EXHIBIT 10.25
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STOCK PURCHASE AGREEMENT
The undersigned, Heartsoft, Inc., a Delaware corporation (the
"Company"), agrees with Hi-Tel Group, Inc., a Florida corporation (the
"Purchaser"), as follows:
1. ISSUANCE AND SALE OF SHARES.
1.1 Sale of Shares. Subject to the terms and conditions hereof and in
reliance on the respective representations and warranties of the parties herein,
the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees
to purchase from the Company, 775,000 shares of Series A Convertible Preferred
Stock of the Company (the "Shares"), $0.01 par value, at the purchase price of
$1.00 per share, all shares upon issuance and delivery to Purchaser to be duly
authorized, validly issued, fully paid and nonassessable.
1.2 Terms of Shares. The Shares shall have the rights, powers,
qualifications, restrictions and preferences provided for in the form of the
Certificate of Designation of the Series A Convertible Preferred Shares
("Certificate of Designation") attached hereto as Exhibit A.
2. GRANT OF WARRANTS. The Purchaser shall receive warrants to purchase
200,000 shares of common stock of the Company upon the terms and conditions set
forth in the Common Share Purchase Warrant by and between the Company and
Purchaser attached hereto as Exhibit B.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as disclosed in
disclosure schedules attached hereto, the Company represents and warrants to the
Purchaser as of the date of this Agreement and on the Purchase Date (as
hereinafter defined) that:
3.1 Delivery of Company Documents. The Company has previously delivered
to the Purchaser true and complete copies of the following documents ("Company
Documents"):
(i) Annual Report on Form 10-KSB dated November 18, 1999,
containing audited financial statements for the fiscal year ending March 31,
1999 ("Audited Financial Statements");
(ii) Quarterly Reports on Form 10-QSB dated November 18, 1999,
containing unaudited interim financial statements for the periods ending June
30, 1999, and September 30, 1999 ("Unaudited Interim Financial Statements");
(iii) The Company's news releases issued during the period
April 1, 1999, through January 31, 2000.
As of their respective dates, such Company Documents did not contain any untrue
statement of 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. The Audited Financial Statements of the Company included
in the Company Documents have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as
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may be indicated therein or in the notes thereto) and fairly present the
financial position of the Company as of the dates thereof and the results of
operations and changes in financial position for the periods then ended subject.
3.2 Organization and Good Standing. The Company and its subsidiary are
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of organization, with full power and authority to own
their properties and conduct their businesses.
3.3 Capitalization. The authorized capital stock of the Company
consists of 5,000,000 shares of $0.01 par value preferred stock, and 30,000,000
shares of $0.0005 par value common stock, of which 9,157,214 shares were issued
and outstanding at December 31, 1999.
3.4 Authorization and No Violation. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary corporate action of the Company. Neither
the execution and delivery of the Agreement nor the consummation of any
transaction provided for herein will (i) result in the breach of any of the
terms or conditions of, or constitute a default under, an agreement, indenture
or instrument to which the Company or its subsidiary is a party or otherwise
bound or affected, or any provision of the Company's certificate of
incorporation or bylaws; (ii) violate any law, or any rule or regulation of any
administrative agency or governmental body or any order, writ, injunction of any
court, administrative agency or governmental body, having jurisdiction over the
Company and its subsidiary or (iii) result in the creation of any interest,
lien, charge or encumbrance in or upon any property of the Company or its
subsidiary.
3.5 Legal Proceedings. Other than set forth in the Company Documents,
there is no suit or actions pending or, to the Company's best knowledge and
belief, threatened suits or actions against the Company, its subsidiary, or any
of the properties, assets, or business of the Company or its subsidiary. Other
than set forth in the Company Documents, there is no outstanding order, writ,
injunction or decree of any court, administrative agency or governmental body or
arbitrational tribunal against or affecting the Company, its subsidiary, or any
of the capital stock, properties, assets, or business of the Company or its
subsidiary that might have a material adverse effect upon the consolidated
financial condition of the Company.
3.6 Tax Matters. The Company and its subsidiary have duly and timely
filed all tax returns required to be filed by them, and have paid all taxes
shown to be due and payable on all such returns, all assessments notices that
have been received by them and all other taxes, governmental charges, duties,
penalties, interest and fines due and payable by them on or before the date of
this Agreement. There are no agreements, waivers or other arrangements providing
for an extension of time with respect to the filing of the tax returns by the
Company or its subsidiary, or the payment by, or assessment against, the Company
or its subsidiary of any tax, governmental charge, duty or deficiency. There are
no suits, actions, claims, investigations, inquiries or proceedings threatened
or now pending against the Company or its subsidiary in respect to taxes,
governmental charges, duties or assessments or any claims for additional taxes,
governmental charges, duties or assessments asserted by any such authority. The
reserves made for taxes and governmental charges on the financial statements are
sufficient for the payment of
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all unpaid taxes and governmental charges payable by the Company and its
subsidiary attributable to all periods ending on or before the date of the
financial statements. The Company and its subsidiary have withheld or collected
on each payment made to each of its employees the amount of all taxes
(including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and state and local wage income taxes) required to be
withheld or collected therefrom and have paid the same to the proper tax
receiving officer.
3.7 Debt. Except to the extent reflected or reserved against in the
financial statements, or disclosed elsewhere herein or in the Company Documents,
the Company and its subsidiary as of such date (and as of this date) had (and
have) no debt, liability or obligation of any nature, whether accrued, absolute,
contingent or other, arising out of transactions entered into, or any state of
facts existing, prior to such dates, respectively, which have (or would have) a
material adverse effect on the consolidated financial condition of the Company.
There is no valid basis for the assertion against the Company or its subsidiary
of any such debt, liability or obligation, which might have a material adverse
effect upon the consolidated financial condition of the Company, except to the
extent reflected or reserved against in the financial statements or disclosed
elsewhere herein or in the Company Documents.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Company that:
4.1 Organization and Good Standing. Purchaser is duly organized and
validly existing and in good standing as a corporation under the laws of the
State of Florida.
4.2 Authorization. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action of the Purchaser.
This Agreement has been duly executed and delivered and is a valid and binding
agreement of the Purchaser.
4.3 Acquiring Shares for Own Account. The Purchaser was not organized
directly or indirectly for the specific purpose of acquiring the Shares, and is
acquiring such Shares for its own accounts and not for the personal accounts of
its shareholders or partners.
4.4 Sole Party in Interest. The Purchaser is the sole party in interest
agreeing to purchase the Shares subscribed for herein, and is not acquiring said
Shares with a view to their resale or distribution.
4.5 Limited Transferability. The Purchaser is aware that the issuance
of the Shares is not currently registered under the Securities Act of 1933 (the
"Act") and its ability to sell or dispose of the Shares will be restricted. The
Purchaser is subscribing for Shares with full knowledge of such limitation. The
Purchaser acknowledges that it is aware that the Shares may not be resold or
offered by it for sale in the absence of: (i) an effective registration
statement under the Act covering the Shares; or (ii) an opinion of counsel
satisfactory to the Company that registration under the Act is not necessary.
The Purchaser consents to the placing of a restrictive legend on the Shares
indicating that the Shares have not been registered under the Act, and the
Purchaser understands that the Company will notify its transfer agents that the
Shares are restricted.
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5. PURCHASER'S ACKNOWLEDGMENTS. Purchaser acknowledges that:
5.1 Receipt of Company Documents. Purchaser has been provided and has
read the Company Documents described in Section 3.1; and
5.2 Opportunities to Ask Questions. Purchaser has been provided
opportunities to ask questions of representatives of the Company regarding the
risks and merits of its purchase hereunder and to obtain any additional
information necessary to verify the accuracy of the information contained in the
above-mentioned documents and to obtain non-confidential public information
about the Company, its operations and prospects from the time of such documents
through the Purchase Date (as hereinafter defined). Upon the basis of Purchaser
reading the above mentioned documents and Purchaser's discussion with
representatives of the Company, Purchaser possesses sufficient information to
understand the risk and merits associated with its purchase hereunder and to
verify the accuracy of information received; provided, however, that the
foregoing shall not in any way waive, prejudice or otherwise adversely affect
Purchaser's right to rely on the Company's representations and warranties
contained herein or otherwise given in connection with the purchase of the
Shares.
6. DELIVERY AND PAYMENT OF SHARES. On March 1, 2000 ("Purchase Date"),
Purchaser shall deliver to the Company wire funds payable to the Company in the
amount of $775,000, representing payment in full for the Shares. Thereupon, the
Company shall issue and deliver in accordance with Purchaser's instructions the
Shares.
7. REGISTRATION UNDER SECURITIES ACT OF 1933.
7.1 Filing of Registration Statement. The Company will cause to be
prepared and filed a registration statement relating to the Conversion Shares
(as defined in Section 7.6) and the common stock underlying the Warrants (as
described in Section 2) and cause such registration statement to become
effective no later than August 1, 2000. The Company will cause the Registration
Statement to remain effective for 90 days. If, during the period when such
registration statement is effective, any event occurs as a result of which the
prospectus included in such registration statement would include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, not misleading, or it shall be necessary to amend
or supplement such prospectus to comply with applicable law, the Company will
forthwith notify Purchaser and/or Transferee (as defined in Section 7.8) thereof
and on request of Purchaser and/or Transferees (i) prepare and file under the
Act such amendments and supplements as may be necessary to keep available a
prospectus covering such registered stock meeting the requirements of the Act;
and (ii) furnish to Purchaser and/or Transferees such numbers of copies of the
registration statement and prospectus as amended or supplemented as may
reasonably be requested from time to time. The registration statement filed
pursuant to this Section 7.1 shall be prepared in accordance with the
requirements of a form for registration promulgated by the Commission under the
Act that shall be both permissible by its terms for use in connection with the
method of distribution contemplated by the Purchaser and/or Transferees,
appropriate to such method of distribution. The Company shall pay for the cost
of the registration statement deemed to have been filed under this Section 7.1
(excluding
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underwriter discounts and commissions, if any, and the fees and expenses of
Purchaser's and/or Transferees' counsel).
7.2 Penalty Upon Failure to Register by August 1, 2000. The Company
agrees to file the registration statement described in Section 7.1 in a timely
manner so that the effective date for such registration shall be no later than
August 1, 2000. In the event that the registration described in Section 7.1
shall not become effective on or before August 1, 2000, the Company shall agree
to pay to the Purchaser $100,000 per month in common stock of the Company using
the following formula: $100,000/(0.60 x the Closing Bid Price), prorated during
the month such registration becomes effective; provided, however, that the
Company shall have no liability to the Purchaser if the failure to file such
registration statement on or before August 1, 2000 is caused, in whole or in
part, due to a breach of the obligations described in Section 7.10. The penalty
described under this Section 7.2 will only be effective until March 1, 2001; at
such time, penalties will no longer accrue or be payable by the Company under
this Section. The "Closing Bid Price" will be calculated as an average of the
closing bid price, as reported by the Nasdaq Stock Market, Inc., for the 20
consecutive trading days preceding the 1st day of each month a penalty is
payable pursuant to this Section 7.2.
7.3 Blue Sky Qualification. The Company shall use its best efforts to
qualify the Conversion Shares covered by any registration statement for offer
and sale under the securities or "Blue Sky" laws of such States of the United
States of America as the Purchaser and/or Transferees may reasonably request.
7.4 Affiliate Rights. The Purchaser and/or Transferees may include in
any registration statement covering the offering of Conversion Shares hereunder,
any other shares of stock of the Company owned by the Purchaser upon the same
conditions and terms covering the Conversion Shares, if, in the opinion of
counsel satisfactory to the Company, the offering and sale of such other shares
would at the time be restricted or limited because the Purchaser may be deemed
to be an affiliate (as that term is defined in rules and regulations of the
Commission under the Act) of the Company.
7.5 Obligation of Company Following Registration. Following the
Company's registration of the Conversion Shares held by Purchaser under the Act,
the Company agrees:
(i) As soon as practicable after the effective date of the
registration statement relating to such Conversion Shares, and in the case of a
registration for sale on a national securities exchange or through brokers in
the over-the-counter market for up to 90 days after such effective date if by
law required for such delivery, to furnish Purchaser and such Transferees with
such numbers of copies of the registration statement and the prospectus relating
to the Conversion Shares covered thereby as such Purchaser and such Transferees
may from time to time reasonably request;
(ii) To notify Purchaser and any Transferees as soon as
practicable after it receives notification thereof, of the time when a
registration statement has become effective or any supplement to any prospectus
forming part of such registration statement has been filed;
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(iii) To notify Purchaser and any Transferees promptly of any
request by the Commission for the amendment or supplementation of a registration
statement or prospectus, or for additional information;
(iv) To prepare and file with the Commission promptly upon the
request of Purchaser or any Transferee, any amendment of, or supplement to, a
registration statement or prospectus relating to information respecting
Purchaser or Transferee that, in the opinion of counsel to Purchaser, may be
necessary or advisable in connection with the distribution of the registered
Conversion Shares;
(v) Not to file any amendment of, or supplement to, any such
registration statement or prospectus relating to information respecting
Purchaser or any Transferee itself to which Purchaser or such Transferee
reasonably objects in writing within seven (7) days after having been furnished
with a copy thereof; and
(vi) To advise Purchaser and Transferees promptly in the event
that it receives notice or obtains knowledge of the issuance of a stop order by
the Commission suspending the effectiveness of any such registration statement
or of the initiation or threat of any proceeding for that purpose, and to
promptly use its best efforts to prevent the issuance of any stop order and to
obtain the withdrawal of any stop order in the event that one is issued.
7.6 Definition of "Conversion Shares." For the purpose of this
Agreement, the term "Conversion Shares" shall be deemed to include any and all
shares of common stock, par value $.0005 per share, of the Company issuable upon
conversion of the Shares and any and all securities issued with respect to such
Conversion Shares, including but not limited to, shares issued as a result of
any share dividend, share split, reclassification or exchange.
7.7 Definition of "Registration" or "Register." For purposes of this
Agreement the terms "registration" or "register" shall include only a filing
with the Commission of a registration statement under the Act on Form SB-2 or
any equivalent thereof.
7.8 Definition of "Transferee." The rights granted to Purchaser
pursuant to the terms of this Agreement may be transferred to and exercised by
any Hi-Tel Group, Inc. Related Entity. "Hi-Tel Group, Inc. Related Entity" shall
mean any entity controlled by, or owned 50% or more by Hi-Tel Group, Inc. The
term "Transferee" herein shall include all Hi-Tel Group, Inc. Related Entities.
7.9 Indemnification in Connection with Registration. The Company agrees
that it will:
(i) Indemnify and hold harmless Purchaser, each Transferee,
any of their officers, directors, and each person who controls any such person
within the meaning of the Act in connection with any registration statement
filed pursuant to this Agreement, against any losses, claims, damages or
liabilities, joint or several, to which any such person may become subject,
whether under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof): (A) are caused by any untrue
statement or alleged untrue
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statement of any material fact contained in any registration statement under
which any of the Conversion Shares were, pursuant to any of the provisions of
this Agreement, registered under the Act, any prospectus contained therein, any
amendment thereof or supplement thereto or any documents incorporated by
reference into any of the foregoing; or (B) are caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading;
(ii) That it will reimburse Purchaser, each such Transferee,
their officers, directors, and each such controlling person, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action arising under clause
(i) of this Section 7.9; and
(iii) The Company will not be liable under clauses (i) or (ii)
of this Section 7.9 to the extent that any such loss, claim, damage, expense or
liability arises out of, or is based upon, an untrue statement or alleged
omission so made in conformity with written information furnished by Purchaser
or any such Transferee seeking indemnification specifically for use in the
preparation of such registration statement or prospectus contained therein or
amendment thereof or supplement thereto; or the failure of Purchaser or
Transferees to fulfill their obligations to the Company under clause (i) of
Section 7.10.
7.10 Obligations of Purchaser and/or Transferees. Purchaser agrees (and
each Transferee shall agree):
(i) The Purchaser or any Transferee shall furnish to the
Company such information as may be reasonably requested by the Company in
connection with the registration of the Conversion Shares and will cooperate to
cause the registration statement to become effective as aforesaid;
(ii) To indemnify and hold harmless the Company, each of its
directors and each of its officers who have signed any registration statement,
and each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (or actions in respect
thereof): (A) caused by any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which any of the
Conversion Shares were, pursuant to any of the provisions of this Agreement,
registered under the Act, any prospectus contained in such registration
statement, or any amendment thereof or supplement thereto; or (B) caused by any
omission or alleged omission to state a material fact required to be stated
therein, or necessary to make the statement contained therein not misleading; in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission, or alleged omission, was so made in
reliance upon, and in conformity with, written information furnished by
Purchaser or any such Transferee, as the case may be, specifically for use in
the preparation of such registration statement or prospectus contained therein
or amendment thereof or supplement thereto, or is attributable to Purchaser's or
Transferee's failure to carry out its obligations under clause (i) of this
Section 7.10; and
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(iii) That it will reimburse any legal and other expenses
reasonably incurred by the Company or any such director, officer, or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action.
7.11 Rights of Indemnifying Party. Promptly after receipt by an
indemnified party pursuant to the provisions of Sections 7.9 or 7.10 of notice
of the commencement of any action, such indemnified party will notify the
indemnifying party if a claim thereto is to be made against the indemnifying
party of the commencement thereof; to the extent that the omission to notify the
indemnifying party shall cause material prejudice to such indemnifying party in
connection with defending against any such action it shall be relieved from
liability that it may otherwise have to any indemnified party under the
provisions of this Agreement. In the event that any such action is brought
against any indemnified party, and it duly notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party, similarly notified, to assume the defense of such action, with counsel
satisfactory to such indemnified party; and after notice from the indemnifying
party to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense of such action
other than reasonable costs of investigation.
7.12 Equitable Relief. The parties agree that the remedy at law for
breach of the provisions of this Section 7 will be inadequate and that each
party shall be entitled, in addition to all other remedies to which they may be
entitled, to temporary or permanent injunctive or mandatory relief or specific
performance without the necessity of proving damage.
8. LISTING. The Company will use its best efforts to list the
Conversion Shares on any exchange that the Company's shares might trade, if
necessary.
9. LEGEND ON SHARE CERTIFICATES. A legend will be placed on the share
certificates representing the Shares to the following effect:
"THE SHARES REPRESENTED BY THE CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (`ACT') AND MAY
NOT BE SOLD UNLESS A REGISTRATION STATEMENT UNDER THE ACT
SHALL BE IN EFFECT WITH RESPECT THERETO AND THE SELLER SHALL
HAVE COMPLIED WITH THE ACT AND ALL APPLICABLE RULES AND
REGULATIONS THEREUNDER, OR THE SELLER SHALL HAVE OBTAINED AND
DELIVERED TO HEARTSOFT, INC. AN OPINION OF COUNSEL
SATISFACTORY TO HEARTSOFT, INC. TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED."
Appropriate "stop-transfer" instructions will be given to the Company's transfer
agents with respect to the Shares.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
actually received or when sent by cable, telegraph, or telex (and confirmed by
first class mail, postage prepaid) to the addresses set forth below or to such
other address or addresses the parties may designate by similar notice.
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If to the Company: Heartsoft, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx Xxxxx
If to the Purchaser: Hi-Tel Group, Inc.
0000 Xxxx Xxxxxxxxxx Xxxx., #000
Xx. Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx
11. MISCELLANEOUS.
11.1 Survival of Representations. All representations and warranties
contained herein or made in writing by the Company and the Purchaser in
connection with the transactions contemplated hereby except any representation
or warranty as to which compliance may have been appropriately waived, shall
survive the execution and delivery of this Agreement.
11.2 Expenses and Attorney Fees. Each party bears the cost of expenses
and attorney fees in connection herewith.
11.3 Partial Invalidity. If any term, covenant or condition of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
11.4 Law Governing. This Agreement shall be construed and interpreted
in accordance with and governed and enforced in all respects by the laws of the
State of Delaware.
11.5 Headings. The section and subsection headings throughout this
Agreement are for convenience and reference only, and the words contained
therein shall not be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Agreement.
11.6 Counterparts. This Agreement may be executed in any number of
counterparts, each signed by different persons and all of said counterparts
together shall constitute one and the same instrument, and such instrument shall
be deemed to have been made, executed and delivered on the date first
hereinabove written, irrespective of the time or times when the same or any
counterparts thereof actually may have been executed and delivered a counterpart
thereof to the Company and the Purchaser.
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11.7 Entire Agreement. This Agreement and the exhibits contain the
entire agreement of the parties hereto and may not be modified, altered or
changed in any manner whatsoever, except by a written agreement signed by the
parties hereto.
EXECUTED, as of this 1st day of March, 2000.
HEARTSOFT INC.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------
Xxxxxxxx X. Xxxxx
Chief Executive Officer, President
and Chairman of the Board
"Company"
HI-TEL GROUP, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------
Xxxxxx Xxxxxx
President
"Purchaser"
711353
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SCHEDULE 3.1
The Company's Annual Report on Form 10-KSB dated November 18, 1999
inadvertently indicated that the Company's Common Stock is registered pursuant
to Section 12(g) of the Securities Exchange Act of 1934. The Purchaser is
advised that the Company's Common Stock has not been so registered.
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EXHIBIT A
---------
CERTIFICATE OF DESIGNATION
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
($0.01 PAR VALUE)
OF
HEARTSOFT, INC.
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PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
-------------------------------------
The undersigned, the Chairman of the Board, President and Chief
Executive Officer of Heartsoft, Inc. does hereby certify that the following
resolution was duly adopted on March 1, 2000 by the Board of Directors (the
"Board") of Heartsoft, Inc., a Delaware corporation (hereinafter called the
"Company"), acting pursuant to the provisions of Section 141(c) and 151(a) of
the General Corporation Law of the State of Delaware and Article IV of the
Certificate of Incorporation of the Company, as amended ("Certificate of
Incorporation").
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board by the provisions of the Certificate of Incorporation of the Company,
the issuance of a series of the Preferred Stock, par value $0.01 per share, of
the Company, which shall consist of 775,000 shares of the 5,000,000 shares of
preferred stock that the Company now has authority to issue, be, and the same
hereby is, authorized, and the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of the shares of such series are fixed as
follows:
SECTION 1. DESIGNATION AND AMOUNTS
-----------------------
The series is designated as "Series A Convertible Preferred Stock"
("Preferred Stock").
The series shall initially consist of 775,000 shares of Preferred
Stock. The Board may, at any time and from time to time, decrease the number of
shares of Preferred Stock in the series as long as the decrease does not reduce
the number of shares below the number of shares then
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issued and outstanding or issuable upon exercise of any outstanding warrants to
purchase Preferred Stock ("Warrants").
SECTION 2. RANKING
-------
The Preferred Stock ranks, as to liquidation, (a) junior to any series
of preferred stock, the terms of which specifically provide that the series
ranks senior to the Preferred Stock ("Senior Stock"), (b) on a parity with any
series of preferred stock, the terms of which specifically provide that the
series ranks on a parity with the Preferred Stock ("Parity Stock") and (c)
senior to any series of preferred stock, the terms of which do not specifically
provide that the series ranks senior to, or on a parity with, the Preferred
Stock ("Junior Stock") and the shares of the common stock of the Company, par
value $0.0005 ("Common Stock").
SECTION 3. DIVIDENDS
---------
The holders of Preferred Stock are not entitled to any dividends.
SECTION 4. LIQUIDATION PREFERENCE
----------------------
4.1 Distribution Amount. If there is a voluntary or involuntary
liquidation of the Company, subject to the rights of any Senior Stock or Parity
Stock outstanding, the holders of Preferred Stock are entitled to receive out of
the assets of the Company available for distribution to stockholders of the
Company, $1.00 per share before any distribution is made to holders of any
Junior Stock or the Common Stock.
If, upon the voluntary or involuntary liquidation of the Company, the
amounts payable with respect to the Preferred Stock are not paid in full, the
holders of Preferred Stock, together with the holders of any Parity Stock, will
share ratably in the distribution of assets of the Company in proportion to the
full respective preferential rights to which they are entitled.
After payment of the full amount to which they are entitled, the
holders of Preferred Stock will not be entitled to any further participation in
any distribution of the assets of the Company.
4.2 Consolidation or Merger. Neither a consolidation, merger or other
business combination of the Company with or into another person nor a sale of
all or substantially all of the assets of the Company constitutes a voluntary or
involuntary liquidation within the meaning of this Section 4.
4.3 Noncash Distributions. If, under this Section 4, any of the assets
of the Company are to be distributed other than in cash, the Board of Directors
of the Company shall promptly engage an independent competent appraiser to
determine the fair market value of the assets to be distributed to the holders
of Preferred Stock. The fair market value of the assets as determined by the
appraiser shall be conclusive for purposes of determining the amount distributed
to the holders of Preferred Stock.
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SECTION 5. VOTING RIGHTS
-------------
5.1 Voting Rights. A holder of Preferred Stock does not have any voting
rights, except as required by law or as expressly provided in this Section 5.
5.2 Certain Required Votes. So long as any Preferred Stock remains
outstanding, the Company shall not, without the affirmative vote of the holders
of at least 66-2/3% of the then outstanding Preferred Stock, voting separately
as a class, (a) amend or repeal any provision of the Certificate of
Incorporation or the Bylaws of the Company so as to adversely affect the
relative rights, preferences, qualifications, restrictions or limitations of the
Preferred Stock, (b) authorize or issue, or increase the authorized number of
shares of, any Senior Stock or (c) effect any reclassification of the Preferred
Stock.
SECTION 6. REDEMPTION
----------
The Company may not redeem the Preferred Stock.
SECTION 7. CONVERSION RIGHTS
-----------------
7.1 Optional Conversion. At any time, the initial holder may, at the
option of such initial holder, convert any number of shares of the Preferred
Stock into shares of Common Stock using the following formula: [$775,000/(0.6 x
Closing Bid Price)] x [Number of Shares of Preferred Stock Converted/775,000];
provided, however, the last day on which such initial holder can convert any of
the Preferred Stock into Common Stock shall be the earlier of: (a) ninety (90)
days after the day the Company's registration statement relating to the Common
Stock underlying the Preferred Stock becomes effective, or (b) March 1, 2002.
The "Closing Bid Price" will be calculated as an average of the closing bid
price, as reported by the Nasdaq Stock Market, Inc., for the 20 consecutive
trading days preceding the conversion of the Preferred Stock.
In the event that the initial holder transfers all or a portion of such
initial holder's Preferred Stock to another person, then the formula set forth
in Section 7.1 shall be adjusted to reflect pro rata interests of and shall be
applicable to all such holders of the Preferred Stock.
In the case of an optional conversion pursuant to Section 7.1, the
shares of Preferred Stock shall be deemed to have been converted and the shares
of Common Stock shall be deemed to have been issued on the date the Preferred
Stock is properly surrendered pursuant to Section 7.3.
7.2 Automatic Conversion. If, during the optional conversion period,
any holder elects not to convert the Preferred Stock under Section 7.1, the
Preferred Stock shall automatically convert on the 90th day following the day
the Company's registration statement relating to the Common Stock underlying the
Preferred Stock becomes effective, or, if no such registration statement becomes
effective,
14
the Preferred Stock shall automatically convert on march 1, 2002 in accordance
with the formula set forth in Section 7.1.
From and after the Trigger Date, the Preferred Stock will be deemed to
be no longer outstanding and the rights of the holders of Preferred Stock shall
be limited to the right to receive shares of Common Stock issuable upon
conversion and the right to receive any accumulated but unpaid dividends on the
Preferred Stock from the last dividend payment to the Trigger Date. From and
after the Trigger Date, the certificate representing the Preferred Stock will be
deemed to represent only such rights. The Company shall give prompt notice of
the occurrence of the Trigger Date to all holders of outstanding Preferred
Stock. Until certificates representing the Preferred Stock have been surrendered
as required hereby, a holder of Preferred Stock shall not be entitled to receive
any dividends that may be subsequently payable on the shares of Common Stock and
may not exercise any voting rights with respect to the shares of Common Stock
issuable upon conversion of the Preferred Stock.
7.3 Mechanics of Conversion. A holder shall surrender the certificate
representing the converted Preferred Stock at the office of the Company or of
any transfer agent for the Common Stock (a), in the case of a conversion
pursuant to Section 7.1, with a notice to the Company stating that the holder
elects to convert the Preferred Stock and containing the name and address of the
person in whose name the Common Stock is to be issued and (b), in the case of a
conversion pursuant to Section 7.2, with a notice containing the name and
address of the person in whose name the Common Stock is to be issued.
A holder shall not be entitled to receive any certificate representing
the Common Stock upon the conversion of the Preferred Stock unless the holder
complies with this Section 7.3.
The Company shall, as soon as practicable after the holder surrenders
the certificate representing the converted Preferred Stock in compliance with
this Section 7.3, issue and deliver at the office at which the converted
Preferred Stock is surrendered, to the holder of shares, or to the person stated
by the holder, a certificate for the Common Stock into which the Preferred Stock
has been converted.
Upon conversion of only a portion of the Preferred Stock represented by
a certificate surrendered for conversion, the Company shall issue and deliver to
the holder a new certificate representing the unconverted Preferred Stock.
7.4 Adjustments Upon Capital Reorganization. If there shall be any
consolidation or merger to which the Company is a party, other than a
consolidation or merger of which the Company is the continuing corporation and
that does not result in any reclassification of, or change in, the outstanding
shares of Common Stock, or any sale or conveyance of the property of the Company
as an entirety or substantially as an entirety, or any recapitalization of the
Company (any such event being called a "Capital Reorganization"), then,
effective upon the effective date of such Capital Reorganization, the Preferred
Stock shall no longer convert into Common Stock but instead shall have the
rights of the kind that the holder of the Preferred Stock would have owned or
have been entitled to receive pursuant to such Capital Reorganization, if
15
the holder of the Preferred Stock had converted such Preferred Stock into Common
Stock immediately prior to the effective date of such Capital Reorganization.
7.5 Fractional Securities. No fractional shares of Common Stock will be
issued upon the conversion of the Preferred Stock and in lieu thereof, the
Company will pay the converting holder in cash the fair market value of the
fractional share based on the Closing Bid Price of the fractional share on the
trading day immediately preceding the date of conversion.
7.6 Transfer Costs. The Company shall pay any and all transfer taxes
and other governmental charges on the issuance or delivery of the Common Stock
upon any conversion of the Preferred Stock. The Company shall not, however, be
required to pay any tax that may be payable in connection with any transfer
involving the issue and delivery of stock in a name other than that of the
initial holder of the shares converted and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of any such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
7.7 Certificate as to Adjustments. Upon any adjustment pursuant to this
Section 7, the Company shall promptly file with the Secretary of the Company and
the transfer agent for the Preferred Stock a certificate setting forth, in
reasonable detail, the adjustment and the facts upon which such adjustment was
based.
7.8 Common Reserved. The Company shall reserve and keep available out
of its authorized and unissued Common Stock such number of shares as shall from
time to time be sufficient to permit conversion of the Preferred Stock.
7.9 Status of Shares. All Common Stock issued upon any conversion of
the Preferred Stock will be validly issued, fully paid and nonassessable.
SECTION 8. SINKING FUND
------------
There is no sinking fund established in connection with the Preferred
Stock.
SECTION 9. NOTICES
-------
Any notice or other communication required or permitted pursuant hereto
to be given to, or made on, the Company shall be given or made by first-class or
registered mail, postage prepaid, addressed as follows:
Heartsoft, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxxx Xxxxx
16
or to such other address as the Company may specify in a notice sent to all
registered holders of Preferred Stock in accordance with this Section 9.
Any notice or other communication required or permitted pursuant hereto
to be given to, or made on, any registered holder of Preferred Stock shall be
given or made by first-class or registered mail, postage prepaid, to the last
address of the registered holder as it appears on the stock transfer records
maintained by, or on behalf of, the Company.
IN WITNESS WHEREOF, the undersigned officers have signed this
Certificate this 1st day of March 2000.
HEARTSOFT, INC.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------
Xxxxxxxx X. Xxxxx
Chairman of the Board, President
and Chief Executive Officer
ATTEST
/s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
Secretary
17
EXHIBIT B
---------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER THE SECURITIES ACT OR (II) AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND QUALIFICATION IS
NOT REQUIRED.
No. HTG-1 March 1, 2000
HEARTSOFT, INC.
COMMON SHARE PURCHASE WARRANT
Warrant to Purchase Two Hundred Thousand (200,000) Common Shares
Expiring February 1, 2005
THIS CERTIFIES THAT, Hi-Tel Group, Inc., a Florida corporation (herein referred
to as the Warrant Holder), in consideration for entering into that certain Stock
Purchase Agreement dated as of March 1, 2000 ("Stock Purchase Agreement"), by
and between the Warrant Holder and Heartsoft, Inc., a Delaware corporation (the
"Company"), or its successors or assigns, at any time following March 1, 2000,
on any Business Day on or prior to 5:00 p.m., Pacific Time, on February 1, 2005
("Expiration Date") is entitled to subscribe for and purchase from the Company,
Two Hundred Thousand (200,000) Common Shares (as defined below) at a price per
Common Share equal to the Exercise Price (as defined below); provided that the
number of Common Shares issuable upon any exercise of this Warrant shall be
adjusted and readjusted from time to time in accordance with Section 5.
1. Certain Definitions.
-------------------
The following terms, as used herein, have the following
meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with such Person.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Closing Bid Price", as of any date of determination, means
the average of the closing bid prices, as reported by the Nasdaq Stock Market,
Inc., for the 20 consecutive trading days preceding such date.
"Commission" means the Securities and Exchange Commission.
18
"Common Share(s)" means the Company's currently authorized
class of Common Stock, par value $0.0005.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Exercise Price" means a price equal to the lesser of (1)
sixty percent (60%) of the Closing Bid Price on the date of the applicable
exercise or (2) $3.00.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such successor Federal statute.
"Warrant Share(s)" means the Two Hundred Thousand (200,000)
Common Shares issued or issuable upon exercise of this Warrant, as adjusted from
time to time pursuant to Section 5.
2. Vesting and Exercise of Warrant
-------------------------------
(a) The Warrant and the Warrant Shares shall immediately vest
upon the execution of this Agreement.
(b) The Warrant Holder may exercise this Warrant by delivering
to the Company a duly executed notice (a "Notice of Exercise") in the form of
Annex A attached hereto, at the election of the Warrant Holder, in which the
Warrant Holder shall receive from the Company the number of Warrant Shares as to
which this Warrant is being exercised and shall pay to the Company the Exercise
Price for each such Warrant Share by wire transfer of immediately available
funds to the account of the Company, in an amount equal to the product of: (i)
the Exercise Price times (ii) the number of Warrant Shares as to which the
Warrant is being exercised.
(c) As soon as practicable, but not later than five (5)
Business Days after the Company shall have received such Notice of Exercise and
payment, the Company shall execute and deliver or cause to be executed and
delivered, in accordance with such Notice of Exercise, a certificate or
certificates representing the number of Common Shares specified in such Notice
of Exercise, issued in the name of the Warrant Holder. This Warrant shall be
deemed to have been exercised and such share certificate or certificates shall
be deemed to have been issued, and such Warrant Holder shall be deemed for all
purposes to have become a holder of record of Common
19
Shares, as of the date that such Notice of Exercise and payment shall have been
received by the Company.
(d) The Warrant Holder shall surrender this Warrant to the
Company when it delivers the Notice of Exercise, and in the event of a partial
exercise of the Warrant, the Company shall execute and deliver to the Warrant
Holder, at the time the Company delivers the share certificate or certificates
issued pursuant to such Notice of Exercise, a new Warrant for the unexercised
portion of the Warrant, but in all other respects identical to this Warrant.
(e) The Company shall pay all expenses, taxes and other
charges payable in connection with the preparation, issuance and delivery of
certificates for the Warrant Shares and any new Warrants, except that if the
certificates for the Warrant Shares or the new Warrants are to be registered in
a name or names other than the name of the Warrant Holder, funds sufficient to
pay all transfer taxes payable as a result of such transfer shall be paid by the
Warrant Holder at the time of its delivery of the Notice of Exercise or promptly
upon receipt of a written request by the Company for payment.
No fractional Common Shares will be issued in connection with any
exercise of this Warrant, and any fractional Common Unit (resulting from any
adjustment pursuant to Section 5 or otherwise) in the aggregate number of Common
Shares being purchased upon any exercise of this Warrant shall be eliminated.
3. Investment Representation.
-------------------------
(a) By accepting the Warrant, the Warrant Holder represents
that it is acquiring the Warrant for its own account for investment purposes and
not with the view to sell or distribute, and that the Warrant Holder will not
offer, sell or otherwise dispose of the Warrant or the Warrant Shares except
under circumstances as will not result in a violation of applicable laws,
including, without limitation, Federal and state securities laws.
(b) The Warrant Holder has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Company, and it is able to bear the economic risk
of the investment in the Company and, at the present time, the Warrant Holder
could afford a complete loss of its investment. The Warrant Holder recognizes
that its investment in the Company involves substantial risks, including a risk
of total loss of its investment. Except as expressly provided in the Stock
Purchase Agreement, the Warrant Holder acknowledges that the Company has not
made any representations or warranties with respect to its business, condition
(financial or otherwise) or prospects, and the Warrant Holder has not relied on
the Company for any information or advice with respect to the Warrant Holders
investment.
20
4. Validity of Warrant and Issuance of Common Shares
-------------------------------------------------
The Company represents and warrants that this Warrant has been
duly authorized and is validly issued.
The Company further represents and warrants that on the date
hereof it has duly authorized and reserved, and the Company hereby agrees that
it will at all times until the Expiration Date have duly authorized and
reserved, such number of Common Shares as will be sufficient to permit the
exercise in full of the Warrant, and that all such Common Shares are and will be
duly authorized and, when issued upon exercise of the Warrant, will be validly
issued, fully paid and nonassessable, and free and clear of all security
interests, claims, liens, equities and other encumbrances.
5. Adjustment Provisions.
---------------------
The number of Warrant Shares that may be purchased upon any
exercise of the Warrant, shall be subject to change or adjustment as follows:
(a) Common Unit Reorganization. If the Company shall subdivide
its outstanding Common Shares into a greater number of shares, by way of share
split, share dividend or otherwise, or consolidate its outstanding Common Shares
into a smaller number of shares (any such event being herein called a "Common
Share Reorganization"), then (i) clause (2) in the definition of Exercise Price
shall be adjusted, effective immediately after the effective date of such Common
Unit Reorganization, by multiplying by a fraction, the numerator of which shall
be the number of Common Units outstanding on such effective date before giving
effect to such Common Unit Reorganization and the denominator of which shall be
the number of Common Units outstanding after giving effect to such Common Unit
Reorganization, and (ii) the number of Common Shares subject to purchase upon
exercise of this Warrant shall be adjusted, effective at such time, to a number
determined by multiplying the number of Common Shares subject to purchase
immediately before such Common Share Reorganization by a fraction, the numerator
of which shall be the number of shares outstanding after giving effect to such
Common Share Reorganization and the denominator of which shall be the number of
Common Shares outstanding immediately before giving effect to such Common Share
Reorganization.
(b) Capital Reorganization. If there shall be any
consolidation or merger to which the Company is a party, other than a
consolidation or a merger of which the Company is the continuing corporation and
that does not result in any reclassification of, or change (other than a Common
Share Reorganization) in, outstanding Common Shares, or any sale or conveyance
of the property of the Company as an entirety or substantially as an entirety,
or any recapitalization of the Company (any such event being called a "Capital
Reorganization"), then, effective upon the effective date of such Capital
Reorganization, the Warrant Holder shall no longer have the right to purchase
Common Shares, but shall have instead the right to purchase, upon exercise of
this Warrant, the kind and amount of Common Shares and other securities and
property (including cash) which the Warrant Holder would have owned or have been
entitled to receive pursuant to such Capital Reorganization, if the Warrant had
been exercised immediately prior to the effective date of such Capital
Reorganization.
21
(c) Adjustment Rules.
(i) Any adjustments pursuant to this Section 5 shall
be made successively whenever any event referred to herein shall occur, except
that, notwithstanding any other provision of this Section 5, no adjustment shall
be made to the number of Warrant Shares to be delivered to the Warrant Holder
(or to the Exercise Price) if such adjustment represents less than one-percent
(1%) of the number of Warrant Shares previously required to be so delivered, but
any lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to one-percent (1%) or more of the number of
Warrant Shares to be so delivered.
(ii) If the Company shall take a record of the
holders of its Common Shares for any purpose referred to in this Section 5, then
(x) such record date shall be deemed to be the date of the issuance, sale,
distribution or grant in question and (y) if the Company shall legally abandon
such action prior to effecting such action, no adjustment shall be made pursuant
to this Section 5 in respect of such action.
(d) Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Section 5, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all Common Shares which the Warrant Holder is entitled to
receive upon exercise of this Warrant.
6. Registration of Warrant and Warrant Shares.
-------------------------------------------
(a) The Warrant and Warrant Shares Have Not Been Registered.
Neither the Warrant nor the Warrant Shares have been registered with the
Commission under the Securities Act or qualified for sale pursuant to any state
Blue Sky Law, and may not be sold or transferred without such registration or
qualification, or an opinion of counsel that such a transfer would be exempt
from such registration or qualification. Any such opinion of counsel must be in
form and substance satisfactory to the Company and its counsel and shall recite
the pertinent circumstances surrounding the proposed transfer and the basis for
exemptions. No rights shall be hereby granted which are in violation of
applicable laws, including, without limitation, Federal or state securities laws
or regulations.
(b) Filing of Registration Statement for Warrant Shares.
(i) Filing of Registration Statement. The Company
will cause to be prepared and filed a registration statement
relating to the Warrant Shares and cause such registration
statement to become effective no later than August 1, 2000.
The Company will cause such registration statement to remain
effective for 90 days. If, during the period when such
registration statement is effective, any event occurs as a
result of which the prospectus included in such registration
statement would include an untrue statement of a material fact
or omit to state a
22
material fact necessary in order to make the statements made,
not misleading, or it shall be necessary to amend or
supplement such prospectus to comply with applicable law, the
Company will forthwith notify Warrant Holder thereof and on
request of the Warrant Holder (A) prepare and file under the
Securities Act such amendments and supplements as may be
necessary to keep available a prospectus covering such
registered stock meeting the requirements of the Securities
Act; and (B) furnish to Warrant Holder such numbers of copies
of the registration statement and prospectus as amended or
supplemented as may reasonably be requested from time to time.
The registration statement filed pursuant to this Section
shall be prepared in accordance with the requirements of a
form for registration promulgated by the Commission under the
Securities Act that shall be both permissible by its terms for
use in connection with the method of distribution contemplated
by the Warrant Holder, appropriate to such method of
distribution. The Company shall pay for the cost of the
registration statement deemed to have been filed under this
Section 6(b)(i) (excluding underwriter discounts and
commissions, if any, and the fees and expenses of Warrant
Holder's counsel).
(ii) Blue Sky Qualification. The Company shall use
its best efforts to qualify the Warrant Shares covered by any
registration statement for offer and sale under the securities
or "Blue Sky" laws of such States of the United States of
America as the Warrant Holder may reasonably request.
(iii) Affiliate Rights. The Warrant Holder may
include in any registration statement covering the offering of
Warrant Shares hereunder, any other shares of stock of the
Company owned by the Warrant Holder upon the same conditions
and terms covering the Warrant Shares, if, in the opinion of
counsel satisfactory to the Company, the offering and sale of
such other shares would at the time be restricted or limited
because the Warrant Holder may be deemed to be an affiliate
(as that term is defined in rules and regulations of the
Commission under the Securities Act) of the Company.
(iv) Obligation of Company Following Registration.
Following the Company's registration of the Warrant Shares
held by Warrant Holder under the Securities Act, the Company
agrees:
A. As soon as practicable after the
effective date of the registration statement relating
to such Warrant Shares, and in the case of a
registration for sale on a national securities
exchange or through brokers in the over-the-counter
market for up to 90 days after such effective date if
by law required for such delivery, to furnish Warrant
Holder with such numbers of copies of the
registration statement and the prospectus relating to
the Warrant Shares covered thereby as such Warrant
Holder may from time to time reasonably request;
B. To notify the Warrant Holder as soon as
practicable after it receives notification thereof,
of the time when a registration statement has
23
become effective or any supplement to any prospectus
forming part of such registration statement has been
filed;
C. To notify the Warrant Holder promptly of
any request by the Commission for the amendment or
supplementation of a registration statement or
prospectus, or for additional information;
D. To prepare and file with the Commission
promptly upon the request of the Warrant Holder, any
amendment of, or supplement to, a registration
statement or prospectus relating to information
respecting Warrant Holder that, in the opinion of
counsel to Warrant Holder, may be necessary or
advisable in connection with the distribution of the
registered Warrant Shares;
E. Not to file any amendment of, or
supplement to, any such registration statement or
prospectus relating to information respecting Warrant
Holder itself to which Warrant Holder reasonably
objects in writing within seven (7) days after having
been furnished with a copy thereof; and
F. To advise Warrant Holder promptly in the
event that it receives notice or obtains knowledge of
the issuance of a stop order by the Commission
suspending the effectiveness of any such registration
statement or of the initiation or threat of any
proceeding for that purpose, and to promptly use its
best efforts to prevent the issuance of any stop
order and to obtain the withdrawal of any stop order
in the event that one is issued.
(v) Definition of "Registration" or "Register." For
purposes of this Agreement the terms "registration" or
"register" shall include only a filing with the Commission of
a registration statement under the Securities Act on Form SB-2
or any equivalent thereof.
(vi) Indemnification in Connection with Registration.
The Company agrees that it will:
A. Indemnify and hold harmless the Warrant
Holder, any of its officers, directors, and each
person who controls any such person within the
meaning of the Securities Act in connection with any
registration statement filed pursuant to this
Agreement, against any losses, claims, damages or
liabilities, joint or several, to which any such
person may become subject, whether under the
Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect
thereof) are caused by any untrue statement or
alleged untrue statement of any material fact
contained in any registration statement under which
any of the Warrant Shares were, pursuant to any of
the provisions of this
24
Agreement, registered under the Securities Act, any
prospectus contained therein, any amendment thereof
or supplement thereto or any documents incorporated
by reference into any of the foregoing or are caused
by any omission or alleged omission to state therein
a material fact required to be stated therein or
necessary to make the statements therein not
misleading;
B. That it will reimburse the Warrant
Holder, its officers, directors, and each such
controlling person, for any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such loss, claim,
damage, liability or action arising under clause A
under this Section 6(b)(vi).
C. The Company will not be liable under
clauses A or B of this Section 6(b)(vi) to the extent
that any such loss, claim, damage, expense or
liability arises out of, or is based upon, an untrue
statement or alleged omission so made in conformity
with written information furnished by Warrant Holder
seeking indemnification specifically for use in the
preparation of such registration statement or
prospectus contained therein or amendment thereof or
supplement thereto; or the failure of the Warrant
Holder to fulfill its obligations to the Company
under clause A of Section 6(b)(vii).
(vii) Obligations of Warrant Holder. Warrant Holder
agrees:
A. The Warrant Holder shall furnish to the
Company such information as may be reasonably
requested by the Company in connection with the
registration of the Warrant Shares and will cooperate
to cause the registration statement to become
effective as aforesaid;
B. To indemnify and hold harmless the
Company, each of its directors and each of its
officers who have signed any registration statement,
and each person, if any, who controls the Company
within the meaning of the Act, against any losses,
claims, damages or liabilities (or actions in respect
thereof) caused by any untrue statement or alleged
untrue statement of any material fact contained in
any registration statement under which any of the
Warrant Shares were, pursuant to any of the
provisions of this Agreement, registered under the
Act, any prospectus contained in such registration
statement, or any amendment thereof or supplement
thereto or caused by any omission or alleged omission
to state a material fact required to be stated
therein, or necessary to make the statement contained
therein not misleading; in each case to the extent,
but only to the extent, that such untrue statement or
alleged untrue statement or omission, or alleged
omission, was so made in reliance upon, and in
conformity with, written information furnished by the
Warrant Holder, as the case may be, specifically for
use in the preparation of such registration statement
or prospectus contained therein or amendment thereof
or
25
supplement thereto, or is attributable to Warrant
Holder's failure to carry out its obligations under
clause A of this Section 6(b)(vii); and
C. That it will reimburse any legal and
other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in
connection with investigating or defending any such
loss, claim, damage, liability or action.
(viii) Rights of Indemnifying Party. Promptly after
receipt by an indemnified party pursuant to the provisions of
Sections 6(b)(vi) or 6(b)(vii) of notice of the commencement
of any action, such indemnified party will notify the
indemnifying party if a claim thereto is to be made against
the indemnifying party of the commencement thereof; to the
extent that the omission to notify the indemnifying party
shall cause material prejudice to such indemnifying party in
connection with defending against any such action it shall be
relieved from liability that it may otherwise have to any
indemnified party under the provisions of this Agreement. In
the event that any such action is brought against any
indemnified party, and it duly notifies the indemnifying party
of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party, similarly
notified, to assume the defense of such action, with counsel
satisfactory to such indemnified party; and after notice from
the indemnifying party to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified
party in connection with the defense of such action other than
reasonable costs of investigation.
(ix) Equitable Relief. The parties agree that the
remedy at law for breach of the provisions of this Section 6
will be inadequate and that the non-breathing party shall be
entitled, in addition to all other remedies to which they may
be entitled, to temporary or permanent injunctive or mandatory
relief or specific performance without the necessity of
proving damage.
7. Transfer of Warrant.
-------------------
(a) This Warrant is personal to the Warrant Holder and this
Warrant and the rights of the Warrant Holder hereunder may not be sold,
assigned, transferred or conveyed, in whole or in part, except with the prior
written consent of the Company.
(b) Upon transfer of the Warrant permitted hereunder, the
Warrant Holder must deliver to the Company a duly executed Warrant Assignment in
the form of Annex A, attached hereto, with funds sufficient to pay any transfer
tax imposed in connection with such assignment. Upon surrender of this Warrant
to the Company, the Company shall execute and deliver a new Warrant in the form
of this Warrant, with appropriate changes to reflect such assignment, in the
name or names of the assignee or assignees specified in the fully executed
Warrant Assignment or other instrument of assignment and, if the Warrant
Holder's entire interest is not being transferred or assigned, in the name of
the Warrant Holder, and this Warrant
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shall promptly be canceled. In connection with any transfer or exchange of this
Warrant permitted hereunder, the transferring Warrant Holder shall pay all costs
and expenses relating thereto, including, without limitation, all transfer
taxes, if any, and all reasonable expenses incurred by the Company (including
legal fees and expenses). Any new Warrant issued shall be dated the date hereof.
The terms "Warrant" and "Warrant Holder" as used herein include all Warrants
into which this Warrant (or any successor Warrant) may be exchanged or issued in
connection with the permitted transfer or assignment of this Warrant, any
successor Warrant and the holders of those Warrants, respectively.
8. Lost Mutilated or Missing Warrant Certificates.
----------------------------------------------
Upon receipt by the Company of evidence satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant, and, in the case of
loss, theft or destruction, upon receipt of indemnification satisfactory to the
Company, or, in the case of mutilation, upon surrender and cancellation of the
mutilated Warrant, the Company shall execute and deliver a new Warrant of like
tenor and representing the right to purchase the same aggregate number of
Warrant Shares. The recipient of any such Warrant shall reimburse the Company
for all reasonable expenses incidental to the replacement of such lost,
mutilated or missing Warrant.
9. Successors and Assigns.
----------------------
All the provisions of this Warrant by or for the benefit of
the Company or the Warrant Holder shall bind and inure to the benefit of their
respective successors and permitted assigns.
10. Notices.
-------
All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by certified U.S. mail, return receipt requested and
postage prepaid, or by private overnight mail courier service. The respective
addresses to be used for all such notices, demands or requests are as follows:
(a) if to the Company, to Heartsoft, Inc., 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxx
Xxxxx, XX 00000, Attention: Xxxxxxxx Xxxxx, facsimile (000) 000-0000, (b) if to
the Warrant Holder, to Hi-Tel Group, Inc., 0000 Xxxx Xxxxxxxxxx Xxxxxxxxx, #000,
Xx. Xxxxxxxxxx, Xxxxxxx 00000, Fax: (000) 000-0000), Attention: Xxxxxx Xxxxxx
and (c) if to any party, addressed to such address as such party may hereafter
specify to the Company, in the case of any communication to be provided by the
Company, or to each Warrant Holder, in the case of any communication to be
provided by the Warrant Holder, for the purpose of notice hereunder.
27
11. Waivers; Amendments.
-------------------
Any provision of this Warrant may be amended or modified with
(but only with) the written consent of the Company and the Warrant Holder. Any
amendment, modification or waiver effected in compliance with this Section 11
shall be binding upon the Company and the Warrant Holder. The Company shall give
notice as soon as reasonably practicable to the Warrant Holder of any amendment,
modification or waiver effected in compliance with this Section 11. No failure
or delay of the Company or the Warrant Holder in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereon or the exercise of any other right or power. No notice or demand on the
Company in any case shall entitle the Company to any other or future notice or
demand in similar or other circumstances. The rights and remedies of the Company
and the Warrant Holder hereunder are cumulative and not exclusive of any rights
or remedies which each would otherwise have.
12. Miscellaneous.
-------------
(a) The Warrant shall not entitle the Warrant Holder, prior to
the exercise of the Warrant, to any rights as a holder of shares of the Company.
(b) In case any one or more of the provisions contained in
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
(c) Without limiting the rights of the Company and the Warrant
Holder to pursue all other legal and equitable rights available to such party
for the other parties' failure to perform its obligations hereunder, the Company
and the Warrant Holder each hereto acknowledge and agree that the remedy at law
for any failure to perform any obligations hereunder would be inadequate and
that each shall be entitled to specific performance, injunctive relief or other
equitable remedies in the event of any such failure.
(d) This Warrant shall be construed and enforced in accordance
with the laws of the state of Delaware without regard to principles of conflicts
of law, except as otherwise required by mandatory provisions of law.
(e) The section headings used herein are for convenience of
reference only and shall not be construed in any way to affect the
interpretation of any Provisions of the Warrant.
13. Resolution of Disputes.
----------------------
28
(a) Arbitration. Any dispute, controversy or claim arising out
of or relating to this Warrant or the negotiation hereof or entry hereunto or
any contract or agreement entered into pursuant hereto or the performance by the
parties of its or their terms, shall be settled by binding arbitration held in
Tulsa, Oklahoma, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect, except as specifically
otherwise provided in this Section 13. This Section 13 shall be construed and
enforced in accordance with the Federal Arbitration Act, notwithstanding any
other choice of law provision in this Warrant. Notwithstanding the foregoing,
the Company or Warrant Holder may, in its discretion, apply to a court of
competent jurisdiction for equitable relief. Such an application shall not be
deemed a waiver of the right to compel arbitration pursuant to this Section 13.
(b) Arbitrators. If the matter in controversy (exclusive of
attorney fees and expenses) shall appear, as at the time of demand for
arbitration, to exceed One Million Dollars ($1,000,000), then the panel shall
consist of three neutral arbitrators; otherwise, one neutral arbitrator, in each
case such arbitrators shall be mutually acceptable to the Company and the
Warrant Holder.
(c) Procedures. The arbitrator(s) shall allow such discovery
as the arbitrator(s) determine appropriate under the circumstances and shall
resolve the dispute as expeditiously as practicable, and if reasonably
practicable, within one hundred twenty (120) days after the selection of the
arbitrator(s). The arbitrator(s) shall give the parties written notice of the
decision, with the reasons therefor set out, and shall have thirty (30) days
thereafter to reconsider and modify such decision if any party so requests
within ten (10) days after the decision.
(d) Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or preliminary
relief, and to allocate responsibility for the costs of the arbitration and to
award recovery of attorneys' fees and expenses in such manner as is determined
to be appropriate by the arbitrator(s).
(e) Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject matter
jurisdiction. The Company and Warrant Holder hereby submit to the in personam
jurisdiction of the Federal and State courts of Oklahoma, for the purpose of
confirming any such award and entering judgment thereon.
(f) Confidentiality. All proceedings under this Section 13,
and all evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties and by the arbitrators.
(g) Continued Performance. The fact that the dispute
resolution procedures specified in this Section 13 shall have been or may be
invoked shall not excuse any party from performing its obligations under this
Warrant and during the pendency of any such procedure, all parties shall
continue to perform their respective obligations in good faith, subject to any
rights to terminate this Warrant that may be available to any party.
29
(h) Tolling. All applicable statutes of limitation shall be
tolled while the procedures specified in this Section 13 are pending. The
parties will take such action, if any, required to effectuate such tolling.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its President, all as of the day and year first above
written.
HEARTSOFT, INC.
By: /s/ Xxxxxxxx X. Xxxxx
------------------------
Xxxxxxxx X. Xxxxx
President
30
ANNEX A
-------
Form of Notice of Exercise
--------------------------
Date: __________
To: Heartsoft, Inc.
Reference is made to the Common Share Purchase Warrant dated
March 1, 2000. Terms defined therein are used herein as therein defined.
The undersigned, pursuant to the provisions set forth in the
Warrant, hereby irrevocably elects and agrees to purchase the number of Common
Shares at the Exercise Price(s) set forth below, and makes payment herewith in
full therefor in the amount of $ __________in the following form:_____________
__________________________________________.
Number of Warrant Shares Applicable Exercise Price
------------------------ -------------------------
________________________ _________________________
________________________ _________________________
If said number of shares is less than all of the shares purchasable hereunder,
the undersigned hereby requests that a new Warrant representing the remaining
balance of the shares be registered in the name of____________________________,
whose address is
___________________________
___________________________
___________________________
The undersigned hereby represents that it is exercising the
Warrant for its own account for investment purposes and not with the view to any
sale or distribution and that the Warrant Holder will not offer, sell or
otherwise dispose of the Warrant or any underlying Warrant Shares in violation
of applicable securities laws.
Hi-Tel Group, Inc.
By: ________________________
Xxxxxx Xxxxxx
President
31
ANNEX B
-------
Form of Warrant Assignment
--------------------------
Reference is made to the Common Share Purchase Warrant dated
March 1, 2000, issued by Heartsoft, Inc. Terms defined therein are used herein
as therein defined.
FOR VALUE RECEIVED __________________ (the "Assignor") hereby
sells, assigns and transfers all of the rights of the Assignor as set forth in
the Common Share Purchase Warrant dated March 1, 2000, with respect to the
number of Warrant Shares covered thereby as set forth below, to the Assignee(s)
as set forth below:
Name(s) of Number of Applicable Exercise
Assignee(s) Address(es) Warrant Shares Price of Warrant Share
----------- ----------- -------------- ----------------------
___________ ___________ ______________ ______________________
___________ ___________ ______________ ______________________
All notices to be given by the Company to the Assignor as
Warrant Holder shall be sent to the Assignee(s) at the above listed address(es),
and, if the number of shares being hereby assigned is less than all of the
shares covered by the Warrant held by the Assignor, then also to the Assignor.
In accordance with Section 7 of the Warrant, the Assignor
requests that the Company execute and deliver a new Warrant or Warrants in the
name or names of the assignee or assignees, as is appropriate, or, if the number
of shares being hereby assigned is less than all of the shares covered by the
Warrant held by the Assignor, new Warrants in the name or names of the assignee
or the assignees as is appropriate, and in the name of the Assignor.
The undersigned represents that the Assignee has represented
to the Assignor that the Assignee is acquiring the Warrant for its own account
or the account of an Affiliate for investment purposes and not with the view to
sell or distribute, and that the Assignee will not offer, sell or otherwise
dispose of the Warrant or the Warrant Shares except under circumstances as will
not result in a violation of applicable securities laws.
Dated:__________
Hi-Tel Group, Inc.
By: ________________________
Xxxxxx Xxxxxx
President
32
