated: , Name of Holder:
------------ -----
(Print)
--------------------------------
(By:)
----------------------------------
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
D-2-13
92
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of SeraNova, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of SeraNova, Inc. with full power of
substitution in the premises.
Dated:
---------------, ----
---------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
--------------------------
D-2-14
93
Annex A
Date Number of Warrant Shares Number of Warrant Shares Number of Warrant
Available to be Exercised Exercised Shares Remaining to
be Exercised
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