EXHIBIT 10.1
EXECUTION COPY
STANDBY SECURITIES PURCHASE AGREEMENT
THIS STANDBY SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated
as of June 2, 2005, is made by and between DDi Corp., a Delaware corporation
(the "COMPANY"), and, separately, each of the purchasers set forth on Exhibit A
attached hereto (each, a "PURCHASER" and collectively, the "PURCHASERS"). The
Company and each Purchaser are sometimes referred to individually as a "PARTY"
and, collectively, as the "PARTIES."
W I T N E S S E T H:
WHEREAS, the Company intends to undertake a rights offering (the "RIGHTS
OFFERING") pursuant to which the Company will offer to the Company's common
stockholders (the "STOCKHOLDERS") rights (the "RIGHTS") to purchase shares (the
"OFFERED SHARES") of the Company's common stock, par value $0.001 per share (the
"COMMON STOCK");
WHEREAS, pursuant to the terms of the Rights Offering, each of the
Stockholders will have the right to purchase its pro rata share of the Offered
Shares;
WHEREAS, the Company has filed a registration statement on Form S-3 (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") covering the offering and sale of the Offered Shares to the Stockholders;
and
WHEREAS, the Company wishes to provide for the purchase and sale of the
Unsubscribed Shares (as defined below) and to establish certain rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and each of the Purchasers, acting
separately, agree as follows:
ARTICLE I
ISSUANCE AND SALE OF SHARES
1.1 Issuance, Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to each of the Purchasers, and each of the Purchasers
separately agrees to purchase from the Company, severally and not jointly, at a
purchase price per share equal to the subscription price per share specified on
the cover page of the prospectus (the "PROSPECTUS") included in the Registration
Statement at the time it is declared effective by the SEC or on the cover page
to the prospectus relating to the Registration Statement that is filed with the
SEC pursuant to Rule 424(b) under the Securities Act (the "PER SHARE
SUBSCRIPTION PRICE"), a specified portion, as set forth in Exhibit A hereto
under the column titled "Proportionate Share" of the number of Offered Shares
equal to the Shortfall (as defined below) divided by the Per Share Subscription
Price (all such Offered Shares not subscribed for and purchased by the
Stockholders in the Rights Offering being referred to herein as the
"UNSUBSCRIBED SHARES"). The Parties agree that the Per Share
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Subscription Price will equal fifty percent (50%) of the Average Share Price on
the second Business Day immediately prior to the date on which the Rights
Offering is commenced. In no event shall the number of Unsubscribed Shares
multiplied by the Per Share Subscription Price result in an amount in excess of
Seventy Five Million Dollars ($75,000,000). The "SHORTFALL" shall be equal to
the amount by which $75,000,000 (the "OFFERING PRICE") exceeds the aggregate
subscription price to be paid by the Stockholders (other than the Purchasers
pursuant to this Agreement) who subscribe for and purchase shares of Common
Stock offered in the Rights Offering on or before the expiration date thereof.
Notwithstanding anything in the foregoing to the contrary, in no event shall any
Purchaser be obligated to purchase a number of Unsubscribed Shares in excess of
the product of such Purchaser's "Proportionate Share" specified on Exhibit A and
the aggregate number of Unsubscribed Shares, and no Purchaser shall be obligated
to purchase any Unsubscribed Shares that any other Purchaser is obligated to
purchase pursuant to this Agreement.
1.2 Closing. Upon the terms and subject to the satisfaction of the
conditions contained in Article VI of this Agreement, the closing of the
purchase and sale of the Unsubscribed Shares (the "CLOSING") shall take place at
the offices of Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx Xxxxx,
Xxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, at 9:00 a.m., local time, on
the third Business Day following the expiration of the Rights Offering, provided
that the Closing may take place at such other place, time or date as shall be
mutually agreed upon by the Company and the Required Purchasers (the date of the
Closing, the "CLOSING DATE") it being understood, however, that each Purchaser's
right and obligation to purchase its Proportionate Share of the Unsubscribed
Shares shall be fixed, subject to the conditions contained in Article VI, as of
the time of the expiration of the Rights Offering.
1.3 Deliveries. At the Closing (i) the Company shall deliver to the
Purchasers stock certificates registered in the name of the Purchasers,
representing the Unsubscribed Shares purchased by the Purchasers hereunder and
(ii) each Purchaser shall deliver to the Company the aggregate purchase price
for the Unsubscribed Shares equal to the product of (A) the number of
Unsubscribed Shares to be acquired by such Purchaser and (B) the Per Share
Subscription Price, which shall be paid by such Purchaser to the Company via
wire transfer of immediately available funds to an account designated in writing
by the Company at least two Business Days prior to the Closing Date.
Certificates for the Unsubscribed Shares shall be registered in such names and
in such denominations as each Purchaser may request not less than two Business
Days prior to the Closing Date.
1.4 Standby Commitment Fee. As compensation to the Purchasers for
satisfying their commitments, the Company agrees to issue to each of the
Purchasers that has fulfilled its obligation to purchase Unsubscribed Shares
pursuant to this Agreement warrants to purchase shares of the Company's Common
Stock (the "STANDBY COMMITMENT FEE WARRANTS"). The number of Standby Commitment
Fee Warrants issuable to each Purchaser shall be determined in accordance with
the following formula:
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N = P x 10.7% x O
where
N = the number of Standby Commitment Fee Warrants issuable to a
Purchaser;
P = the Proportionate Share of such Purchaser; and
O = the total number of shares of Common Stock outstanding on a
fully diluted basis (without giving effect to issuances of Common Stock and
securities exercisable for Common Stock to the Company's management under the
proposed 2005 Incentive Plan and assuming that two-thirds of the Company's
Series B Preferred Stock outstanding on the date of this Agreement has been
repurchased or redeemed) following consummation of the Rights Offering and the
purchase of the Unsubscribed Shares pursuant to this Agreement.
The Standby Commitment Fee Warrants shall be in the form attached hereto as
Exhibit B, with each such warrant having an initial exercise price equal to the
Per Share Subscription Price and an expiration date of July 31, 2006. Such
Standby Commitment Fee Warrants shall be delivered to the Purchasers on the
Closing Date, but each Purchaser shall be deemed to have earned its Standby
Commitment Fee Warrants effective as of the time its right and obligation to
purchase its Proportionate Share of the Unsubscribed Shares shall become fixed,
as provided in Section 1.2.
1.5 Capitalized Terms. Capitalized terms not otherwise defined in this
Agreement shall have the meanings ascribed to such terms in Section 9.1 hereof.
1.6 Reallocation of Unsubscribed Shares. Notwithstanding anything in this
Agreement to the contrary, each Purchaser agrees that it will not purchase
shares of Common Stock pursuant to the Rights Offering and/or this Agreement if
such purchases would cause such Purchaser and its Affiliates to beneficially own
40% or more of the shares of outstanding voting stock of the Company, determined
in accordance with Rule 13d-3 promulgated under the Exchange Act. In connection
therewith, the Company shall have the right, in its sole discretion, to reduce
the amount of Unsubscribed Shares that any Purchaser acquires, and to reallocate
such Unsubscribed Shares to another Purchaser who agrees to take such additional
Unsubscribed Shares, such that after giving effect to the Rights Offering and
the issuance of Common Stock under this Agreement, no Purchaser and/or its
affiliates will beneficially own more than 39.9% of the shares of outstanding
voting stock of the Company, determined in accordance with Rule 13d-3
promulgated under the Exchange Act. If any reallocation is made pursuant to this
Section 1.6, the Proportionate Share of the affected Purchasers shall be
modified accordingly for purposes of issuance of the Standby Commitment Fee
Warrants pursuant to Section 1.3 and the Break-up Warrants pursuant to Section
7.3.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers, that the
statements contained in this Article II are true and correct as of the date
hereof and will be true and correct as of the Closing as though made as of the
Closing.
2.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power
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and authority to own, lease and operate its properties and assets and to carry
on its business as it is now being conducted. The Company is duly qualified to
conduct business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned,
operated or leased by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, have a Material Adverse Effect.
2.2 Due Authorization. The Company has the requisite corporate power and
authority to enter into this Agreement and the Registration Rights Agreement (as
defined below) and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by the Company of this Agreement and the
Registration Rights Agreement, the issuance, sale and delivery of the
Unsubscribed Shares, the issuance of the Standby Commitment Fee Warrants and the
consummation by the Company of the transactions contemplated hereby and thereby
(a) are within the corporate power and authority of the Company and (b) have
been duly authorized by all necessary corporate action of the Company; provided
that the transactions contemplated by this Agreement, the Registration Rights
Agreement and the Warrants (collectively, the "TRANSACTION DOCUMENTS") and the
issuance of the Common Stock in the Rights Offering, the issuance of the
Unsubscribed Shares pursuant to this Agreement and the issuance of Common Stock
upon exercise of the Standby Commitment Fee Warrants is subject to the approval
thereof by the stockholders of the Company, including approval for increasing
the Company's authorized shares of Common Stock. This Agreement has been duly
and validly executed and delivered by the Company. Assuming the due
authorization, execution and delivery by each of the Purchasers of this
Agreement, this Agreement and the Registration Rights Agreement constitute valid
and binding obligations of the Company enforceable against it in accordance with
their respective terms, except (x) as enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or
other laws affecting the enforcement of creditors' rights in general, and except
that the enforceability of this Agreement is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law), and (y) as rights to indemnity and contribution hereunder
may be limited by Federal or state securities law and/or public policy.
Following approval by the stockholders of the Company of an increase in the
Company's authorized shares of Common Stock, (i) the shares issuable in the
Rights Offering shall be validly reserved for issuance and, when issued and
delivered in accordance with the terms of the Rights Offering, shall be validly
issued, fully paid and non-assessable; (ii) the Unsubscribed Shares shall be
validly reserved for issuance and, when issued and delivered in accordance with
the terms of this Agreement, shall be validly issued, fully paid and
non-assessable; and (iii) the shares of Common Stock issuable upon the exercise
of the Standby Commitment Fee Warrants or the Break-up Warrants (as defined
below) (such shares, the "WARRANT SHARES") shall be validly reserved for
issuance and, when issued and delivered in accordance with the terms of this
Agreement and the terms of the Standby Commitment Fee Warrants or the Break-up
Warrants, shall be validly issued, fully paid and non-assessable. Prior to the
consummation of the Rights Offering, the Company shall take all necessary
corporate action to convene a meeting of the Company's stockholders to vote to
approve the transactions contemplated by the Transaction Documents and the
authorization of a sufficient number of additional shares of Common Stock for
issuance in the Rights Offering, for issuance as Unsubscribed Shares pursuant to
this Agreement and for issuance upon exercise of the Standby Commitment Fee
Warrants or the Break-up Warrants and to approve the issuance of such shares
(such approvals being referred to herein as the "STOCKHOLDER APPROVALS").
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2.3 SEC Reports. The Company has filed all registration statements, forms,
reports and other documents required to be filed by the Company with the SEC
since January 1, 2004. All such registration statements, forms, reports and
other documents (including those that the Company may file after the date hereof
until the Closing Date) are referred to herein as the "SEC Reports." The SEC
Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
complied, or will comply when filed, as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such SEC Reports, and (iii) did not or will not at the time they were or are
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such SEC Reports or necessary in order to
make the statements in such SEC Reports, in the light of the circumstances under
which they were made, not misleading. No subsidiary of the Company is subject to
the reporting requirements of Section 13(a) or Section 15(d) of the Exchange
Act.
2.4 Financial Statements. Each of the financial statements (including, in
each case, any related notes and schedules) included or to be included in the
SEC Reports comply as to form in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
or will be prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited interim financial
statements may not contain all footnotes required by GAAP, 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 interim
financial statements, to normal and recurring year-end audit adjustments.
2.5 Rights Offering Registration Statement. The Registration Statement and
the Prospectus (and any amendment thereof or supplement thereto, including any
documents incorporated therein by reference) will comply, in all material
respects, with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations of the SEC thereunder. The
Registration Statement (and any amendment thereto, including any documents
incorporated therein by reference) will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading; and the
Prospectus (and any supplement thereto) will not contain any untrue statement of
a material fact or omit to state any 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.
2.6 No Conflicts; No Defaults. The Company is not (A) in violation of its
Certificate of Incorporation or by-laws or (B) in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which it may be bound or to which any of
its properties may be subject, except in the case of (B) above for such defaults
that, individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect. The execution and delivery of this Agreement and the
Registration Rights Agreement, the issuance and delivery of the Unsubscribed
Shares, the Standby
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Commitment Fee Warrants, the Break-up Warrants and the Rights, the consummation
of the Rights Offering, the consummation by the Company of the transactions
contemplated by this Agreement and the Registration Rights Agreement and the
compliance by the Company with terms of this Agreement and the Registration
Rights Agreement do not and will not result in any violation of the certificate
of incorporation or by-laws or other organizational documents of the Company or
any of its subsidiaries, and do not and will not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default (or give
rise to a right of termination, cancellation, modification or acceleration of
any obligation or loss of any material benefit) under, require a consent or
waiver under, constitute a change of control under, require the payment of a
penalty or increase fees under, or result in the creation or imposition of any
mortgage, right of first refusal, claim, license, limitation in voting rights,
security interest, pledge, lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries under (A) any indenture,
mortgage, loan agreement, note, lease or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries may be bound or to which any of its or their properties may be
subject or (B) any existing applicable Law or Order to which the Company or any
of its subsidiaries is subject, except, in the case of (A) and (B) above, where
such conflicts, breaches or defaults or liens, charges or encumbrances,
individually and in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
2.7 No Consents. No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign (other
than under the Securities Act and the securities or blue sky laws of the various
states), is required for the offer of the Rights, the offer and sale by the
Company of the Unsubscribed Shares, the consummation of the Rights Offering, the
issuance of the Standby Commitment Fee Warrants or the consummation by the
Company of the transactions contemplated by this Agreement or the Registration
Rights Agreement.
2.8 No Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, proceeding, claim, arbitration or investigation pending or, to the
knowledge of the Company, threatened against the Company, any of its
subsidiaries, any Company employee benefit plan or any of their assets,
properties or rights that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect. There are no material
judgments, orders, settlements or decrees outstanding against the Company or any
of its subsidiaries. Except as disclosed in the SEC Reports, no officer or
director of the Company is a defendant in any action, suit, proceeding, claim or
arbitration or, to the knowledge of the Company, the subject of any
investigation commenced by any Governmental Entity, with respect to the
performance of his or her duties as an officer and/or director of the Company.
2.9 Private Placement. Subject to the compliance by each of the Purchasers
with its representations and warranties set forth in Sections 3.4, 3.5, 3.8 and
3.9 hereof, it is not necessary in connection with the offer, sale and delivery
of the Unsubscribed Shares, the Standby Commitment Fee Warrants, the Break-up
Warrants, the Warrant Shares and any securities deliverable pursuant to the
Registration Rights Agreement or pursuant to the exercise, conversion or
exchange of such securities (collectively, but excluding the Break-up Warrants
for purposes of the Registration Rights Agreement, the "RESTRICTED SECURITIES")
to each of the Purchasers to register the offer or sale of such securities under
the Securities Act or any state
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law. Neither the Company nor any agent on its behalf has solicited or will
solicit any offers to buy or has offered to sell or will offer to sell all or
any part of the Restricted Securities or any other securities to any Person or
Persons so as to bring the sale of the Restricted Securities by the Company to
the Purchasers within the registration provisions of the Securities Act.
2.10 General Solicitation. The Company is not offering or selling the
Restricted Securities in connection with any advertisement, article, notice or
other communication regarding the Restricted 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.
2.11 No Undisclosed Liabilities. Except as disclosed in the SEC Reports
filed prior to the date of this Agreement or in the Company's consolidated
balance sheet as of March 31, 2005 (the "COMPANY BALANCE SHEET"), the Company
and its subsidiaries do not have any liabilities (whether accrued, absolute,
contingent or otherwise), except for liabilities (i) incurred in the ordinary
course of business consistent with past practice or (ii) that, individually or
in the aggregate, are not reasonably likely to result in a Material Adverse
Effect.
2.12 Absence of Certain Changes or Events. Between the date of the Company
Balance Sheet and the date of this Agreement, except as disclosed in the Company
SEC Reports, the Company and its subsidiaries have conducted their respective
businesses only in the ordinary course of business consistent with past
practice. Since the date of the Company Balance Sheet, there has not been any
change, event, circumstance or development that, individually or in the
aggregate, has had or is reasonably likely to result in a Material Adverse
Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, as to itself only, represents and warrants to the Company,
as of the date hereof and as of the Closing Date, as follows:
3.1 Organization. If such Purchaser is a corporation, such Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of formation and has the requisite corporate power and
authority to carry on its business as it is now being conducted. If such
Purchaser is a limited partnership, such Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of its
jurisdiction of formation and has the requisite limited partnership power and
authority to carry on its business as it is now being conducted. If such
Purchaser is a limited liability company, such Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of formation and has the requisite limited liability company
power and authority to carry on its business as it is now being conducted.
3.2 Due Authorization. If such Purchaser is a corporation, such Purchaser
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby and the execution and
delivery by such Purchaser of this Agreement, the purchase of the Unsubscribed
Shares and the consummation of the transactions
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contemplated hereby (a) are within the corporate power and authority of such
Purchaser and (b) have been duly authorized by all necessary corporate action of
such Purchaser. If such Purchaser is a limited partnership, such Purchaser has
the requisite limited partnership power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby and the
execution and delivery by such Purchaser of this Agreement, the purchase of the
Unsubscribed Shares and the consummation of the transactions contemplated hereby
(a) are within the limited partnership power and authority of such Purchaser and
(b) have been duly authorized by all necessary limited partnership action of
such Purchaser. If such Purchaser is a limited liability company, such Purchaser
has the requisite limited liability company power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby and the
execution and delivery by such Purchaser of this Agreement, the purchase of the
Unsubscribed Shares and the consummation of the transactions contemplated hereby
(a) are within the limited liability company power and authority of such
Purchaser and (b) have been duly authorized by all necessary limited liability
company action of such Purchaser. This Agreement has been duly and validly
executed and delivered by such Purchaser. Assuming the due authorization,
execution and delivery by the Company of this Agreement, this Agreement
constitutes a valid and binding obligation of such Purchaser enforceable against
it in accordance with its terms, except (x) as enforcement hereof may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or
other laws affecting the enforcement of creditors' rights in general, and except
that the enforceability of this Agreement is subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law), and (y) as rights to indemnity and contribution hereunder
may be limited by Federal or state securities law and/or public policy.
3.3 No Conflicts. The execution, delivery and performance of this
Agreement by such Purchaser, the purchase of the Unsubscribed Shares and the
consummation by such Purchaser of the other transactions contemplated by this
Agreement and the compliance by such Purchaser with the terms of this Agreement
do not and will not result in any violation of the charter or by-laws or other
applicable organizational documents of such Purchaser, and do not and will not
conflict with, or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of such Purchaser under (A) any
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which such Purchaser is a party or by which it may be bound or to
which any of its properties may be subject or (B) any existing applicable Law or
Order to which such Purchaser is subject, except, in the case of (A) and (B)
above, where such conflicts, breaches or defaults or liens, charges or
encumbrances, individually and in the aggregate, would not have or reasonably be
expected to result in a material adverse effect on such Purchaser's ability to
consummate the transactions contemplated by this Agreement.
3.4 Acquisition for Investment. Such Purchaser understands that the
Restricted Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is acquiring
the Restricted Securities as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Restricted Securities or any part thereof, has no present intention of
distributing any of such Restricted Securities and has no arrangement or
understanding with any other Persons regarding the distribution of such
Restricted Securities, except, in each case, pursuant to effective registrations
or qualifications relating thereto under the Securities Act and applicable state
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securities or blue sky laws or pursuant to an exemption therefrom; provided,
however, that in making such representation, such Purchaser does not agree to
hold the Restricted Securities for any minimum or specific term and reserves the
right to sell, transfer or otherwise dispose of the Restricted Securities at any
time in accordance with federal and state securities laws applicable to such
sale, transfer or disposition
3.5 Accredited Investor Status. Such Purchaser was not created for the
purpose of acquiring the Restricted Securities and is an "accredited investor,"
as that term is as defined in Rule 501(a) of Regulation D under the Securities
Act. 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 Restricted Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
the Restricted Securities and, at the present time, is able to afford a complete
loss of such investment. Such Purchaser understands that its investment in the
Restricted Securities involves a significant degree of risk. Such Purchaser is a
"qualified institutional buyer" (as defined in Rule 144A promulgated under the
Securities Act).
3.6 Information. Such Purchaser and its advisers have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Restricted Securities which
have been requested by such Purchaser or its advisers. Such Purchaser and its
advisers have been afforded the opportunity to ask questions of the Company's
management concerning the Company and the Restricted Securities.
3.7 Government Review. Such Purchaser understands that no Governmental
Authority has passed upon or made any recommendation or endorsement of the
Restricted Securities.
3.8 General Solicitation. Such Purchaser is not purchasing the Restricted
Securities as a result of any advertisement, article, notice or other
communication regarding the Restricted 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.
3.9 Resale or Transfer. Such Purchaser understands that: (i) other than
pursuant to the Registration Rights Agreement, the resale of the Restricted
Securities has not been and is not being registered under the Securities Act or
any applicable state securities laws, and the Restricted Securities may not be
sold or otherwise transferred unless (a) the Restricted Securities are sold or
transferred pursuant to an effective registration statement under the Securities
Act, (b) at the Company's request, such Purchaser shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance and
scope reasonably satisfactory to the Company's counsel) to the effect that the
Restricted Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, or (c) the Restricted
Securities are sold pursuant to Rule 144 promulgated under the Securities Act;
(ii) any sale of such Restricted Securities made in reliance on Rule 144 under
the Securities Act may be made only in accordance with the terms of such Rule;
and (iii) except as set forth in the Registration Rights Agreement, neither the
Company nor any other Person is under any obligation to register such Restricted
Securities under the Securities Act or any state securities laws or to comply
with
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the terms and conditions of any exemption thereunder. Such Purchaser
acknowledges that an appropriate restrictive legend will be placed on the
certificate or certificates representing the Restricted Securities that may be
issued pursuant to this Agreement.
3.10 Non-reliance Regarding Tax Consequences. Such Purchaser understands
that such Purchaser shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement.
3.11 No Consent. No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign (other
than under the Securities Act and the securities or blue sky laws of the various
states) is required for the purchase of the Restricted Securities to be
purchased by such Purchaser hereunder and the consummation by such Purchaser of
the transactions contemplated by this Agreement.
3.12 Not Acting In Concert. Such Purchaser is not an "affiliate" (within
the meaning of Rule 405 of the Securities Act) of any other Purchaser, is not
acting in concert with any other Purchaser and is not a member of a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) that includes
another Purchaser as a member and has no current intention to act in the future
in a manner that would make it a member of such a group, except in each case,
with respect to one or more other Purchasers that share a common investment
advisor with such Purchaser, which may be deemed to be "affiliates" and/or
acting in concert and/or members of a "group" with such Purchaser.
ARTICLE IV
COVENANTS
4.1 Consents, Approvals and Filings. Subject to the terms of this
Agreement, the Company and each Purchaser, as to itself, shall use their
respective commercially reasonable efforts to take, or cause to be taken, all
actions, and do, or cause to be done, and to assist and cooperate with the other
Parties in doing, all things necessary, proper, desirable or advisable to obtain
and make all consents, approvals and filings required to be obtained or made by
the Company or such Purchaser, as the case may be, in connection with the
authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
4.2 Further Assurances. At any time or from time to time after the date of
this Agreement, the Company, on the one hand, and each Purchaser, as to itself,
on the other hand, agree to cooperate with each other, and at the request of the
other Party, to execute and deliver any further instruments or documents and to
take all such further action as the other Party may reasonably request in order
to evidence or effectuate the consummation of the transactions contemplated by
this Agreement and to otherwise carry out the intent of the Parties hereunder.
4.3 Public Statements. Neither the Company nor any Purchaser, as to
itself, shall issue any public announcement, statement or other disclosure with
respect to this Agreement or the transactions contemplated hereby without the
prior written consent of the other Party hereto, which consents shall not be
unreasonably withheld, except if such public announcement,
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statement or other disclosure is required by applicable law or applicable stock
market regulations, in which case the disclosing Party shall consult in advance
with respect to such disclosure with the other Party to the extent reasonably
practicable. Without limiting the foregoing, the Parties each acknowledge and
agree that the existence of this Agreement and the terms and conditions hereof
may be disclosed (i) by the Company in a press release announcing the terms of
this Agreement and in any Registration Statement relating to the Rights Offering
or any other documents contained therein, or in any other filing required by law
or the applicable requirements of any stock exchange or market on which the
Common Stock is primarily traded, without the consent of any of the Purchasers,
and (ii) by any of the Purchasers in any filings made pursuant to Section 13 of
the Exchange Act, without the consent of the Company.
4.4 Reservation of Shares. The Company shall at all times reserve and keep
available for issue upon the exercise of the Standby Commitment Fee Warrants and
the Break-up Warrants such number of authorized but unissued shares of Common
Stock deliverable upon the exercise of the Standby Commitment Fee Warrants as
will be sufficient to permit the exercise in full of all Standby Commitment Fee
Warrants issued and such number of authorized but unissued shares of Common
Stock deliverable pursuant to the Registration Rights Agreement or pursuant to
the exercise, conversion or exchange in full of any securities issued pursuant
to the Registration Rights Agreement.
4.5 No Market Activity in Common Stock. From the date of this Agreement
through and including the earlier of (a) the date of the expiration or
termination of the Rights Offering and (b) the date of the termination of this
Agreement pursuant to Article VII hereof, other than pursuant to the Rights
Offering and this Agreement no Purchaser shall (i) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise; provided that a Purchaser may transfer shares of Common Stock
during this period in the manner provided in Section 5.1(i); provided further
that this Section 4.5 shall not limit in any manner any offer, pledge,
commitment, contractual obligation, purchase, grant, loan, transfer, disposition
or any other activity with respect to any option, contract, agreement,
derivative security or instrument, put equivalent position, swap or other
agreement or instrument existing as of the date of this Agreement, including,
but not limited to, settling, renewing or rolling-over, in whole or in part, any
of such agreements or instruments.
4.6 Listing. The Company shall take all necessary actions such that all of
the Unsubscribed Shares, the Warrant Shares and any shares of Common Stock
issuable pursuant to the Registration Rights Agreement or upon the exercise,
conversion or exchange in full of any securities issued pursuant to the
Registration Rights Agreement, will be duly listed and admitted for trading on
all of the markets where shares of Common Stock are traded, including the Nasdaq
National Market, no later than the effective date of the Resale Registration
Statement (as such term is defined in the Registration Rights Agreement).
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4.7 Rights Offering.
(a) Subject to the right of the Company to terminate the Rights
Offering and this Agreement in accordance with Section 7.1(d) hereof, the
Company shall use commercially reasonable efforts to take, or cause to be taken,
all actions, and do, or cause to be done, all things necessary, proper,
desirable or advisable to consummate the Rights Offering.
(b) The Company further covenants that (i) the Offering Price of the
Common Stock issuable in the Rights Offering shall be Seventy Five Million
Dollars ($75,000,000) and (ii) the Rights Offering shall be open for 15 Business
Days, unless a longer period is required by applicable federal securities laws
and the rules and regulations thereunder, including the interpretations thereof
by the staff of the SEC.
4.8 Use of Proceeds. The Company shall use the net proceeds of the Rights
Offering and from the purchase of the Unsubscribed Shares under this Agreement
(i) to repurchase or redeem (and/or to set aside restricted cash for such
purpose) at least two thirds of the issued and outstanding Series B-1 Preferred
Stock and Series B-2 Preferred Stock (collectively, the "SERIES B PREFERRED
STOCK") and (ii) to repurchase all issued and outstanding Senior Accreting Notes
of its subsidiary DDi Capital (the "SENIOR ACCRETING NOTES"), to the extent the
net proceeds are sufficient therefor. Any funds remaining after application of
the net proceeds as provided in the preceding sentence shall be used for general
corporate purposes.
ARTICLE V
RESTRICTIONS ON TRANSFER
5.1 Restrictions on Transfer. The Purchasers shall not, and shall ensure
that their respective Affiliates do not, purchase, sell, transfer, assign,
convey, gift, mortgage, pledge, encumber, hypothecate or otherwise dispose of,
directly or indirectly ("TRANSFER"), any Restricted Securities; provided,
however, that the foregoing shall not restrict in any manner a Transfer (i) by a
Purchaser (x) to one or more of its Affiliates or (y) by a partnership to a
partner of such partnership or a retired partner of such partnership or to the
estate of any such partner or retired partner, or by a limited liability company
to a member of such limited liability company or a retired member or to the
estate of any such member or retired member, provided that the transferee in
each case agrees in writing to be subject to the terms of this Section 5.1, or
(ii) by a Purchaser to any other person in a private transaction if the Company
first shall have been furnished with an opinion of legal counsel, reasonably
satisfactory to the Company, to the effect that such Transfer is exempt from the
registration requirements of the Securities Act or (iii) made in accordance with
Rule 144 under the Securities Act, provided that the Company shall have the
right to receive an opinion of legal counsel for the Holder, reasonably
satisfactory to the Company, to the effect that such Transfer is exempt from the
registration requirements of the Securities Act, prior to the removal of the
legend subject to Rule 144 or (iv) made pursuant to a registration statement
declared effective by the SEC. Any purported Transfers of Restricted Securities
in violation of this Article V shall be null and void and no right, title or
interest in or to such Restricted Securities shall be Transferred to the
purported transferee, buyer, donee, assignee or encumbrance holder. The Company
will not give, and will not permit the Company's transfer agent to give, any
effect to such purported Transfer in its stock records.
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5.2 Compliance with Laws; Stop Order.
(a) The Purchasers shall, and shall ensure that their respective
Affiliates shall, observe and comply with the Securities Act and the Exchange
Act and the regulations promulgated thereunder and all other requirements of
applicable Laws in connection with any permitted Transfer of the Restricted
Securities, including all requirements of applicable Laws relating to the use of
insider information or the trading of securities while in the possession of
nonpublic information.
(b) In order to enforce the provisions of this Article V, the
Company may impose stop transfer instructions with respect to all of the
Restricted Securities held by the Purchasers.
5.3 Restrictive Legends. Each Purchaser understands and agrees that the
Restricted Securities will bear a legend substantially similar to the legend set
forth below in addition to any other legend that may be required by applicable
law or by any agreement between the Company and such Purchaser:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
REGISTERED AND/OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND REGISTRATION AND/OR
QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS, (B) IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND REGISTRATION AND/OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS PROVIDED THAT AT THE ISSUER'S
REQUEST, THE TRANSFEROR THEREOF SHALL HAVE DELIVERED TO THE ISSUER
AN OPINION OF COUNSEL (which opinion shall be in form, substance and
scope REASONABLY satisfactory to the ISSUER) TO THE EFFECT THAT SUCH
SECURITIES MAY BE sold or transferred pursuant to an exemption from
such registration, or (c) SUCH SECURITIES MAY BE sold pursuant to
Rule 144 PROMULGATED under the Securities Act OF 1933, AS AMENDED.
5.4 Registration Rights. Holders of the Restricted Securities shall have
the registration rights set forth in a Registration Rights Agreement to be dated
the Closing Date, among the Company and each of the Purchasers, in substantially
the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT").
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ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of the Purchasers and the Company at the
Closing. The obligations of each of the Purchasers to purchase from the Company,
and the Company to sell to each of the Purchasers, the Unsubscribed Shares, to
deliver the Standby Commitment Fee Warrants and to consummate the other
transactions contemplated hereby are subject to the satisfaction (or waiver by
the Required Purchasers and the Company) at or prior to the Closing Date of each
of the following conditions:
(a) no preliminary or permanent injunction or other Order by any
Governmental Authority which prevents the consummation of the transactions
contemplated hereby shall have been issued and remain in effect;
(b) no statute, rule, regulation or other Law shall have been
enacted by any Governmental Authority which would prevent or make illegal the
consummation of the transactions contemplated by this Agreement;
(c) any consents, filings and approvals that are necessary for the
consummation of the transactions contemplated by this Agreement shall have been
made or obtained except where (i) the Company's failure to make or obtain such
consents, filings and approvals would not have a Material Adverse Effect or a
material adverse effect on the Company's ability to perform its obligations
under this Agreement or (ii) any Purchaser's failure to obtain such consents,
filings and approvals would not have a material adverse effect on such
Purchaser's ability to perform its obligations under this Agreement; and
(d) the Stockholder Approvals shall have been obtained; and
(e) the Rights Offering shall have been consummated.
6.2 Additional Conditions to Obligations of Each of the Purchasers at the
Closing. The obligation of each Purchaser to purchase the Unsubscribed Shares
and consummate the other transactions contemplated hereby shall be subject to
the satisfaction or waiver by the Required Purchasers at or prior to the Closing
Date of each of the following additional conditions:
(a) the representations and warranties of the Company set forth in
this Agreement (disregarding for these purposes, the phrases "material,"
"materially," "in all material respects," "Material Adverse Effect" and any
similar phrase) shall be true and correct as of the Closing, as though made on
and as of the Closing (except to the extent such representations and warranties
relate to an earlier date, in which case such representations and warranties
shall be true and correct, on and as of such earlier date (disregarding for
these purposes, the phrases "material," "materially," "in all material
respects," "Material Adverse Effect" and any similar phrase)), except for such
failures to be true and correct which, individually or in the aggregate, have
not had and are not reasonably likely to result in a Material Adverse Effect;
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(b) the Company shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by it on or prior to the Closing
Date;
(c) from the date hereof through the Closing Date, there shall not
have occurred, and be continuing, a Material Adverse Effect;
(d) from the date hereof through the Closing Date, there shall not
have occurred, and be continuing, a suspension of the trading of the Common
Stock by the SEC or by Nasdaq National Market;
(e) the Company shall have delivered the certificates for the
Unsubscribed Shares to the Purchasers;
(f) the Company shall have executed and delivered the Registration
Rights Agreement and the Standby Commitment Fee Warrants;
(g) the Company shall have delivered to the Purchasers an officer's
certificate certifying as to its compliance with the conditions set forth in
clauses (a) through (d) and (k) of this Section 6.2;
(h) the Company's counsel shall have delivered to the Purchasers an
opinion dated the Closing Date in form and substance reasonably acceptable to
the Purchasers, which shall include the opinions set forth in Exhibit D hereto;
(i) the Company shall have delivered to the Purchasers a certificate
dated as of the Closing Date executed by the Secretary of the Company certifying
(i) the charter documents of the Company; (ii) certificates of good standing of
the Company in its jurisdiction of organization; (iii) resolutions duly adopted
by the Board of Directors of the Company approving the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, and that such resolutions have not been amended and remain
in full force and effect; and (iv) as to the incumbency of each signatory of the
Company;
(j) the Company shall have obtained approval for listing the
Unsubscribed Shares and the Warrant Shares on the Nasdaq National Market,
subject to issuance; and
(k) the Company shall have reasonably demonstrated that, following
the consummation of the Rights Offering and the purchase of the Unsubscribed
Shares by the Purchasers pursuant to this Agreement, together with other sources
of payment available to the Company, the Company will have sufficient funds to
repay or redeem at least two-thirds of the outstanding shares of Series B
Preferred Stock and to repay the Senior Accreting Notes in full.
6.3 Additional Conditions to Obligations of the Company at the Closing.
The obligations of the Company to issue and sell the Unsubscribed Shares and to
issue the Standby Commitment Fee Warrants and to consummate the other
transactions contemplated hereby shall be subject to the satisfaction (or waiver
by the Company) at or prior to the Closing Date of each of the following
additional conditions:
15
(a) the representations and warranties of each Purchaser set forth
in this Agreement (disregarding for these purposes, the phrases "material,"
"materially," "in all material respects," "Material Adverse Effect" and any
similar phrase) shall be true and correct as of the Closing, as though made on
and as of the Closing (except to the extent such representations and warranties
relate to an earlier date, in which case such representations and warranties
shall be true and correct, on and as of such earlier date (disregarding for
these purposes, the phrases "material," "materially," "in all material
respects," "Material Adverse Effect" and any similar phrase)), except for such
failures to be true and correct which, individually or in the aggregate, have
not had and are not reasonably likely result in a material adverse effect on
such Purchaser's ability to consummate the transactions contemplated by this
Agreement; provided, however, that in the event that one or more Purchasers
fails to satisfy the condition specified in this Section 6.3(a) (such Purchasers
are referred to for purposes of this proviso as the "BREACHING PURCHASERS") but
the other Purchasers that have satisfied such condition agree to purchase the
Unsubscribed Shares to be purchased by such Breaching Purchasers, then this
condition shall nonetheless be deemed to be satisfied; and
(b) each Purchaser shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by it on or prior to the Closing
Date; provided, however, that in the event that one or more Purchasers fails to
satisfy the condition specified in this Section 6.3(b) (such Purchasers are
referred to for purposes of this proviso as the "BREACHING PURCHASERS") but the
other Purchasers that have satisfied such condition agree to purchase the
Unsubscribed Shares to be purchased by such Breaching Purchasers, then this
condition shall nonetheless be deemed to be satisfied;
(c) each Purchaser shall have delivered the following to the
Company:
(i) the purchase price payable for the Unsubscribed Shares
which such Purchaser is acquiring; and
(ii) an officer's certificate certifying as to such
Purchaser's compliance with the conditions set forth in clauses (a) and
(b) of this Section 6.3.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated at any time:
(a) by the Company with the consent of the Required Purchasers;
(b) by the Company (i) upon a breach of any covenant or agreement on
the part of the Purchasers set forth in this Agreement or if any representation
or warranty of the Purchasers set forth in this Agreement shall not be true and
correct, in either case such that the conditions set forth in Section 6.3(a) or
6.3(b) would not be satisfied (a "TERMINATING PURCHASER BREACH"); provided, that
such Terminating Purchaser Breach shall have been caused by Purchasers that, in
the aggregate, are obligated to purchase at least a majority of the Unsubscribed
Shares hereunder, and shall not have been waived or cured by the earlier of (x)
the
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Closing Date or (y) within 10 days after written notice of such Terminating
Purchaser Breach is given to each of the breaching Purchasers by the Company; or
(ii) if any condition to the Company's obligations to close at the Closing set
forth in Article VI has not been satisfied as of the Closing or satisfaction of
such a condition is or becomes impossible (other than because of the failure of
the Company to comply with its obligations under this Agreement), and the
Company has not waived such condition;
(c) by any Purchaser with respect to itself: (i) upon a breach of
any covenant or agreement on the part of the Company set forth in this Agreement
or if any representation or warranty of the Company set forth in this Agreement
shall not be true and correct, in either case such that the conditions set forth
in Section 6.2(a) or 6.2(b) would not be satisfied (a "TERMINATING COMPANY
BREACH"); provided, that such Terminating Company Breach shall not have been
cured by the earlier of (x) the Closing Date or, (y) within 10 days after
written notice of such Terminating Company Breach is given to the Company by the
Required Purchasers; or (ii) if any condition to the Purchasers' obligation to
close set forth in Article VI has not been satisfied as of the Closing, or
satisfaction of such a condition is or becomes impossible (other than because of
the failure of any Purchaser to comply with its obligations under this
Agreement), and, in each case, the Required Purchasers have not waived such
breach or condition.
(d) by the Company at any time if the Board of Directors of the
Company elects to withdraw the Rights Offering for any reason;
(e) without action on the part of any party, in the event the Rights
Offering is not launched or the Registration Statement is not declared effective
by the SEC within 120 days of the date of this Agreement or the Rights Offering
is not consummated within 150 days of the date of this Agreement unless the
Company shall have obtained a consent to an extension of either such time
periods from the Required Purchasers; and
(f) without action on the part of any party, in the event of a
Change of Control of the Company unless the Company shall have obtained a waiver
thereof from the Required Purchasers.
7.2 Reimbursement of Expenses. The Company shall reimburse each of the
Purchasers for its out of pocket fees and expenses (including reasonable
attorneys', accountants' and consultants' fees and expenses) reasonably incurred
by them in connection with the transactions contemplated by this Agreement;
provided, however, that the maximum amount of expenses that the Company shall be
required to pay under this Section 7.2 shall not exceed $100,000 in the
aggregate.
7.3 Termination Fee. In the event this Agreement is terminated pursuant to
Section 7.1(c) (but only with respect to a Purchaser that has exercised its
right to terminate under such subsection) or Sections 7.1(d), (e) or (f), each
Purchaser shall be entitled to receive warrants to purchase shares of Common
Stock (the "BREAK-UP WARRANTS") in the form attached as Exhibit E. The number of
Break-up Warrants issuable to each Purchaser shall be determined in accordance
with the following formula:
17
N = P x 10.7% x O x d
where
N = the number of Break-up Warrants issuable to a Purchaser;
P = the Proportionate Share of such Purchaser;
O = the total number of shares of Common Stock outstanding on a
fully diluted basis (without giving effect to issuances of Common Stock and
securities exercisable for Common Stock to the Company's management under the
proposed 2005 Incentive Plan and assuming that two-thirds of the Company's
Series B Preferred Stock outstanding on the date of this Agreement has been
repurchased or redeemed) as of the date of the termination of this Agreement;
and
d = 50%, if termination occurs prior to the effectiveness of the
Registration Statement and 100% if termination occurs following effectiveness of
the Registration Statement.
Each Break-up Warrant shall have an initial exercise price equal to 50% of the
Average Share Price on the date of the termination of this Agreement. Except as
set forth in or contemplated by Section 4.7(b)(ii), Section 7.2, Section 7.4 or
Article VIII hereof, the Purchasers' receipt of the Break-up Warrants pursuant
to this Section 7.3 shall be in full satisfaction of any amount or obligations
owed to the Company to the Purchasers, and shall be the Purchasers' sole remedy
hereunder.
7.4 Effect of Termination. If this Agreement is terminated pursuant to the
provisions of Section 7.1, this Agreement shall forthwith become void and there
shall be no further obligations on the part of the Company or any Purchaser or
their respective directors, officers, employees, agents or representatives,
except for the provisions of Section 8.1(a) (but only with respect to third
party claims or any claim for a breach of Section 4.7(b)(ii) hereof) and
Sections 7.2, 7.3, 8.2, 8.3, 8.4, 9.1, 9.2, 9.4, 9.5, 9.7, 9.8 and 9.10, which
shall survive any termination of this Agreement; provided, that nothing in this
Section 7.4 shall relieve any Party from liability for any willful breach of
this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification.
(a) The Company shall indemnify and hold harmless each of the
Purchasers, and each of their respective directors, officers, employees,
partners, limited partners, members, agents, representatives, affiliates and
controlling Persons (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) against any and all losses, claims, demands,
damages, liabilities, costs and expenses (including reasonable attorneys' and
accountants' fees, disbursements and expenses, as incurred) (collectively,
"LOSSES") incurred or suffered by such party arising out of or based upon (i)
any breach of a representation or warranty or breach of or failure to perform
any covenant or agreement on the part of the Company
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contained in this Agreement, any Standby Commitment Fee Warrant, any Break-up
Warrant, the Registration Rights Agreement or any other agreement or instrument
furnished by the Company to a Purchaser pursuant to this Agreement or (ii) third
party claims or demands relating to the fact that a Purchaser is a party to this
Agreement; provided that the Company shall not be required to indemnify a
Purchaser to the extent that the Losses arise from the gross negligence or
willful misconduct of such Purchaser or any of its affiliates.
(b) Each Purchaser shall indemnify and hold harmless the Company and
its directors, officers, employees, agents, representatives, affiliates and
controlling Persons (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) against any and all Losses incurred or suffered
by such party arising out of or based upon any breach of a representation or
warranty or breach of or failure to perform any covenant or agreement on the
part of such Purchaser contained in this Agreement; provided that the Purchasers
shall not be required to indemnify the Company to the extent the Losses arise
from the gross negligence or willful misconduct of the Company or any of its
affiliates.
8.2 Indemnification Procedures. All claims or demands for indemnification
under this Article VIII shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which a Party (the
"INDEMNIFYING PARTY") would be liable to the other Party (the "INDEMNIFIED
PARTY") hereunder is asserted against an Indemnified Party by a third party, the
Indemnified Party shall with reasonable promptness notify the Indemnifying Party
of such claim or demand (the "CLAIM NOTICE"), specifying the nature of such
claim or demand and the amount or the estimated amount thereof to the extent
then feasible (which estimate shall not be conclusive of the final amount of
such claim or demand). The Indemnifying Party shall have fifteen (15) days from
the receipt of the Claim Notice (the "NOTICE PERIOD") to notify the Indemnified
Party (i) whether or not the Indemnifying Party disputes the Indemnifying
Party's liability to the Indemnified Party hereunder with respect to such claim
or demand and (ii) if the Indemnifying Party does not dispute such liability,
whether or not the Indemnifying Party desires, at the sole cost and expense of
the Indemnifying Party, to defend against such claim or demand, provided that
the Indemnified Party is hereby authorized (but not obligated) prior to and
during the Notice Period to file any motion, answer or other pleading and to
take such action which the Indemnified Party shall reasonably deem necessary or
appropriate to protect the Indemnified Party's interests. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
the Indemnifying Party does not dispute the Indemnifying Party's obligation to
indemnify hereunder and desires to defend the Indemnified Party against such
claim or demand and except as hereinafter provided, the Indemnifying Party shall
have the right to defend (with counsel reasonably satisfactory to the
Indemnified Party) by appropriate proceedings.
(b) 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; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such proceeding and to employ counsel
reasonably satisfactory to the 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
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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
the reasonable fees and expenses of one separate counsel, and one local counsel
in each applicable jurisdiction, shall be at the expense of the Indemnifying
Party).
(c) All Losses (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or proceeding)
will be paid to the Indemnified Party, as incurred, within ten (10) Business
Days of written notice thereof to the Indemnifying Party upon receipt of an
undertaking to repay such amount if it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder. The Indemnifying
Party will not consent to entry of any judgment or enter into any settlement or
otherwise seek to terminate any action or proceeding in which any Indemnified
Party is or could be a party and as to which indemnification or contribution
could be sought by such Indemnified Party under this Section 8.2, unless such
judgment, settlement or other termination includes, as an unconditional term
thereof, the giving by the claimant or plaintiff to such Indemnified Party of a
release, in form and substance reasonably satisfactory to the Indemnified Party,
from all liability in respect of such claim or litigation for which such
Indemnified Party would be entitled to indemnification hereunder and such
judgment or consent does not include a statement as to the admission of fault or
culpability on behalf of any Indemnified Party.
(d) In the event the Indemnified Party has a claim against the
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected by a third party, the Indemnified
Party shall with reasonable promptness send a Claim Notice with respect to such
claim to the Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within the Notice Period that the Indemnifying Party disputes
such claim, the amount of such claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder.
(e) The Indemnified Party's failure to give reasonably prompt notice
to the Indemnifying Party of any actual, threatened or possible claim or demand
which may give rise to a right of indemnification hereunder shall not relieve
the Indemnifying Party of any liability which the Indemnifying Party may have to
the Indemnified Party unless the failure to give such notice materially and
adversely prejudices the Indemnifying Party.
8.3 Survival of Representations, Warranties, etc. The respective
representations, warranties, and agreements made herein by or on behalf of the
Parties hereto shall remain in full force and effect, regardless of any
investigation made by or on behalf of any other Party to this Agreement or any
officer, director or employee of, or Person controlling or under common control
with, such Party and will survive delivery of and payment for any Restricted
Securities.
20
8.4 Other.
(a) Neither the Company nor any Purchaser shall have any obligation
under this Article VIII to indemnify any Person for lost profits or for
consequential, incidental, punitive or exemplary damages.
(b) Any and all remedies set forth in this Agreement: (i) shall be
in addition to any and all other remedies the Purchasers or the Company may have
at law or in equity, (ii) shall be cumulative, and (iii) may be pursued
successively or concurrently as each of the Purchasers and the Company may
elect. The exercise of any remedy by any Purchaser or the Company shall not be
deemed an election of remedies or preclude any Purchaser or the Company,
respectively, from exercising any other remedies in the future.
ARTICLE IX
MISCELLANEOUS
9.1 Definitions. The following terms, as used in this Agreement, shall
have the following meanings:
"AFFILIATE" shall have the meaning ascribed to such term in Rule
12b-2 promulgated under the Exchange Act.
"AVERAGE SHARE PRICE" shall mean, with respect to any day, the
average of the Daily Share Prices for the twenty (20) trading days ending two
(2) trading days before the day in question. "DAILY SHARE PRICE" shall mean, for
any trading day, the closing price per share of the Common Stock on The Nasdaq
Stock Market (or other principal securities market on which the Common Stock is
then traded) on such day, or, if there are no sales of the Common Stock on such
securities market on such day, the average of the high bid and low ask prices
for the Common Stock on such day, or, if there are no high bid and low ask
prices for the Common Stock on such day, as determined by the Board of Directors
of the Company in good faith.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday and
any day on which banking institutions in the State of New York are authorized by
Law or other governmental action to close.
"CHANGE OF CONTROL" shall mean (i) the consolidation, merger or
other business combination (including, without limitation, a reorganization or
recapitalization) of the Company with or into another Person (other than (A) a
consolidation, merger or other business combination (including, without
limitation, reorganization or recapitalization) in which holders of the
Company's voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, at least sixty percent (60%) of the
voting power of the capital stock of the surviving entity or entities, or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company); (ii) the sale or transfer of all
or substantially all of the Company's assets; or (iii) the closing of the
transfer (whether by merger, consolidation or otherwise), in one transaction or
a series of related transactions, to a Person or group of affiliated Persons
(other than an underwriter of the Company's securities), of the Company's
securities, if after such closing, such Person or group
21
of affiliated Persons would hold forty percent (40%) or more of the outstanding
voting stock of the Company (or the surviving or acquiring entity).
Notwithstanding anything contained herein to the contrary, any transaction in
which one or more of the Purchasers or any of their respective Affiliates is
involved shall not constitute a Change of Control.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, in each case as the same shall be in
effect at the time.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state or local U.S.
or foreign governmental, regulatory, legislative, executive or administrative
agency, commission, body, department, board, or other governmental subdivision,
court, tribunal, arbitrating body or other governmental authority.
"LAWS" shall mean all federal, state and local U.S. or foreign laws,
statutes, ordinances, rules, regulations, orders and decrees.
"MATERIAL ADVERSE EFFECT" shall mean any material adverse change,
event, circumstance or development with respect to, or material adverse effect
on, the operations, business, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, or any event
that would reasonably be expected to prevent the consummation of the
transactions consummated hereby; provided, however, that none of the following,
to the extent occurring after the date hereof, shall constitute a Material
Adverse Effect: (i) the consummation of the transactions contemplated by this
Agreement, including the Rights Offering, (ii) changes in generally accepted
accounting principles; (iii) changes that are the result of factors generally
affecting the printed circuit board industry, except to the extent that such
changes have a materially disproportionate effect on the Company and its
subsidiaries, taken as a whole, relative to other similarly situated
participants in the printed circuit board industry; (iv) changes that are the
result of economic factors affecting the national economy, except to the extent
that such changes have a materially disproportionate effect on the Company and
its subsidiaries, taken as a whole, relative to other similarly situated
participants in the industries or markets in which they operate; or (v) a
decline in the price of the Company Common Stock on The Nasdaq National Market
(it being understood that the facts and circumstances giving rise to such
decline may be deemed to constitute and shall be taken into account in
determining whether there has been a Material Adverse Effect).
"ORDER" shall mean any judgment, rule, decree, writ, injunction,
order or decision of any Governmental Authority that is binding on any person or
its property under applicable Law.
"PERSON" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
22
"REQUIRED PURCHASERS" shall mean Purchasers, that in the aggregate,
are obligated to purchase at least 75% of the Unsubscribed Shares hereunder.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, in each case as the same shall be in effect at
the time.
9.2 Assignment; Successors and Assigns. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and permitted assigns of the Parties and, with
respect to Section 8.1 hereof, shall inure to the benefit of their respective
officers, directors, employees, partners, limited partners, members, agents,
representatives, affiliates and controlling Persons, and no other Person shall
have any right or obligation hereunder. The Company may not assign this
Agreement without the consent of the Purchasers. No Purchaser may assign its
rights under this Agreement without prior written consent of the Company, except
that any Purchaser may assign its rights hereunder to any Affiliate that is a
"qualified institutional buyer" (as defined in Rule 144A promulgated under the
Securities Act), provided that notwithstanding such assignment such Purchaser
shall remain liable for all of its obligations hereunder.
9.3 Entire Agreement. This Agreement sets forth the entire agreement of
the Parties with respect to the subject matter hereof. Any prior agreements or
understandings among the Parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement.
9.4 Notices. Any notice, request, claim, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed received on the day delivered personally or sent by
facsimile (with confirmation of receipt), on the third Business Day after posted
by registered or certified mail, postage prepaid, or on the next Business Day
after sent by recognized overnight courier service, as follows:
(i) if to the Company, to:
DDi Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxx X. Xxxxx Xxxxxx, Esq.
(ii) if to any Purchaser, to the address set forth on such
Purchaser's signature page hereto,
23
or to such other address as the Person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein.
9.5 Amendments; Waivers. Except as otherwise expressly permitted herein,
no amendment or waiver of any provision of this Agreement, and no consent with
respect to any departure by the Company therefrom, shall be effective unless the
same shall be in writing and signed by the Required Purchasers and the Company;
provided that no such waiver, amendment, or consent shall, unless in writing and
signed by all the Purchasers and the Company, do any of the following:
(i) increase a Purchaser's "Proportionate Share" as set forth
on Exhibit A hereto;
(ii) require a Purchaser to purchase a number of Unsubscribed
Shares in excess of the product of such Purchaser's "Proportionate Share"
as set forth on Exhibit A hereto and the aggregate number of Unsubscribed
Shares;
(iii) modify the formula for determining the Per Share
Subscription Price or the definition of "Shortfall";
(iv) waive or modify the terms of Section 4.8 hereof;
(v) reduce the number of Standby Commitment Fee Warrants
payable to the Purchasers pursuant to this Agreement or the term thereof
or increase the exercise price thereof;
(vi) reduce the number of Break-up Warrants payable to the
Purchasers pursuant to this Agreement or the term thereof or increase the
exercise price thereof; or
(vii) extend the time periods set forth in Section 7.1(e) by
more than an additional 30 days.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts and any Party may execute any such counterpart, each of which when
executed and delivered (which deliveries may be made by facsimile) shall be
deemed to be an original, and all of which counterparts taken together shall
constitute but one and the same instrument.
9.7 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the Laws of the State of New York,
without giving effect to any of the conflicts of laws provisions thereof that
would require the application of the substantive Laws of any other jurisdiction.
9.8 Exclusive Jurisdiction; Venue. Each of the Company and the Purchasers
hereby irrevocably submits in any suit, action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated hereby to the
exclusive jurisdiction and venue of the federal and state courts located in the
City and State of New York, Borough of Manhattan and irrevocably waives any and
all objections to exclusive jurisdiction or review of venue that any
24
such Party may have under the laws of the State of New York or of the United
States. Without limiting the other remedies, this Agreement shall be enforceable
by specific performance.
9.9 Severability. If any provision of this Agreement or the application
thereof to any Person or circumstance is held illegal, invalid or unenforceable
in any jurisdiction under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and mutually acceptable to
the parties herein.
9.10 Independent Nature of Each Purchaser's Obligations and Rights. The
obligations of each Purchaser hereunder are several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a group, a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement, and it shall not
be necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
[SIGNATURE PAGE FOLLOWS]
* * * * *
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first written above.
DDi CORP.
By: /s/ XXXXX X. XXXXXXXX
---------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President and
Chief Financial Officer
S-1
CAIMAN PARTNERS, L.P.
By: Caiman Capital GP, L.P., General Partner
By: /s/ XXXXX X. XXXX
------------------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Director
Address for Notice:
Xxxx Capital Management LLC
c/o Xxxxx Xxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
S-2
CONTRARIAN TURNAROUND EQUITIES, LLC
By: Contrarian Capital Management, LLC,
its manager
By: /s/ XXXXX XXXXXXX
------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Portfolio Manager
Address for Notice:
000 X. Xxxxxx Xxx., Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
S-3
GREYWOLF CAPITAL PARTNERS II LP
By: /s/ XXXXXXX XXXX
------------------------------------------
Name: Xxxxxxx Xxxx
Title: Partner
Address for Notice:
Greywolf Capital
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
S-4
QVT FUND LP
By: QVT Associates GP LLC, its general partner
By: /s/ XXXXXXXX XXXXX
------------------------------------------
Name: Xxxxxxxx Xxxxx
Title: Managing Member
By: /s/ XXXXX XX
------------------------------------------
Name: Xxxxx Xx
Title: Managing Member
Address for Notice:
c/o QVT Financial LP
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
With a copy to:
Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx
S-5
SANKATY CREDIT OPPORTUNITIES, L.P.
By: /s/ XXXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
SANKATY HIGH YIELD ASSET PARTNERS, L.P.
By: /s/ XXXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
SANKATY HIGH YIELD PARTNERS II, L.P.
By: /s/ XXXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
SANKATY HIGH YIELD PARTNERS III, L.P.
By: /s/ XXXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
SANKATY PROSPECT CREDIT PARTNERS, L.P.
By: /s/ XXXXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Managing Director
ADDRESS FOR NOTICE FOR ALL PURCHASERS
ON THIS PAGE:
Sankaty Advisors
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
S-6
EXHIBIT A
PURCHASERS
Name Proportionate Share
--------------------------------------- -------------------
Caiman Partners, L.P. 20.000%
Contrarian Turnaround Equities, LLC 26.667%
Greywolf Capital Partners II LP 10.000%
QVT Fund LP 26.667%
Sankaty Credit Opportunities, L.P. 8.286%
Sankaty High Yield Asset Partners, L.P. 2.012%
Sankaty High Yield Partners II, L.P. 2.677%
Sankaty High Yield Partners III, L.P. 2.677%
Sankaty Prospect Credit Partners, L.P. 1.014%
EXHIBIT B
FORM OF STANDBY COMMITMENT FEE WARRANT
[Attached]
FORM OF STANDBY COMMITMENT FEE WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD OR OFFERED FOR SALE
OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE
SECURITIES ARE SOLD AND TRANSFERRED IN A TRANSACTION THAT IS EXEMPT FROM OR NOT
SUBJECT TO REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE OFFERING OF THIS SECURITY AND THE SHARES OF COMMON STOCK PURCHASABLE
HEREUNDER HAVE NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR.
DDi CORP.
Date of Initial Issuance: _______________
Number of Shares: _______________
Initial Warrant Price: $_____ per share(1)
Expiration Date: July 31, 2006
THIS CERTIFIES that, for value received, ______________________, or its
registered assigns to the extent permitted hereunder (the "HOLDER"), is entitled
to subscribe for and purchase from DDi CORP., a Delaware corporation (the
"COMPANY"), upon the terms and conditions set forth herein, at any time during
the Term (as defined below) of this Warrant, _______________ shares of common
stock, $0.001 par value per share, of the Company ("COMMON STOCK"), at the
Warrant Price (as defined below), payable as provided herein. As used herein,
the term "this Warrant" shall mean and include this Warrant and any Warrant or
Warrants hereafter issued as a consequence of the exercise or transfer of this
Warrant in whole or in part.
The number of shares of Common Stock issuable upon the exercise of the
Warrant (the "WARRANT SHARES") and the Warrant Price may be adjusted from time
to time as hereinafter set forth.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
"AFFILIATE" of any specified Person means any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
----------
(1) The initial warrant price shall be equal to the Per Share Subscription
Price (as defined in the Standby Securities Purchase Agreement).
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. No
Person shall be deemed an Affiliate of another Person solely by virtue of the
fact that both Persons own shares of the Company's capital stock.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday and
any day on which banking institutions in the State of New York are authorized by
Law or other governmental action to close.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"PERSON" means an individual, a corporation, partnership, limited
liability company, association, trust or any other entity or organization,
including a government, a political subdivision or an agency or instrumentality
thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"TERM OF THIS WARRANT" shall mean the period beginning on the date
of initial issuance hereof and ending on July 31, 2006.
"TRANSFER" means the offer, sale, donation, assignment (as
collateral or otherwise), mortgage, pledge, grant, hypothecation, encumbrance,
gift, bequest or transfer or disposition of any security.
"WARRANT PRICE" shall mean $____ per share(2), subject to adjustment
in accordance with Section 5 hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1 Procedure for Exercise of Warrant. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 10
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form of Exhibit A attached hereto, (ii) cash, a
certified or official bank check payable to the order of the Company, or a wire
transfer of funds to the Company's account, in each case in the amount of the
Warrant Price for each share being purchased and any amount required to be paid
by the Holder on account of a transfer of a Warrant or Warrant Shares pursuant
to Section 3 hereof, and (iii) this Warrant.
In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder or, subject to compliance with
Section 6.2, such other name or names as may be designated by the Holder, shall
be delivered to the Holder hereof within a reasonable time, not exceeding three
Business Days, after the rights represented by this Warrant shall have been so
----------
(2) The initial warrant price shall be equal to the Per Share Subscription
Price (as defined in the Standby Securities Purchase Agreement).
2
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares with respect to which this Warrant shall not then have been
exercised shall also be issued to the Holder hereof within such time. The person
in whose name any certificate for shares of Common Stock is issued upon exercise
of this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Holder shall have complied with
the conditions for exercise of this Warrant set forth above, irrespective of the
date of delivery of such certificate, except that, if the date of such
compliance is a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such shares at the
close of business on the next succeeding date on which the stock transfer books
are open.
2.2 Transfer Restriction Legend. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND/OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SHARES MAY
NOT be OFFERED OR sold or transferred EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
REGISTRATION AND/OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAWS, (B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND REGISTRATION AND/OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS PROVIDED THAT AT THE ISSUER'S
REQUEST, THE TRANSFEROR THEREOF SHALL HAVE DELIVERED TO THE ISSUER
AN OPINION OF COUNSEL (WHICH OPINION SHALL BE IN FORM, SUBSTANCE AND
SCOPE REASONABLY SATISFACTORY TO THE ISSUER FROM COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER) TO THE EFFECT THAT SUCH SECURITIES MAY
BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION, OR (C) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE
144 PROMULGATED UNDER THE SECURITIES ACT."
Any certificate issued at any time in exchange or substitution for
any certificate bearing such legend shall also bear such legend unless, in the
opinion of counsel for the Holder thereof (which counsel shall be satisfactory
to the Company) the securities represented thereby are not, at such time,
required by law to bear such legend. The foregoing legend shall be removed from
the certificates representing any Warrant Shares, at the request of the Holder
3
thereof, at such time as they become eligible for resale pursuant to Rule
144(k) under the Securities Act or as they have been sold pursuant to a
registration statement declared effective by the Securities and Exchange
Commission or pursuant to Rule 144 under the Securities Act. At the request of
the Company, the Company shall have the right to receive an opinion of counsel
for the Holder, reasonably satisfactory to the Company, to the effect that the
transfer of the Warrant Shares is exempt from the registration requirements of
the Securities Act, prior to the removal of the legend if the request for
removal is being made pursuant to Rule 144 or Rule 144(k) under the Securities
Act.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued Common Stock (or
out of shares of Common Stock held in its treasury) solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. The Company covenants and agrees
that all shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant shall, upon issuance, be validly issued,
fully paid and nonassessable, and free from all taxes, liens, preemptive rights
and charges with respect to the issue thereof. The Company shall take all such
actions as may be necessary to ensure that all such Warrant Shares may be so
issued without violation by the Company of any applicable law or governmental
regulation or any requirements of any domestic securities exchange or quotation
system upon which shares of Common Stock or other securities constituting
Warrant Shares may be listed or quoted (except for official notice of issuance
which shall be immediately delivered by the Company upon each such issuance).
The Company further covenants and agrees that it shall pay when due and payable
any and all federal and state documentary or stamp taxes (other than federal or
state income taxes) which may be payable in respect of the issue of this Warrant
or any Common Stock or certificates therefor issuable upon the exercise of this
Warrant, except that, if Warrant Shares or new Warrants shall be registered in a
name or names other than the name of the Holder, funds sufficient to pay all
transfer taxes payable as a result of such transfer shall be paid by the Holder
at the time of delivery of the Notice of Exercise.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5(a), Section 5(b), Section 5(c) or Section
5(f), the number of Warrant Shares shall be changed to the number determined by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable immediately prior to such adjustment
and dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT. The Warrant Price and terms of the Warrant shall be
subject to adjustment from time to time as follows:
(a) If, at any time during the Term of this Warrant, the Company
shall make or issue, a dividend or other distribution payable in additional
shares of Common Stock, then and in each such event the Warrant Price then in
effect immediately before such event shall be decreased as of the time of
such issuance by multiplying the Warrant Price then in effect by a fraction:
4
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance, and
(2) the denominator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance plus the number of shares of Common Stock issuable in payment
of such dividend or distribution.
(b) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a subdivision or split-up
of shares of Common Stock, then, immediately after the date fixed for the
determination of holders of Common Stock entitled to receive shares in such
subdivision or split-up, the Warrant Price in effect immediately before the
subdivision or split-up shall be appropriately decreased so that the number
of shares of Common Stock issuable upon the exercise hereof shall be
increased in proportion to such increase in outstanding shares.
(c) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock or reverse stock split, then, immediately
after the effective date for such combination, the Warrant Price in effect
immediately prior to such combination or reverse stock split shall be
appropriately increased so that the number of shares of Common Stock issuable
upon the exercise hereof shall be decreased in proportion to such decrease in
outstanding shares.
(d) If, at any time during the Term of this Warrant, the Company
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company (other than shares of Common Stock) or in cash or
other property (other than dividends or distributions for which an adjustment
is made pursuant to other provisions of this Section 5 or regular cash
dividends paid out of earnings or earned surplus, determined in accordance
with generally accepted accounting principles), then and in each such event
provision shall be made so that the Holder shall receive upon the exercise
hereof, in addition to the number of shares of Common Stock issuable
hereunder, the kind and amount of securities of the Company, cash or other
property which the Holder would have been entitled to receive had this
Warrant been exercised on the effective date fixed for the determination of
holders of Common Stock entitled to receive a dividend or distribution in
such event and had the Holder thereafter, during the period from such date to
and including the exercise date, retained any such securities receivable
during such period, giving application to all adjustments called for during
such period under this Section 5 with respect to the rights of the Holder.
(e) In the case of any proposed consolidation or merger of the
Company with another entity, or the proposed sale of all or substantially all
of its assets to another person or entity, or any proposed consolidation,
reorganization, recapitalization, or reclassification of the capital stock of
the Company or other transaction, then, as a condition of such consolidation,
merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction, the Company shall give 30 days' prior
written notice thereof to the Holder
5
hereof and lawful and adequate provision shall be made whereby the Holder
shall thereafter have the right to receive upon the basis and upon the terms
and conditions specified herein, in lieu of the Warrant Shares immediately
theretofore purchasable hereunder, such shares of stock, securities, cash or
assets as may (by virtue of such consolidation, merger, sale, consolidation,
reorganization, recapitalization, reclassification or other transaction) be
issued or payable with respect to or in exchange for the number of Warrant
Shares purchasable hereunder immediately before such consolidation, merger,
sale, reorganization, recapitalization, reclassification or other
transaction. In any such case appropriate provision shall be made with
respect to the rights and interests of the Holder to the end that the
provisions hereof shall thereafter be applicable as nearly as may be
practicable, in relation to any shares of stock, securities, cash or assets
thereafter deliverable upon the exercise of this Warrant. Notwithstanding the
foregoing sentences, if (x) there shall occur any consolidation, merger,
sale, consolidation, reorganization, recapitalization or other transaction in
which the Common Stock is converted into or exchanged for anything other than
solely equity securities, and (y) the common stock of the acquiring or
surviving company (which shall be understood to mean the ultimate parent of
such company, if such company is not publicly traded and its ultimate parent
is publicly traded) is publicly traded, then, as part of such consolidation,
merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction, (i) the Holder shall have the right
thereafter to receive upon the exercise hereof such number of shares of
common stock of the acquiring or surviving company as is determined by
multiplying (A) the number of shares of Common Stock subject to this Warrant
immediately prior to such consolidation, merger, sale, consolidation,
reorganization, recapitalization, reclassification or other transaction by
(B) a fraction, the numerator of which is the Fair Market Value (as defined
below) per share of Common Stock as of the effective date of such
consolidation, merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction, as determined pursuant to Section 7,
and the denominator of which is the fair market value per share of common
stock of the acquiring or surviving company as of the effective date of such
transaction, as determined in good faith by the Board of Directors of the
Company (using the principles set forth in Section 7 to the extent
applicable), and (ii) the exercise price per share of common stock of the
acquiring or surviving company shall be the Warrant Price divided by the
fraction referred to in clause (B) above. The Company shall not effect any
such consolidation, merger, sale, reorganization, recapitalization,
reclassification or other transaction unless, prior to the consummation
thereof, the successor entity (if other than the Company) resulting from such
consolidation, merger, sale, reorganization, recapitalization,
reclassification or other transaction (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument the
obligation to deliver to each Holder of Warrants such shares of stock,
securities, cash or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to acquire upon exercise of Warrants.
(f) If at any time the Company shall issue or sell any Common Stock
(other than Common Stock issued (a) pursuant to the Company's existing or
future stock option plans or pursuant to any other existing or future Common
Stock related director or employee compensation plan of the Company approved
by the board of directors of the Company (the "BOARD OF DIRECTORS"), (b) as
consideration for the acquisition of a business or of assets, (c) to the
Company's joint venture partners in exchange for interests in the relevant
joint venture, (d) upon conversion of any shares of any series of preferred
stock or as the payment
6
of a dividend with respect to any series of preferred stock outstanding on
the date hereof or the issuance of which caused an adjustment under the other
provisions of this Section 5 or (e) upon the exercise or conversion of any
security the issuance of which caused an adjustment under the other
provisions of this Section 5 for a consideration per share less than the
Warrant Price then in effect, or shall issue any options, rights, warrants or
other securities convertible into or exercisable or exchangeable for Common
Stock (other than such securities paid as dividends on any class of preferred
stock outstanding on the date hereof or the issuance of which caused an
adjustment under the other provisions of this Section 5) having a conversion,
exercise or exchange price, together with the issue price of such securities,
per share of Common Stock less than the Warrant Price then in effect, the
Warrant Price to be in effect after such issuance or sale shall be determined
by multiplying the Warrant Price in effect immediately prior to such issuance
or sale by a fraction, (i) the denominator of which shall be the sum of (w)
the number of shares of Common Stock outstanding immediately prior to such
issuance or sale plus (x) the number of additional shares of Common Stock to
be issued or sold (or, in the case of any options, rights, warrants or other
convertible, exercisable or exchangeable securities, issued on conversion,
exercise or exchange), and (ii) the numerator of which shall be the sum of
(y) the number of shares of Common Stock outstanding immediately prior to
such issuance and sale plus (z) the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number of
additional shares of Common Stock so issued or sold (or issuable on
conversion, exercise or exchange) would purchase at the Warrant Price in
effect on the date of such issuance or sale. In case any portion of the
consideration to be received by the Company shall be in a form other than
cash, the fair market value (determined in accordance with the principles set
forth in Section 7 to the extent applicable) of such non-cash consideration
shall be utilized in the foregoing computation. Such adjustment shall be made
successively whenever any such issuance or sale is made, and shall become
effective immediately after such issuance or sale. If all the Common Stock
deliverable upon exercise, conversion or exchange of securities convertible
into Common Stock have not been issued when such securities are no longer
outstanding, then the Warrant Price shall promptly be readjusted to the
Warrant Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
Common Stock issued upon conversion, exercise or exchange of such securities.
(g) Whenever the Warrant Price shall be adjusted as provided in this
Section 5, the Company shall promptly prepare a statement showing the facts
requiring such adjustment and the Warrant Price and number of Warrant Shares
that shall be in effect after such adjustment, setting forth in reasonable
detail and certifying the calculation of such adjustment. The Company shall
cause a copy of such statement to be sent by mail, first class postage
prepaid, to each Holder at its, his or her address appearing on the Company's
records. The Company shall, as promptly as reasonably practicable after the
written request at any time of the Holder (but in any event not later than 10
days thereafter), furnish or cause to be furnished to the Holder a
certificate setting forth (i) the Warrant Price then in effect and (ii) the
number of shares of Common Stock and the amount, if any, of other securities,
cash or property which then would be received upon the exercise of this
Warrant.
(h) Adjustments made pursuant to this Section 5 shall be made on the
date such dividend, subdivision, split-up, reverse stock split, combination,
distribution, issuance,
7
sale, consolidation, reorganization, recapitalization, reclassification or
other transaction, as the case may be, is made, and shall become effective at
the close of business on the day such event becomes effective.
SECTION 6. OWNERSHIP.
6.1 Ownership of Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Section 6.
6.2 Transfer and Replacement.
(a) No Holder shall Transfer this Warrant other than (i) a Transfer
to one or more of its Affiliates or (ii) if the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such Transfer is exempt from the registration
requirements of the Securities Act. Notwithstanding the foregoing, no
registration or opinion of counsel shall be required for, and a Transfer
shall be permitted in the event of, a Transfer by a Holder which is a
partnership to a partner of such partnership or a retired partner of such
partnership or to the estate of any such partner or retired partner, or a
Transfer by a Holder which is a limited liability company to a member of such
limited liability company or a retired member or to the estate of any such
member or retired member, provided that the transferee in each case agrees in
writing to be subject to the terms of this Section 6. Any attempt to Transfer
this Warrant other than in accordance with this Section 6 shall be null and
void and no right, title or interest in or to such Warrant shall be
Transferred to the purported transferee, buyer, donee, assignee or
encumbrance holder. The Company will not give, and will not permit the
Company's transfer agent to give, any effect to such attempted Transfer in
its stock records.
(b) Subject to Section 6.2(a), this Warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the
Holder hereof in person or by duly authorized attorney, together with a
properly executed Assignment (in the form of Exhibit B or Exhibit C hereto,
as the case may be) and a new Warrant or Warrants, of the same tenor as this
Warrant but registered in the name of the transferee or transferees (and in
the name of the Holder, if a partial transfer is effected) shall be promptly
made and delivered by the Company upon surrender of this Warrant duly
endorsed, at the office of the Company referred to in Section 9 hereof. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft or destruction, and, in such case, of indemnity or security reasonably
satisfactory to it, and upon surrender of this Warrant if mutilated, the
Company shall promptly make and deliver a new Warrant of like tenor, in lieu
of this Warrant. This Warrant shall be promptly cancelled by the Company upon
the surrender hereof in connection with any transfer or replacement. Except
as otherwise provided above, in the case of the loss, theft or destruction of
a Warrant, the Company shall pay all expenses, taxes and other charges
payable in connection with any transfer or replacement of this Warrant, other
than documentary or stamp taxes (if any) payable in connection with a
transfer of this Warrant, which shall be payable by the Holder. The Holder
shall not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
8
SECTION 7. FRACTIONAL SHARES. Fractional shares shall not be issued upon
the exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 7, be entitled under the terms hereof to receive
a fractional share upon the complete exercise of this Warrant, the Company
shall, upon the exercise of this Warrant for the largest number of whole shares
then called for, pay a sum in cash equal to the excess of the Fair Market Value
of such fractional share over the Warrant Price for such fractional share on the
exercise date.
(a) The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market or another nationally recognized trading
system as of the exercise date, the Fair Market Value per share of Common Stock
shall be deemed to be the average of the high and low reported sale prices per
share of Common Stock thereon on the trading day immediately preceding the
effective date or the exercise date, as applicable (provided that if no such
price is reported on such day, the Fair Market Value per share of Common Stock
shall be determined pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national
securities exchange, the Nasdaq National Market or another nationally recognized
trading system as of the effective date or the exercise date, as applicable, the
Fair Market Value per share of Common Stock shall be deemed to be the amount
most recently determined by the Board to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under any
plan, agreement or arrangement with employees of the Company); and, upon request
of the Holder, the Board (or a representative thereof) shall, as promptly as
reasonably practicable but in any event not later than 3 Business Days after
such request, notify the Holder of the Fair Market Value per share of Common
Stock and furnish the Holder with reasonable documentation of the Board's
determination of such Fair Market Value. Notwithstanding the foregoing, if the
Board has not made such a determination within the three-month period prior to
the exercise date, then (A) the Board shall make, and shall provide or cause to
be provided to the Holder notice of, a determination of the Fair Market Value
per share of the Common Stock within 15 days of a request by the Holder that it
do so, and (B) payment in cash with respect to any fractional share as required
by Section 7 hereof shall be delayed until such determination is made and notice
thereof is provided to the Holder (it being understood that this shall not
prevent the Holder, at its option, from exercising the Warrant prior to such
determination).
SECTION 8. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder:
8.1 Certain Actions. The Company shall not amend its charter to
eliminate as an authorized class of capital stock that class denominated as
"Common Stock" on the date hereof. The Company shall not by any action avoid or
seek to avoid the observance
9
or performance of any terms of this Warrant or impair or diminish its value, but
shall at all times in good faith assist in the carrying out of all such terms of
Warrant. Without limiting the generality of the foregoing, the Company shall
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
8.2 Shall Bind Successors. This Warrant and the rights evidenced
hereby shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of the Holder and its permitted assigns to the extent
permitted by Section 6.2.
8.3 No Exercise Interference; Par Value. Other than in accordance
with Section 6.2, the Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Warrant Shares
acquirable upon exercise of this Warrant is at all times equal to or less than
the Warrant Price then in effect.
8.4 Notices of Certain Actions. The Company shall give written
notice to the Holder in the event (A) the Company closes its books or takes a
record (1) with respect to any dividend or distribution upon the Common Stock,
or for the purpose of entitling or enabling any stockholder to receive any other
right, or (2) with respect to any pro rata subscription offer to holders of
Common Stock, or (B) of any recapitalization, reorganization, reclassification,
consolidation, merger, dissolution, liquidation or sale of all or substantially
all of the Company's assets or other transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities, cash or assets with respect to or in
exchange for Common Stock. Such notice shall be sent at least ten days prior to
the record date or effective date for the event specified in such notice.
SECTION 9. NOTICES. Any notice or other document required or permitted to
be given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at such address as shall have been furnished
to the Company in writing by the Holder. Any notice or other document required
or permitted to be given or delivered to the Company shall be delivered at, or
sent by certified or registered mail to, the Company at its address for notices
set forth on the signature page hereto or to such other address as shall have
been furnished in writing to the Holder by the Company. Any notice so addressed
and mailed by registered or certified mail shall be deemed to be given when so
mailed. Any notice so addressed and otherwise delivered shall be deemed to be
given when actually received by the addressee.
SECTION 10. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This
Warrant shall not entitle the Holder to any of the rights of a stockholder of
the Company (including, without limitation, any preemption rights, voting rights
or rights to dividends) except upon exercise in accordance with the terms
hereof. Notwithstanding the foregoing, in the event (i) the Company effects a
split of the Common Stock by means of a stock dividend and the Warrant Price of
and the number of Warrant Shares are adjusted as of the date of the distribution
of the dividend (rather than as of the record date for such dividend), and (ii)
the Holder exercises this Warrant
10
between the record date and the distribution date for such stock dividend, the
Holder shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend. No provision hereof, in
the absence of affirmative action by the Holder to purchase shares of Common
Stock, and no mere enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the Warrant Price hereunder
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
SECTION 11. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT
OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 12. WARRANT REGISTER. The Company shall maintain at its principal
executive offices books for the registration and the registration of transfer of
Warrants. The Holder may change its address as shown on the warrant register by
written notice to the Company requesting such change.
SECTION 13. AMENDMENTS. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Holder and the Company. The headings in this Warrant are for
purposes of reference only and shall not affect the meaning or construction of
any of the provisions hereof.
11
IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be
signed by their duly authorized officers this ________ day of ____________,
2005.
DDi CORP.
__________________________________
Name:
Title:
[HOLDER]:
__________________________________
__________________________________
Name:
Title:
Address:
__________________________________
__________________________________
__________________________________
Attention:
Facsimile:
12
EXHIBIT A
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE ATTACHED WARRANT
The undersigned hereby exercises the right to purchase shares of Common Stock
which the undersigned is entitled to purchase by the terms of the attached
Warrant according to the conditions thereof, and herewith makes payment of
$_______________ therefor in cash.
All shares to be issued pursuant hereto shall be issued in the name of, and the
initial address of such person to be entered on the books of DDi CORP. shall be:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
The shares are to be issued in certificates of the following denominations:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[Type Name of Holder]
By:___________________
Title:________________
Date: ________________
13
EXHIBIT B
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT
FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the attached Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer said Warrant on the books of DDi CORP., with full power of
substitution.
[Type Name of Holder]
By:___________________
Title:________________
Date:________________
NOTICE:
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
14
EXHIBIT C
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT
FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ______________ shares of Common Stock under and pursuant to the
attached Warrant, and (ii) on a non-exclusive basis, all other rights of the
undersigned under and pursuant to the attached Warrant, it being understood that
the undersigned shall retain, severally (and not jointly), with the
transferee(s) named herein, all rights assigned on such non-exclusive basis. The
undersigned does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer said Warrant on the books of DDi
CORP., with full power of substitution.
[Type Name of Holder]
By:___________________
Title:________________
Date:________________
NOTICE:
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
15
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
[Attached]
================================================================================
REGISTRATION RIGHTS AGREEMENT
by and among
DDi CORP.
AND
THE HOLDERS SIGNATORY HERETO
Dated as of ______________, 2005
================================================================================
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of _________,
2005, among those holders of Common Stock signatory hereto (the "HOLDERS") and
DDi CORP., a Delaware corporation (the "COMPANY").
WHEREAS:
A. Pursuant to that certain Standby Securities Purchase Agreement, dated
as of __________, 2005 (the "PURCHASE AGREEMENT"), between the Company and the
purchasers signatory thereto, upon the satisfaction of certain conditions, the
Company will issue Rights Offering Common Stock and Standby Commitment Fee
Warrants (as defined below) to the Holders.
B. Pursuant to the Standby Commitment Fee Warrants, the Company has agreed
to issue to the Holders upon the exercise thereof, shares of the Company's
Common Stock.
C. In order to induce the Holders to enter into the Purchase Agreement,
the Company has agreed to grant to the Holders as set forth herein certain
registration rights under the Securities Act (as defined below) and applicable
state securities laws with respect to the Rights Offering Common Stock and the
Warrant Common Stock (as defined below).
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. DEFINITIONS.
In addition to the terms defined elsewhere herein and the terms set forth
in the Purchase Agreement that are not otherwise defined herein, which shall
have the same meanings herein as in the Purchase Agreement, the following terms
shall have the following meanings when used herein with initial capital letters:
"ADVICE" has the meaning set forth in Section 3(b).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or is under common control
with such Person. For the purposes of this definition, "control", when used with
respect to any Person, means possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of the 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.
"BLACK SCHOLES WARRANT VALUE" shall mean the value of a warrant as
determined by the Board of Directors as of the date of determination using the
Black-Scholes valuation formula (based upon the advice of an independent
investment bank of national standing selected by the Board of Directors), which
value shall be determined by customary nationally recognized investment banking
practices using such formula. For purposes of calculating such amount, (1) the
term of the warrants will be the time from the date of determination to the
expiration date
of such warrants, (2) the assumed volatility will be 35%, (3) the assumed
risk-free rate will equal the yield on three month U.S. Treasury securities, and
(4) the price for each share of Common Stock will be (x) the average closing
price of a share of Common Stock for the twenty consecutive trading days
immediately preceding, but not including, the date of determination as reported
on the principal national securities exchange on which the shares of Common
Stock are listed or admitted for trading or (y) if not listed or admitted for
trading on any national securities exchange, the average of the closing bid and
asked prices during such twenty trading day period in the over-the-counter
market as reported by the Nasdaq National Market or any comparable system or (z)
in all other cases, as determined in good faith by the Board of Directors of the
Company, based on the advice of an independent investment bank of national
standing selected by the Board of Directors.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York, New York are permitted or required by
any applicable law to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means all of the common stock, par value $0.001 per share,
of the Company.
"COMPANY" has the meaning set forth in the Preamble and also includes the
Company's successors.
"DELAY NOTICE" has the meaning set forth in Section 2(e).
"DELAY PERIOD" has the meaning set forth in Section 2(e).
"EFFECTIVENESS PERIOD" has the meaning set forth in Section 2(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" or "HOLDERS" has the meaning set forth in the Preamble or each
Person to whom a Holder Transfers Registrable Securities or Registrable
Liquidated Damages Warrant Securities in accordance with Article V of the
Purchase Agreement. The Holder of a Warrant shall be deemed to be the Holder of
Warrant Common Stock issuable with respect thereto.
"LIQUIDATED DAMAGES WARRANT" means any warrants issued as liquidated
damages pursuant to the provisions of this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"PERSON" means a natural person, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or other entity, or a governmental
entity or any department, agency or political subdivision thereof.
2
"PROSPECTUS" shall mean the prospectus included in a Resale Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities or Registrable Liquidated Damages Warrant Securities
covered by a Resale Registration Statement or a Warrant Resale Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and, in each case, including all documents
incorporated by reference therein.
"REGISTRABLE SECURITIES" means (i) the shares of Rights Offering Common
Stock, (ii) the shares of Warrant Common Stock, (iii) to the extent shares of
Common Stock acquired by the Holders in the Rights Offering are not freely
tradeable, any shares of Common Stock acquired by the Holders in the Rights
Offering and (iv) other shares of Common Stock owned by the Holders as of the
date of this Agreement, including any shares of Common Stock or other securities
that may be received by the Holders (x) as a result of a stock dividend, stock
split or other distribution of Common Stock in relation to the Rights Offering
Common Stock or the Warrant Common Stock or (y) on account of Rights Offering
Common Stock or Warrant Common Stock in a recapitalization, reorganization,
consolidation, merger, share exchange or other transaction involving the
Company, in each case upon the respective original issuance thereof, and at all
times subsequent thereto; provided, however, that the foregoing shall cease to
be "Registrable Securities" to the extent that (i) such securities have been
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering them or (ii) such securities are then
saleable by the holder thereof pursuant to Rule 144(k).
"REGISTRATION STATEMENT" means a Resale Registration Statement or a
Warrant Resale Registration Statement.
"RESALE REGISTRATION" shall mean a registration effected pursuant to
Section 2(a).
"RESALE REGISTRATION STATEMENT" shall mean a "resale" registration
statement of the Company pursuant to the provisions of Section 2(a) which covers
the resale of all of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act, on Form S-3 (or
if such form is not available, any other appropriate available form) under the
Securities Act, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all documents
incorporated by reference therein.
"RIGHTS OFFERING COMMON STOCK" means the Company's Common Stock issued to
the Holders pursuant to the Purchase Agreement.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STANDBY COMMITMENT FEE WARRANT" means one of the Common Stock Purchase
Warrants, dated as of __________, 2005, issued pursuant to the terms of the
Purchase Agreement, entitling the Holder thereof to purchase Warrant Common
Stock under the terms and subject to the conditions set forth therein.
3
"TRANSFER" means and includes the act of selling, giving, transferring,
creating a trust (voting or otherwise), assigning or otherwise disposing of
(other than pledging, hypothecating or otherwise transferring as security or any
transfer upon any merger or, consolidation) (and correlative words shall have
correlative meanings); provided, however, that any transfer or other disposition
upon foreclosure or other exercise of remedies of a secured creditor after an
event of default under or with respect to a pledge, hypothecation or other
transfer as security shall constitute a Transfer.
"WARRANTS" means the Standby Commitment Fee Warrants and the Liquidated
Damages Warrants, collectively.
"WARRANT COMMON STOCK" means the Company's Common Stock issued or issuable
to the Holders upon the exercise of any of the Warrants.
"WARRANT RESALE REGISTRATION STATEMENT" shall mean a "resale" registration
statement of the Company that is filed pursuant to the provisions of Section
2(c) which covers the resale of all of the Warrant Common Stock issuable upon
the exercise of the Liquidated Damages Warrants for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act, on Form S-3 (or
if such form is not available, any other appropriate available form) under the
Securities Act, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all documents
incorporated by reference therein.
2. RESALE REGISTRATION.
(a) Registration Requirement.
Subject to the last sentence of this paragraph, the Company
shall prepare promptly and file with the Commission a Resale Registration
Statement meeting the requirements of the Securities Act within five (5)
Business Days following the Closing under the Purchase Agreement, and will use
its best efforts to cause the Resale Registration Statement to be declared
effective by the Commission as soon as practicable thereafter and in any event
not later than sixty (60) days after such filing. The Company's obligations to
file a Resale Registration Statement and to have it declared effective within
the time periods set forth in the first sentence of this Section 2(a) shall be
subject to the Company's right to deliver to the Holders a Delay Notice pursuant
to Section 2(e) hereof.
If a Resale Registration Statement is not filed with the
Commission within five (5) Business Days following the Closing under the
Purchase Agreement (subject to any bona fide Delay Period), the Company will pay
to each Holder, as liquidated damages and not as a penalty, an amount equal to
1.0% of the aggregate purchase price for the Unsubscribed Shares paid by such
Holder pursuant to Section 1.3 of the Purchase Agreement for each month or part
thereof that such Resale Registration Statement has not been filed, payable in
monthly installments. If the Resale Registration Statement is not declared
effective by the Commission within 60 days after it is filed with the Commission
(subject to any bona fide Delay Period), the
4
Company will pay to each Holder, as liquidated damages and not as a penalty, an
amount equal to 1.0% of the aggregate purchase price for the Unsubscribed Shares
paid by such Holder pursuant to Section 1.3 of the Purchase Agreement for each
month or part thereof that such Resale Registration Statement has not been
declared effective, payable in monthly installments. The payment of liquidated
damages pursuant to this paragraph shall be made by the Company, at its option,
either in cash or in Liquidated Damages Warrants having a value (such value to
be determined as set forth below) equal to such liquidated damages. Such
Liquidated Damages Warrants shall contain the same terms as the Standby
Commitment Fee Warrants except that they shall have an exercise period of one
year from the date of actual issuance, and they shall have an exercise price (x)
with respect to the first installment of Liquidated Damages Warrants, equal to
the Average Share Price (as defined in the Purchase Agreement) on the date on
which the Company first becomes obligated to pay the liquidated damages and (y)
with respect to any subsequent installment of Liquidated Damages Warrants, on
the first Business Day of the month period for which such installment is
issuable. The value of such Liquidated Damages Warrants shall be equal to their
Black Scholes Warrant Value. Liquidated damages shall be deemed to commence
accruing on the day on which the event triggering such liquidated damages
occurs. The liquidated damages to be paid to the Holders pursuant to this
Section 2(a) shall cease to accrue (i) with respect to the liquidated damages
for failure to have the Resale Registration Statement filed with the Commission
on or prior to the fifth Business Day following the Closing, on the day that the
Resale Registration Statement has been filed with the Commission or (ii) with
respect to the liquidated damages for failure to have the Resale Registration
Statement declared effective on or prior to the sixtieth (60th) day after it is
filed with the Commission, on the day that the Resale Registration Statement has
been declared effective by the Commission. The parties hereto agree that the
liquidated damages provided for in this Section 2(a) constitute a reasonable
estimate of the damages that will be suffered by the Holders by reason of the
failure of the Resale Registration Statement to be filed and/or to be declared
effective, as the case may be, in accordance with this Agreement.
(b) Effectiveness Requirement.
The Company agrees to use its best efforts to keep the Resale
Registration Statement continuously effective and the Prospectus usable for
resales for a period commencing on the date that such Resale Registration
Statement is initially declared effective by the Commission and terminating on
the date when all of the Registrable Securities covered by such Resale
Registration Statement have been sold pursuant to such Resale Registration
Statement or have ceased to be Registrable Securities (the "EFFECTIVENESS
PERIOD"); provided, however, the Company is permitted to suspend sales of the
Registrable Securities during any Delay Period.
After the Resale Registration Statement has been declared
effective by the Commission, if at any time the Resale Registration Statement or
the Prospectus thereunder cannot be used for the resale of the Registrable
Securities for any reason (including without limitation by reason of a stop
order or the Company's failure to update the Resale Registration Statement but
subject to any bona fide Delay Period), then, subject to subsection (e) below,
the Company will pay to each Holder, as liquidated damages and not as a penalty,
an amount equal to 1.0% of the aggregate purchase price for the Unsubscribed
Shares paid by such Holder pursuant to Section 1.3 of the Purchase Agreement for
each month or part thereof that such Resale Registration Statement cannot be
used for the resale of the Registrable Securities, payable
5
in monthly installments. The payment of liquidated damages pursuant to this
paragraph shall be made by the Company, at its option, either in cash or in
Liquidated Damages Warrants having a value (such value to be determined as set
forth below) equal to such liquidated damages. Such Liquidated Damages Warrants
shall contain the same terms as the Standby Commitment Fee Warrants except that
they shall have an exercise period of one year from the date of actual issuance,
and they shall have an exercise price (x) with respect to the first installment
of Liquidated Damages Warrants, equal to the Average Share Price (as defined in
the Purchase Agreement) on the date on which the Company first becomes obligated
to pay the liquidated damages and (y) with respect to any subsequent installment
of Liquidated Damages Warrants, on the first Business Day of the month period
for which such installment is issuable. The value of such Liquidated Damages
Warrants shall be equal to their Black Scholes Warrant Value. Liquidated damages
shall be deemed to commence accruing on the day on which the event triggering
such liquidated damages occurs. The liquidated damages to be paid to the Holders
pursuant to this Section 2(b) shall cease to accrue on the day the Holders have
received notice from the Company regarding the reinstatement of effectiveness of
the Resale Registration Statement. The parties hereto agree that the liquidated
damages provided for in this Section 2(b) constitute a reasonable estimate of
the damages that will be suffered by the Holders by reason of the failure of the
Resale Registration Statement to remain effective in accordance with this
Agreement.
(c) Warrant Resale Registration Statement.
Subject to the last sentence of this paragraph, if the Company
is not able to register the resale of the Warrant Common Stock issuable upon
exercise of the Liquidated Damages Warrants (the "REGISTRABLE LIQUIDATED DAMAGES
WARRANT SECURITIES") pursuant to the Resale Registration Statement, the Company
shall prepare promptly and file with the Commission a Warrant Resale
Registration Statement meeting the requirements of the Securities Act within ten
(10) Business Days following the issuance of any such Liquidated Damages
Warrants, and will use its best efforts to cause the Warrant Resale Registration
Statement to be declared effective by the Commission as soon as practicable
thereafter and in any event not later than sixty (60) days after such filing.
The Company's obligations to file a Warrant Resale Registration Statement and to
have it declared effective within the time periods set forth in the first
sentence of this Section 2(c) shall be subject to the Company's right to deliver
to the Holders a Delay Notice pursuant to Section 2(e) hereof.
If a Warrant Resale Registration Statement is not filed with
the Commission within ten (10) Business Days following the issuance of any such
Liquidated Damages Warrants (subject to any bona fide Delay Period), the Company
will pay to each Holder, as liquidated damages and not as a penalty, an amount
equal to 1.0% of the liquidated damages relating to such Liquidated Damages
Warrants for each month or part thereof that such Warrant Resale Registration
Statement has not been filed, payable in monthly installments. If the Warrant
Resale Registration Statement is not declared effective by the Commission within
60 days after it is filed with the Commission (subject to any bona fide Delay
Period), the Company will pay to each Holder, as liquidated damages and not as a
penalty, an amount equal to 1.0% of the liquidated damages relating to such
Liquidated Damages Warrants for each month or part thereof that such Warrant
Resale Registration Statement has not been declared effective, payable in
monthly installments. The payment of liquidated damages pursuant to this
paragraph shall be
6
made by the Company, at its option, either in cash or in Liquidated Damages
Warrants having a value (such value to be determined as set forth below) equal
to such liquidated damages. Such Liquidated Damages Warrants shall contain the
same terms as the Standby Commitment Fee Warrants except that they shall have an
exercise period of one year from the date of actual issuance, and they shall
have an exercise price (x) with respect to the first installment of Liquidated
Damages Warrants, equal to the Average Share Price (as defined in the Purchase
Agreement) on the date on which the Company first becomes obligated to pay the
liquidated damages and (y) with respect to any subsequent installment of
Liquidated Damages Warrants, on the first Business Day of the month period for
which such installment is issuable. The value of such Liquidated Damages
Warrants shall be equal to their Black Scholes Warrant Value. Liquidated damages
shall be deemed to commence accruing on the day on which the event triggering
such liquidated damages occurs. The liquidated damages to be paid to the Holders
pursuant to this Section 2(c) shall cease to accrue (i) with respect to the
liquidated damages for failure to have the Warrant Resale Registration Statement
filed with the Commission on or prior to the tenth Business Day following the
Closing, on the day that the Warrant Resale Registration Statement has been
filed with the Commission or (ii) with respect to the liquidated damages for
failure to have the Warrant Resale Registration Statement declared effective on
or prior to the sixtieth (60th) day after it is filed with the Commission, on
the day that the Warrant Resale Registration Statement has been declared
effective by the Commission. The parties hereto agree that the liquidated
damages provided for in this Section 2(c) constitute a reasonable estimate of
the damages that will be suffered by the Holders by reason of the failure of the
Warrant Resale Registration Statement to be filed and/or to be declared
effective, as the case may be, in accordance with this Agreement.
(d) Warrant Resale Registration Statement Effectiveness Requirement.
The Company agrees to use its best efforts to keep the Warrant
Resale Registration Statement continuously effective and the Prospectus usable
for resales for a period commencing on the date that such Warrant Resale
Registration Statement is initially declared effective by the Commission and
terminating on the date when all of the Registrable Liquidated Damages Warrant
Securities covered by such Warrant Resale Registration Statement have been sold
pursuant to such Warrant Resale Registration Statement or have ceased to be
Registrable Liquidated Damages Warrant Securities; provided, however, the
Company is permitted to suspend sales of the Registrable Liquidated Damages
Warrant Securities during any Delay Period.
After the Warrant Resale Registration Statement has been
declared effective by the Commission, if at any time the Warrant Resale
Registration Statement or the Prospectus thereunder cannot be used for the
resale of the Registrable Liquidated Damages Warrant Securities for any reason
(including without limitation by reason of a stop order or the Company's failure
to update the Warrant Resale Registration Statement but subject to any bona fide
Delay Period), then, subject to subsection (e) below, the Company will pay to
each Holder, as liquidated damages and not as a penalty, an amount equal to 1.0%
of the liquidated damages relating to the related Liquidated Damages Warrants
for each month or part thereof that such Warrant Resale Registration Statement
cannot be used for the resale of the Registrable Liquidated Damages Warrant
Securities, payable in monthly installments. The payment of liquidated damages
pursuant to this paragraph shall be made by the Company, at its option,
7
either in cash or in Liquidated Damages Warrants having a value (such value to
be determined as set forth below) equal to such liquidated damages. Such
Liquidated Damages Warrants shall contain the same terms as the Standby
Commitment Fee Warrants except that they shall have an exercise period of one
year from the date of actual issuance, and they shall have an exercise price (x)
with respect to the first installment of Liquidated Damages Warrants, equal to
the Average Share Price (as defined in the Purchase Agreement) on the date on
which the Company first becomes obligated to pay the liquidated damages and (y)
with respect to any subsequent installment of Liquidated Damages Warrants, on
the first Business Day of the month period for which such installment is
issuable. The value of such Liquidated Damages Warrants shall be equal to their
Black Scholes Warrant Value. Liquidated damages shall be deemed to commence
accruing on the day on which the event triggering such liquidated damages
occurs. The liquidated damages to be paid to the Holders pursuant to this
Section 2(d) shall cease to accrue on the day the Holders have received notice
from the Company regarding the reinstatement of effectiveness of the Warrant
Resale Registration Statement. The parties hereto agree that the liquidated
damages provided for in this Section 2(d) constitute a reasonable estimate of
the damages that will be suffered by the Holders by reason of the failure of the
Warrant Resale Registration Statement to remain effective in accordance with
this Agreement.
(e) Delay Period.
The term "DELAY PERIOD" means, with respect to any obligation
to file any Resale Registration Statement or any Warrant Resale Registration
Statement or to keep any Resale Registration Statement, Warrant Resale
Registration Statement or Prospectus usable for resales pursuant to this Section
2, the shortest period of time determined in good faith by the Company's Board
of Directors to be necessary when there exist circumstances relating to a
material pending development, including, but not limited to, a pending or
contemplated material acquisition or merger or other material transaction or
event, which would require additional disclosure by the Company in such Resale
Registration Statement, Warrant Resale Registration Statement or Prospectus of
previously non-public material information which the Company determines in good
faith upon the advice of counsel that it has a bona fide business purpose for
keeping confidential and non-public and the non-disclosure of which in such
Resale Registration Statement, Warrant Resale Registration Statement or
Prospectus might cause such Resale Registration Statement, Warrant Resale
Registration Statement or Prospectus to fail to comply with applicable
disclosure requirements or if the Company becomes ineligible to use the
registration form on which the Resale Registration Statement or Warrant Resale
Registration Statement is filed and declared effective (such circumstances,
"DELAY CIRCUMSTANCES"). A Delay Period shall commence on and include the date
that the Company gives written notice (a "DELAY NOTICE") to the Holders that the
Prospectus is no longer usable as a result of such Delay Circumstances and shall
end on the date when the Holders are advised in writing by the Company that the
current Delay Period has terminated (it being understood that the Company shall
give such notice to all Holders promptly upon making the determination that the
Delay Period has ended). If as a result of the circumstances giving rise to the
Delay Period the Prospectus included in the Resale Registration Statement or the
Warrant Resale Registration Statement has been amended to comply with the
requirements of the Securities Act, the Company shall enclose such revised
Prospectus with the notice to the Holders advising them that the Delay Period
has terminated. Notwithstanding anything herein to the contrary the Company is
only entitled to three (3) Delay Periods having durations of not more than
thirty (30) days each
8
during any consecutive 12 month period, and not to exceed more than ninety (90)
days in the aggregate in any consecutive 12 month period. A Delay Period may not
commence if a prior Delay Period has terminated within the previous 30 days or
if three Delay Periods have occurred during the consecutive 12 month period
ending on the date that the Company gives notice that a Delay Period has
commenced. The Company covenants and agrees that it will not deliver a Delay
Notice with respect to a Delay Period unless the Company's employees, officers
and directors and their affiliates are also prohibited by the Company for the
duration of the Delay Period from effecting any public sales of shares of Common
Stock beneficially owned by them.
If at any time the Company breaches the terms of this Section
2(e) with respect to the number of Delay Periods in any 12 month period or if
the duration of any Delay Period exceeds 30 days, then, the Company will pay to
each Holder, as liquidated damages and not as a penalty, an amount equal to 1.0%
of the aggregate purchase price for the Unsubscribed Shares paid by such Holder
pursuant to Section 1.3 of the Purchase Agreement for each month or part thereof
that the Company is in violation of this Section 2(e), payable in monthly
installments. The payment of liquidated damages pursuant to this paragraph shall
be made by the Company, at its option, either in cash or in Liquidated Damages
Warrants having a value (such value to be determined as set forth below) equal
to such liquidated damages. Such Liquidated Damages Warrants shall contain the
same terms as the Standby Commitment Fee Warrants except that they shall have an
exercise period of one year from the date of actual issuance, and they shall
have an exercise price (x) with respect to the first installment of Liquidated
Damages Warrants, equal to the Average Share Price (as defined in the Purchase
Agreement) on the date on which the Company first becomes obligated to pay the
liquidated damages and (y) with respect to any subsequent installment of
Liquidated Damages Warrants, on the first Business Day of the month period for
which such installment is issuable. The value of such Liquidated Damages
Warrants shall be equal to their Black Scholes Warrant Value. Liquidated damages
shall be deemed to commence accruing on the day on which the event triggering
such liquidated damages occurs. The liquidated damages to be paid to the Holders
pursuant to this Section 2(e) shall cease to accrue on the day such Delay Period
that causes the Company to breach the terms of this Section 2(e) terminates. The
parties hereto agree that the liquidated damages provided for in this Section
2(e) constitute a reasonable estimate of the damages that will be suffered by
the Holders by reason of the breach by the Company of the terms of this Section
2(e).
(f) Notice.
The Company will, in the event a Registration Statement is
declared effective, notify each such Holder as promptly as practicable, and in
any event no later than the next Business Day, when such Registration Statement
has become effective and take such other actions as are required to permit
unrestricted resales of the Registrable Securities or Registrable Liquidated
Damages Warrant Securities, including providing to each Holder a reasonable
number of copies of the Prospectus which is a part of such Registration
Statement as is requested by such Holder. The Company further agrees to
supplement or amend each Registration Statement if and as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Registration Statement or by the Securities Act or by any other
rules and regulations thereunder for registrations, and the Company agrees to
notify the Holders of Registrable Securities or Registrable Liquidated Damages
Warrant Securities of any such supplement or amendment promptly after its being
used or filed with the Commission.
9
3. REGISTRATION PROCEDURES.
(a) Obligations of the Company.
In connection with its obligations under Section 2 with
respect to the Resale Registration Statement and any Warrant Resale Registration
Statement, the Company shall:
(i) prepare and file with the Commission a Resale
Registration Statement or Warrant Resale Registration
Statement as prescribed by Sections 2(a) and 2(c),
respectively, within the relevant time periods specified
in Sections 2(a) and 2(c), respectively, on Form S-3 (or
if such form is not available, any other appropriate
available form), which form shall (A) be available for
the resale of the Registrable Securities or Registrable
Liquidated Damages Warrant Securities by the selling
Holders thereof and (B) comply as to form in all
material respects with the requirements of the
applicable form and include all financial statements
required by the Commission to be filed therewith; the
Company shall use its best efforts to cause such Resale
Registration Statement or Warrant Resale Registration
Statement to become effective and remain effective and
the Prospectus usable for resales in accordance with
Section 2, subject to the proviso contained in Section
2(b) or Section 2(d), as applicable; provided, however,
that, no fewer than five (5) calendar days before filing
any Resale Registration Statement, Warrant Resale
Registration Statement or Prospectus or any amendments
or supplements thereto, the Company shall furnish to and
afford the Holders covered by such Resale Registration
Statement or Warrant Resale Registration Statement and
their counsel a reasonable opportunity to review copies
of all such documents (including copies of any documents
to be incorporated by reference therein and all exhibits
thereto) proposed to be filed and will cause its
officers and directors, counsel and independent
registered public accountants to respond to such
inquiries as shall be necessary, in the reasonable
opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act;
and the Company shall not file any Resale Registration
Statement, Warrant Resale Registration Statement or
Prospectus or any amendments or supplements thereto in
respect of which the Holders must be afforded an
opportunity to review prior to the filing of such
document, other than filings required under the Exchange
Act, if the Holders or their counsel shall reasonably
object in a timely manner; and provided further,
however, the plan of distribution disclosed in the
Resale Registration Statement or the Warrant Resale
Registration Statement shall be in the form attached
hereto as Exhibit B, with such changes as the Holders
may reasonably request;
(ii) prepare and file with the Commission such amendments
(including post effective amendments) to any
Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness
Period, subject to the proviso contained in Section 2(b)
or Section 2(d), as the case
10
may be, or as reasonably requested by the Holders of a
majority of Registrable Securities or Registrable
Liquidated Damages Warrants Securities, as the case may
be, and cause each Prospectus to be supplemented, if so
determined by the Company or requested by the
Commission, by any required prospectus supplement and as
so supplemented to be filed pursuant to Rule 424 (or any
similar provision then in force), under the Securities
Act; respond as promptly as reasonably possible to any
comments received from the Commission with respect to
such Registration Statement, or any amendment,
post-effective amendment or supplement relating thereto;
and as promptly as reasonably possible, upon request,
provide the Holders true and complete copies of all
correspondence from and to the Commission relating to
such Registration Statement; and comply in all material
respects with the provisions of the Securities Act, the
Exchange Act and the rules and regulations promulgated
thereunder applicable to it with respect to the
disposition of all Registrable Securities or Registrable
Liquidated Damages Warrant Securities covered by such
Registration Statement during the Effectiveness Period
in accordance with the intended method or methods of
distribution by the selling Holders thereof described in
this Agreement;
(iii) register or qualify the Registrable Securities or
Registrable Liquidated Damages Warrant Securities under
all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder shall reasonably
request in writing, keep each such registration or
qualification effective during the Effectiveness Period
and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder
to consummate the disposition in each such jurisdiction
of such Registrable Securities or Registrable Liquidated
Damages Warrant Securities owned by such Holder;
provided, however, that the Company shall not be
required to (A) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would
not otherwise be required to qualify but for this
Section 3(a)(iii), (B) file any general consent to
service of process in any jurisdiction where it would
not otherwise be subject to such service of process or
(C) subject itself to any material taxation in any such
jurisdiction if it is not then so subject;
(iv) promptly (and, in the case of (G) below, not less than
five (5) calendar days prior to such filing) notify each
Holder and promptly confirm such notice in writing, if
such notice was verbally given, (A) when the
Registration Statement covering such Registrable
Securities or Registrable Liquidated Damages Warrant
Securities has become effective and when any post
effective amendments thereto become effective, (B) of
the receipt of any comments from the Commission with
respect to any such document or a document incorporated
by reference therein, (C) of any request by the
Commission or any other federal or state securities
authority for amendments or supplements to such
Registration Statement or Prospectus or for additional
information after such Registration Statement has become
11
effective, (D) of the issuance or threatened issuance by
the Commission or any state securities authority of any
stop order suspending the effectiveness of such
Registration Statement or the qualification of the
Registrable Securities or Registrable Liquidated Damages
Warrant Securities in any jurisdiction described in
Section 3(a)(iii) or the initiation of any proceedings
for that purpose, (E) 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 or Registrable Liquidated
Damages Warrant Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for
such purpose, (F) of the happening of any event or the
failure of any event to occur or the discovery of any
facts, during the Effectiveness Period, which makes any
statement made in such Registration Statement or the
related Prospectus untrue in any material respect or
which causes such Registration Statement or Prospectus
to omit to state a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not misleading
and (G) when a Prospectus or Prospectus Supplement or
post-effective amendment to such Registration Statement
is proposed to be filed;
(v) use its best efforts to prevent the entry of any stop
order or other suspension of effectiveness of any
Registration Statement, or if entered, to obtain the
withdrawal of any such stop order or to avoid the
issuance of, or, if issued, obtain the withdrawal of any
suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities or
Registrable Liquidated Damages Warrant Securities for
sale in any jurisdiction at the earliest possible
moment;
(vi) furnish to each Holder, without charge, one conformed
copy of the Registration Statement and any
post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto,
unless requested) promptly after the filing of such
documents with the Commission, and additional conformed
copies of such Registration Statement as such Holder may
reasonably request;
(vii) promptly deliver to each selling Holder, without charge,
as many copies of the applicable Prospectus (including
each preliminary Prospectus) as such Holder from time to
time may reasonably request (it being understood that
the Company consents to the use of the Prospectus by
each of the selling Holders in connection with the
offering and sale of the Registrable Securities or the
Registrable Liquidated Damages Warrant Securities
covered by the Prospectus), such other documents
incorporated by reference therein and any exhibits
thereto as such selling Holder from time to time may
reasonably request in order to facilitate the
disposition of the Registrable Securities or Registrable
Liquidated Damages Warrant Securities by such Holder;
12
(viii) as soon as practicable after the resolution of any
matter or event specified in Sections 3(a)(iv)(B),
3(a)(iv)(C), 3(a)(iv)(E) and 3(a)(iv)(F) (subject to
the proviso contained in Section 2(b)), prepare and
file with the Commission a supplement or post-effective
amendment to the applicable Registration Statement or
the related Prospectus or any document incorporated
therein by reference or file any other required
document, and provide revised or supplemented
Prospectuses to the Holders so that, as thereafter
delivered to the purchasers of the Registrable
Securities or Registrable Liquidated Damages Warrant
Securities, such Prospectus will not include any untrue
statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which
they were made, not misleading;
(ix) a reasonable time prior to the filing of any document
which is to be incorporated by reference into a
Registration Statement or a Prospectus after the
initial filing of such Registration Statement, provide
a reasonable number of copies of such document to the
Holders as shall be reasonably requested by the
Holders, if any;
(x) cooperate with each seller of Registrable Securities or
Registrable Liquidated Damages Warrant Securities
covered by a Registration Statement and its counsel in
connection with any filings required to be made with
the NASD;
(xi) take all other steps reasonably necessary to effect the
registration of the Registrable Securities or
Registrable Liquidated Damages Warrant Securities
covered by a Registration Statement contemplated
hereby;
(xii) use its best efforts to cause all Registrable
Securities or Registrable Liquidated Damages Warrant
Securities registered pursuant to this Agreement to be
listed on each securities exchange, interdealer
quotation system or other market on which similar
securities issued by the Company are then listed;
(xiii) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing
Registrable Securities or Registrable Liquidated
Damages Warrant Securities to be delivered to a
transferee pursuant to the 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 or
Registrable Liquidated Damages Warrant Securities to be
in such denominations and registered in such names as
any such Holders may request;
(xiv) from and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of
any securities of the Company to include any of their
securities that are not Registrable Securities or
Registrable Liquidated Damages Warrant Securities in
the Registration
13
Statement under Section 2(a) or Section 2(c) hereof or
any amendment or supplement thereto without the consent
of the holders of a majority in interest of the
Registrable Securities or Registrable Liquidated Damages
Warrant Securities, as the case may be; and
(xv) notwithstanding any other provision of this Section
3(a), if the Company becomes ineligible to use the
registration form on which the Registration Statement is
filed and declared effective pursuant to Section 2(a) or
Section 2(c), thereby precluding any Holder from using
the related Prospectus, the Company shall use its best
efforts to prepare and file either a post effective
amendment to the Registration Statement to convert such
registration statement to, or a new Registration
Statement on, another registration form which the
Company is eligible to use within thirty (30) days after
the date that the Company becomes ineligible, provided
such other registration form shall be available for the
sale of the Registrable Securities or Registrable
Liquidated Damages Warrant Securities by the selling
Holders thereof and such amended or new Registration
Statement shall remain subject in all respects to the
provisions of this Section 3(a).
(b) Holders' Obligations.
(i) Each Holder agrees that, upon receipt of any notice from
the Company of the occurrence of any event specified in
Sections 3(a)(iv)(B), 3(a)(iv)(C), 3(a)(iv)(E),
3(a)(iv)(F) or any Delay Notice, such Holder will
forthwith discontinue disposition of Registrable
Securities or Registrable Liquidated Damages Warrant
Securities pursuant to the Registration Statement at
issue until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by
Section 3(a)(viii) or until it is advised in writing
(the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and, if so
directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies in such
Holder's possession, other than permanent file copies
then in such Holder's possession, of the Prospectus
covering such Registrable Securities or Registrable
Liquidated Damages Warrant Securities current at the
time of receipt of such notice.
(ii) Each Holder agrees that the Company may require each
seller of Registrable Securities or Registrable
Liquidated Damages Warrant Securities as to which any
registration is being effected to furnish to it such
information regarding such seller as may be required by
the staff of the Commission to be included in the
applicable Registration Statement, the Company may
exclude from such registration the Registrable
Securities or Registrable Liquidated Damages Warrant
Securities of any seller who fails to furnish such
information which is not otherwise readily available to
the Company within ten (10) Business Days after
receiving such request, and the Company shall have no
obligation to register under the Securities Act the
Registrable Securities or Registrable Liquidated
14
Damages Warrant Securities of a seller who so fails to
furnish such information; provided that upon being
furnished with such information by a Holder, including
by any permitted transferee of Registrable Securities or
Registrable Liquidated Damages Warrant Securities,
whether before or after the Registration Statement is
declared effective, the Company shall as promptly as
reasonably practicable file a post-effective amendment
to the Registration Statement, or a supplement to the
Prospectus, for purposes of including such Holder as a
selling Holder under the Registration Statement.
4. REGISTRATION EXPENSES.
All Registration Expenses will be borne by the Company whether or not the
Registration Statement becomes effective. "REGISTRATION EXPENSES" means all fees
and expenses incident to the performance of, or compliance with, this Agreement
by the Company, including, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses of compliance with
securities or "blue sky" laws (including, without limitation, fees and
disbursements of counsel for the selling Holders in connection with "blue sky"
qualifications of the Registrable Securities or Registrable Liquidated Damages
Warrant Securities and determination of the eligibility of the Registrable
Securities or Registrable Liquidated Damages Warrant Securities for investment
under the laws of such jurisdictions as the Holders of a majority of the
Registrable Securities or Registrable Liquidated Damages Warrant Securities
being sold may designate)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities or
Registrable Liquidated Damages Warrant Securities in a form eligible for deposit
with The Depository Trust Company and of printing Prospectuses if the printing
of Prospectuses is requested by the Holders of a majority of the Registrable
Securities or Registrable Liquidated Damages Warrant Securities included in any
Registration Statement), (iii) fees and disbursements of counsel for the Company
and one single special counsel for the Holders, (iv) all fees and expenses of
listing the Registrable Securities or Registrable Liquidated Damages Warrant
Securities pursuant to Section 3(a)(xii), and (v) fees and expenses of all other
Persons retained by the Company in connection with this Agreement; provided,
however, that Registration Expenses shall not include fees and expenses of any
counsel for the Holders except as provided in clause (iii) above and any local
counsel that are not included in the definition of Registration Expenses nor
shall it include underwriting fees, discounts or commissions relating to the
offer and sale of Registrable Securities or Registrable Liquidated Damages
Warrant Securities, which shall be borne by the Holders included in such
registration pro rata in proportion to the number of Registrable Securities or
Registrable Liquidated Damages Warrant Securities of such Holder included in
such registration. In addition, the Company will pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange on which similar
securities issued by the Company are then listed and the fees and expenses of
any Person, including special experts, retained by the Company.
15
5. INDEMNIFICATION.
(a) Indemnification by the Company.
The Company will indemnify and hold harmless, to the fullest
extent permitted by law, each Holder whose Registrable Securities or Registrable
Liquidated Damages Warrant Securities are registered pursuant to this Agreement,
the officers, directors, agents, members, partners, limited partners and
employees of each of them, each Person who controls such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents, members, partners, limited partners and
employees of any such controlling Person, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, the costs of
investigation and attorneys' fees) and expenses (collectively, "LOSSES"), as
incurred, arising out of or based upon any untrue or alleged untrue statement of
a material fact contained in any Registration Statement, preliminary Prospectus
or Prospectus or in any amendment or supplement thereto, or arising out of or
based upon 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, except insofar as the same are based upon information furnished in
writing to the Company by such Holder expressly for use therein; provided,
however, that the Company will not be liable to any Holder to the extent that
any such Losses arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
Prospectus if either (A) (i) after receiving copies thereof from the Company,
such Holder failed to send or deliver a copy of the Prospectus with or prior to
the delivery of written confirmation of the sale by such Holder to the Person
asserting the claim from which such Losses arise and (ii) the Prospectus would
have corrected in all material respects such untrue statement or alleged untrue
statement or such omission or alleged omission; or (B) such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in all
material respects in an amendment or supplement to the Prospectus previously
furnished by or on behalf of the Company with copies of the Prospectus as so
amended or supplemented, and, after receiving copies thereof from the Company,
such Holder thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of a Registrable Security or
Registrable Liquidated Damages Warrant Security to the Person asserting the
claim from which such Losses arise. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of any Holder or
any officer, director, agent or employee of such Holder.
(b) Indemnification by Holders of Registrable Securities or
Registrable Liquidated Damages Warrant Securities.
In connection with any Registration Statement in which a
Holder is participating, such Holder will furnish to the Company in writing such
information concerning the Holder as the Company reasonably requests concerning
such Holder for use in connection with any Registration Statement or Prospectus
and will severally and not jointly indemnify, to the fullest extent permitted by
law, the Company, its directors and 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, from and against any and all Losses
arising out of or based upon (i) any disposition of Registrable Securities or
Registrable Liquidated Damages Warrant Securities after
16
receiving notice of a Delay Period and prior to receiving Advice under Section
3(b)(i) that use of the Prospectus may be resumed or (ii) any untrue statement
of a material fact contained in any Registration Statement, Prospectus or
preliminary Prospectus or arising out of or based 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 finally judicially determined by a court of competent
jurisdiction to have been contained in any information so furnished in writing
by such Holder to the Company expressly for use in such Registration Statement
or Prospectus and to have been relied upon by the Company in the preparation of
such Registration Statement, Prospectus or preliminary Prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any officer, director, agent or employee
of the Company. In no event will the liability of any selling Holder under this
Section 5(b) be greater in amount than the excess of the amount by which the
total price at which the Registrable Securities or Registrable Liquidated
Damages Warrant Securities sold by such Indemnifying Party and distributed to
the public pursuant to the applicable Registration Statement (net of all related
expenses) is over the amount of any damages which such Indemnifying Party has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) Conduct of Indemnification Proceedings.
If any Person shall become entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall give prompt notice to the
party from which such indemnity is sought (the "INDEMNIFYING PARTY") of any
claim or of the commencement of any action or proceeding with respect to which
such Indemnified Party seeks indemnification or contribution pursuant hereto;
and the Indemnifying Party shall have the right to 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, however, that the failure to so notify the
Indemnifying Party will not relieve the Indemnifying Party from any obligation
or liability except to the extent that it shall be finally determined by a court
of competent jurisdiction that the Indemnifying Party has been prejudiced
materially by such failure.
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; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such proceeding and to employ counsel
reasonably satisfactory to the 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 the reasonable fees and expenses of one
separate counsel (and one local counsel in each applicable jurisdiction) shall
be at the expense of the Indemnifying Party).
17
All Losses (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or proceeding)
will be paid to the Indemnified Party, as incurred, within ten (10) Business
Days of written notice thereof to the Indemnifying Party upon receipt of an
undertaking to repay such amount if it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder. The Indemnifying
Party will not consent to entry of any judgment or enter into any settlement or
otherwise seek to terminate any action or proceeding in which any Indemnified
Party is or could be a party and as to which indemnification or contribution
could be sought by such Indemnified Party under this Section 5, unless such
judgment, settlement or other termination includes, as an unconditional term
thereof, the giving by the claimant or plaintiff to such Indemnified Party of a
release, in form and substance reasonably satisfactory to the Indemnified Party,
from all liability in respect of such claim or litigation for which such
Indemnified Party would be entitled to indemnification hereunder and shall not
include a statement as to the admission of fault or culpability of the
Indemnified Party.
(d) Contribution.
If the indemnification provided for in this Section 5 is
unavailable to an Indemnified Party under Section 5(a) or 5(b) hereof in respect
of any Losses or is insufficient to hold such Indemnified Party harmless, then
each applicable Indemnifying Party, in lieu of or in addition to indemnifying
such Indemnified Party, as applicable, will, jointly and severally, 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 or Indemnifying Parties, on the one hand, and such
Indemnified Party, on the other hand, 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 or
Indemnifying Parties, on the one hand, and such Indemnified Party, on the other
hand, will 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 related 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 will be deemed to include,
subject to any limitations set forth in Section 5(c), any reasonable legal or
other fees or expenses incurred by such party in connection with any action or
proceeding to the extent such party would have been indemnified for such fees
and expenses if the indemnification provided for in this Section 5(d) 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), an Indemnifying
Party that is a selling Holder will not be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities or Registrable Liquidated Damages Warrant Securities sold by such
Indemnifying Party and distributed to the public pursuant to the applicable
Registration Statement (net of all related expenses) exceeds the amount of any
damages which such Indemnifying Party has otherwise been required to pay by
18
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity, contribution and expense reimbursement
obligations of a party hereunder will be in addition to any liability such party
may otherwise have hereunder or otherwise.
6. MISCELLANEOUS.
(a) Reporting.
With a view to making available to the Holders the benefits of
Rule 144 or any other similar rule or regulation of the Commission that may at
the time permit the Holders to sell securities of the Company to the public
without registration, for so long as the Holders continue to own Registrable
Securities or Registrable Liquidated Damages Warrant Securities, the Company
shall use commercially reasonable efforts to:
(i) Make and keep public information available, as those
terms are understood and defined in Rule 144, and file
with the Commission in a timely manner all reports and
other documents required of the Company under the
Securities Act and the Exchange Act; and
(ii) Furnish to each Holder, for so long as the Holder owns
Registrable Securities or Registrable Liquidated Damages
Warrant Securities, promptly upon request, a written
statement by the Company, if true, that it has complied
with the applicable reporting requirements of Rule 144,
the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company,
and such other information as may be reasonably
requested to permit the Holders to sell such securities
pursuant to Rule 144 without registration.
(b) Remedies.
In the event of a breach by the Company of its obligations
under this Agreement, each Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that, in the event of any action for specific performance in
respect of such breach, it will waive the defense that a remedy at law would be
adequate.
(c) Amendments and Waivers.
(i) The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given
unless the Company has obtained the written
19
consent of Holders of at least 75% of the
then-outstanding Registrable Securities and Registrable
Liquidated Damages Warrant Securities.
(ii) Any amendment or waiver effected in accordance with this
Section 6(c) shall be binding upon each holder of
Registrable Securities or Registrable Liquidated Damages
Warrant Securities at the time outstanding, each future
Holder of all such securities, and the Company.
(iii) No failure or delay by any party in exercising any
right, power or privilege hereunder will operate as a
waiver thereof, nor will any single or partial exercise
thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
The rights and remedies herein provided will be
cumulative and not exclusive of any rights or remedies
provided by law.
(d) Notices.
All notices, requests and other communications to either party
hereunder must be in writing (including telecopy or similar writing) and must be
given:
(i) if to a Holder, to the address set forth opposite such
Holder's name on the signature pages hereto, with a copy
to such additional party as indicated on such page.
(ii) If to the Company, to:
DDi Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxx X. Xxxxx Xxxxxx, Esq.
or such other address or telecopier number as such Person may hereafter specify
by written notice to the other parties hereto given five (5) days prior to the
effectiveness of such change. Each such notice, request or other communication
will be effective only when actually delivered at the address specified in this
Section 6(d), if delivered prior to 5 p.m. (local time) and such day is a
business day, and if not, then such notice, request or other communication will
not be effective until the next succeeding business day. Written confirmation of
receipt (A) given by the recipient of such notice or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile
20
number and an image of the first page of such transmission, or (C) provided by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a reputable overnight delivery
service.
(e) Owner of Registrable Securities or Registrable Liquidated
Damages Warrant Securities.
The Company will maintain, or will cause its registrar and
transfer agent to maintain, a stock book with respect to the Common Stock, in
which all transfers of Registrable Securities or Registrable Liquidated Damages
Warrant Securities of which the Company has received notice will be recorded.
The Company may deem and treat the Person in whose name Registrable Securities
or Registrable Liquidated Damages Warrant Securities are registered in the stock
book of the Company as the owner thereof for all purposes, including, without
limitation, the giving of notices under this Agreement.
(f) Successors and Assigns.
Subject to this paragraph (f), this Agreement will inure to
the benefit of and be binding upon the successors and permitted assigns of each
of the parties and will inure to the benefit of each of the Holders. The Company
may not assign its rights or obligations hereunder. Holders may not assign their
rights and obligations under this Agreement; provided, however, that a Holder
may assign its rights and obligations under this Agreement to a third party in
connection with any transfer of Registrable Securities or Registrable Liquidated
Damages Warrant Securities (a "PERMITTED TRANSFEREE"). Notwithstanding the
foregoing, no Permitted Transferee shall be entitled to any of the transferring
Holder's rights under this Agreement (i) unless and until such Permitted
Transferee shall have acknowledged in writing its acceptance of such obligations
hereunder or (ii) if the transferring Holder notifies the Company in writing on
or prior to such transfer that the Permitted Transferee shall not have such
rights.
(g) Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts,
each of which will be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. Facsimile counterpart
signatures shall be acceptable. This Agreement will become effective when each
party hereto receives a counterpart hereof signed by the other party hereto.
(h) Headings.
The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to limit or affect the
meaning or interpretation of this Agreement. All references herein to "Sections"
shall refer to corresponding provisions of this Agreement unless otherwise
expressly noted.
(i) Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York,
without giving effect to the principles of conflict of laws thereof that would
cause the application of the laws of any other jurisdiction.
21
(j) Jurisdiction; Consent to Service of Process.
Each party hereby irrevocably submits, for itself and its
property, to the non-exclusive jurisdiction of the Supreme Court of the State of
New York located in New York, New York in the Borough of Manhattan or the United
States District Court for the Southern District of New York, and any appellate
court from any such court (as applicable, a "NEW YORK COURT"), in any suit,
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment resulting from any such suit, action
or proceeding, and each party hereby irrevocably and unconditionally agrees that
all claims in respect of any such suit, action or proceeding may be heard and
determined in the New York Court. Each party hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, (i) any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
in the New York Court, (ii) the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court, and (iii) the
right to object, with respect to such suit, action or proceeding, that such
court does not have jurisdiction over such party. Each party irrevocably
consents to service of process in any manner permitted by law.
(k) WAIVER OF JURY TRIAL.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY OR DISPUTE THAT MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES
AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6(k).
(l) Severability.
The holding of any provision of this Agreement to be invalid
or unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or
22
portions thereof shall nevertheless remain in full force and effect and
enforceable to the extent they are valid, legal and enforceable, and no
provisions shall be deemed dependent upon any other covenant or provision unless
so expressed herein.
(m) Entire Agreement.
This Agreement constitutes the entire understanding and
agreement among the parties relating to the subject matter hereof and supersedes
any and all prior agreements, representations or understandings, both written
and oral, with respect to the subject matter hereof. Nothing in this Agreement,
express or implied, is intended to confer upon any Person, other than the
parties hereto and their respective successors and assigns, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
(n) No Strict Construction.
The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties hereto, and no presumption or burden of proof
will arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement.
(o) Third Party Beneficiaries.
This Agreement and all of its provisions and conditions are
for the benefit of the parties to this Agreement, any Permitted Transferee and
solely with respect to the provisions of Section 5 hereof, any Indemnified
Party.
(p) Termination.
This Agreement shall terminate on the date on which there
cease to be any Registrable Securities and Registrable Liquidated Damages
Warrant Securities outstanding. The provisions of Section 5 and Section 6(o)
shall survive the termination of this Agreement.
(q) Independent Nature of Holders' Obligations and Rights.
The obligations of each Holder hereunder are 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.
23
(r) No Conflicting Agreements.
The Company represents, warrants and agrees that (i) it has
not entered into, and shall not, on or after the date of this Agreement, enter
into, any agreement that is inconsistent with the rights granted to the Holders
in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has
not previously entered into any agreement which remains in effect granting any
registration rights with respect to any of the Company's securities to any
person and (iii) without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the Registrable Securities and
Registrable Liquidated Damages Warrant Securities, it shall not grant to any
person the right to request the Company to register any Company securities under
the Securities Act unless the rights so granted are not in conflict or
inconsistent with the provisions of this Agreement.
(s) No Inferences.
Nothing in this Agreement shall create any inference that any
Purchaser is required to register any securities of the Company for resale under
the Securities Act, other than the Common Stock issuable pursuant to the
Purchase Agreement and the Warrant Common Stock.
[Signature page follows]
24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DDi CORP.
By: _______________________________
Name:
Title:
S-1
[HOLDER]
By: _______________________________
Name:
Title:
Address for Notice:
S-2
EXHIBIT A
AFFIDAVIT
By executing signature line(s), the undersigned hereby certifies that
he/she/it is the principal beneficial owner of the securities of the Company set
forth below.
The undersigned certifies that it is (i) the sole beneficial owner of the
securities of the Company set forth below, or (ii) if not the sole beneficial
owner of the securities set forth below, shares beneficial ownership of the
securities set forth below with the additional signatories set forth below.
The undersigned understands that to be granted rights under the Agreement,
it must fill in the information on this form and return it to the Company, at
the address set forth in Section 6(d)(ii) of the Agreement.
SUBMISSION OF THIS AFFIDAVIT WILL ENTITLE THE UNDERSIGNED TO RIGHTS UNDER
THE AGREEMENT BUT THESE RIGHTS ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
AGREEMENT.
Class of Securities of the Company
Which the Undersigned Beneficially Owns: _______________________________________
Number of Securities of the Company
Which the Undersigned Beneficially Owns: _______________________________________
Name of
Beneficiary: _________________________________________
By: _________________________________________
Authorized Representative
Name:
Title:
If more than one beneficial owner:
Name of other
beneficial owner:
By: _________________________________________
Authorized Representative
Name:
Title:
A-1
EXHIBIT B
PLAN OF DISTRIBUTION
The selling Holders, or their pledgees, donees, transferees, or any of
their successors in interest selling shares received from a named selling Holder
as a gift, partnership distribution or other non-sale-related transfer after the
date of this prospectus (all of whom may be selling Holders), may offer and sell
the securities from time to time on any stock exchange or automated inter-dealer
quotation system on which the securities are listed, in the over-the-counter
market, in privately negotiated transactions or otherwise, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to prevailing market prices or at prices otherwise negotiated. The
selling Holders may sell the securities by one or more of the following methods,
without limitation:
(a) block trades in which the broker or dealer so engaged will attempt to
sell the securities as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by the broker
or dealer for its own account pursuant to this prospectus;
(c) on any national securities exchange or quotation service on which the
securities are listed or quoted at the time of sale;
(d) in the over-the-counter market;
(e) otherwise than on such exchanges or services or in the
over-the-counter market;
(f) ordinary brokerage transactions and transactions in which the broker
solicits purchases;
(g) privately negotiated transactions;
(h) short sales;
(i) through the writing of options on the securities, whether or not the
options are listed on an options exchange;
(j) through the distribution of the securities by any selling Holder to
its partners, members or stockholders;
(k) one or more underwritten offerings on a firm commitment or best
efforts basis;
(l) transactions which may involve crosses or block transactions;
B-1
(m) to cover hedging transactions (other than "short sales" as defined in
Rule 3b-3 under the Exchange Act) made pursuant to this prospectus;
(n) by pledge to secure debts or other obligations;
(o) any combination of any of these methods of sale; and
(p) any other method permitted pursuant to applicable law.
The selling Holders may also transfer the securities by gift. We do not
know of any arrangements by the selling Holders for the sale of any of the
securities.
The selling Holders may engage brokers and dealers, and any brokers or
dealers may arrange for other brokers or dealers to participate in effecting
sales of the securities. These brokers, dealers or underwriters may act as
principals, or as an agent of a selling Holder. Broker-dealers may agree with a
selling Holder to sell a specified number of the securities at a stipulated
price per security. If the broker-dealer is unable to sell securities acting as
agent for a selling Holder, it may purchase as principal any unsold securities
at the stipulated price. Broker-dealers who acquire securities as principals may
thereafter resell the securities from time to time in transactions in any stock
exchange or automated inter-dealer quotation system on which the securities are
then listed, at prices and on terms then prevailing at the time of sale, at
prices related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above. The
selling Holders may also sell the securities in accordance with Rule 144 under
the Securities Act of 1933, as amended, rather than pursuant to this prospectus,
regardless of whether the securities are covered by this prospectus.
From time to time, one or more of the selling Holders may pledge,
hypothecate or grant a security interest in some or all of the securities owned
by them. The pledgees, secured parties or persons to whom the securities have
been hypothecated will, upon foreclosure in the event of default, be deemed to
be selling Holders. As and when a selling Holder takes such actions, the number
of securities offered under this prospectus on behalf of such selling Holder
will decrease. The plan of distribution for that selling Holder's securities
will otherwise remain unchanged. In addition, a selling Holder may, from time to
time, sell the securities short, and, in those instances, this prospectus may be
delivered in connection with the short sales and the securities offered under
this prospectus may be used to cover short sales.
To the extent required under the Securities Act of 1933, the aggregate
amount of selling Holders' securities being offered and the terms of the
offering, the names of any agents, brokers, dealers or underwriters and any
applicable commission with respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the securities may receive compensation in
the form of underwriting discounts, concessions, commissions or fees from a
selling Holder and/or purchasers of selling Holders' securities of securities,
for whom they may act (which compensation as to a particular broker-dealer might
be in excess of customary commissions).
The selling Holders and any underwriters, brokers, dealers or agents that
participate in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the
B-2
Securities Act of 1933, and any discounts, concessions, commissions or fees
received by them and any profit on the resale of the securities sold by them may
be deemed to be underwriting discounts and commissions.
A selling Holder may enter into hedging transactions with broker-dealers
and the broker-dealers may engage in short sales of the securities in the course
of hedging the positions they assume with that selling Holder, including,
without limitation, in connection with distributions of the securities by those
broker-dealers. A selling Holder may enter into option or other transactions
with broker-dealers that involve the delivery of the securities offered hereby
to the broker-dealers, who may then resell or otherwise transfer those
securities. A selling Holder may also loan or pledge the securities offered
hereby to a broker-dealer and the broker-dealer may sell the securities offered
hereby so loaned or upon a default may sell or otherwise transfer the pledged
securities offered hereby.
The selling Holders and other persons participating in the sale or
distribution of the securities will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, including Regulation M. This regulation may limit the timing of
purchases and sales of any of the securities by the selling Holders and any
other person. The anti-manipulation rules under the Securities Exchange Act of
1934 may apply to sales of securities in the market and to the activities of the
selling Holders and their affiliates. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
These restrictions may affect the marketability of the securities and the
ability of any person or entity to engage in market-making activities with
respect to the securities.
We have agreed to indemnify in certain circumstances the selling Holders
and any brokers, dealers and agents who may be deemed to be underwriters, if
any, of the securities covered by the registration statement, against certain
liabilities, including liabilities under the Securities Act of 1933. The selling
Holders have agreed to indemnify us in certain circumstances against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The securities offered hereby were originally issued to the selling
Holders pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended. We agreed to register the securities under
the Securities Act of 1933, and to keep the registration statement of which this
prospectus is a part effective until the date on which the selling Holders have
sold all of the securities. We have agreed to pay all expenses in connection
with this offering, including the fees and expenses of counsel or other advisors
to the selling Holders, but not including underwriting discounts, concessions or
commissions of the selling Holders.
We will not receive any proceeds from sales of any securities by the
selling Holders.
We cannot assure you that the selling Holders will sell all or any portion
of the securities offered hereby.
B-3
EXHIBIT D
FORM OF OPINIONS OF COMPANY COUNSEL
A. The Company is validly existing as a corporation and in good standing
under the laws of the State of Delaware and the Company has the corporate
power and authority to conduct its business as it is, to our knowledge,
currently conducted, to enter into and perform its obligations under the
Transaction Documents, and to carry out the transactions contemplated by
the Transaction Documents. Based solely on a review of a good standing
certificate from the Secretary of State of the State of California, such
counsel confirms that the Company is in good standing in the State of
California.
B. The Unsubscribed Shares, the Standby Commitment Fee Warrants and the
Warrant Shares have been duly authorized or reserved for issuance by all
necessary corporate action on the part of the Company; and the
Unsubscribed Shares and the Standby Commitment Fee Warrants, when issued,
sold and, in the case of the Unsubscribed Shares, delivered against
payment therefor, in accordance with the provisions of the Purchase
Agreement, and the Warrant Shares, when issued upon the exercise of the
Standby Commitment Fee Warrants and the receipt of the exercise price
provided for under the Standby Commitment Fee Warrants, will be validly
issued, fully paid and non-assessable.
C. The execution and delivery by the Company of the Transaction Documents,
and the consummation by the Company of the transactions contemplated
thereby, have been duly authorized by all necessary corporate action on
the part of the Company, and the Transaction Documents have been duly
executed and delivered by the Company. Each of the Transaction Documents
(other than the Standby Commitment Fee Warrants) constitutes the valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.1
D. The execution and delivery by the Company of the Transaction Documents,
and the consummation by the Company of the transactions contemplated
thereby, do not (a) violate the provisions of the Delaware General
Corporation Law or any U.S. federal or New York state law, rule or
regulation applicable to the Company; (b) violate the provisions of the
Company's Certificate of Incorporation or By-laws, each as amended to
date; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator specifically naming the Company of which
we are aware; or (d) constitute a breach by the Company of, or constitute
a default by the Company under any agreement to which the Company is a
party and is listed as a material contract (Item 10) in the exhibits to
the Company's Form 10-K for the fiscal year ended December 31, 2004.
E. Based in part on the representations of each of the Purchasers in Sections
3.4, 3.5, 3.8 and 3.9 of the Purchase Agreement, the offer and sale of the
Unsubscribed Shares and the Standby Commitment Fee Warrants pursuant to
the Purchase Agreement, and the offer and sale of the Warrant Shares
pursuant to the terms of the Standby Commitment Fee Warrants may be made
without registration under the Securities Act of 1933, as amended.
----------------
(1) [Please note that because the Warrants are governed by Delaware law,
counsel cannot opine on the enforceability thereof.]
EXHIBIT E
FORM OF BREAK-UP WARRANT
[Attached]
FORM OF BREAK-UP WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD OR OFFERED FOR SALE
OR OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE
SECURITIES ARE SOLD AND TRANSFERRED IN A TRANSACTION THAT IS EXEMPT FROM OR NOT
SUBJECT TO REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE OFFERING OF THIS SECURITY AND THE SHARES OF COMMON STOCK PURCHASABLE
HEREUNDER HAVE NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES
ADMINISTRATOR.
DDi CORP.
Date of Initial Issuance: _______________
Number of Shares: _______________
Initial Warrant Price: $_____ per share(1)
Expiration Date: _______________(2)
THIS CERTIFIES that, for value received, ______________________, or its
registered assigns to the extent permitted hereunder (the "HOLDER"), is entitled
to subscribe for and purchase from DDi CORP., a Delaware corporation (the
"COMPANY"), upon the terms and conditions set forth herein, at any time during
the Term (as defined below) of this Warrant, _______________ shares of common
stock, $0.001 par value per share, of the Company ("COMMON STOCK"), at the
Warrant Price (as defined below), payable as provided herein. As used herein,
the term "this Warrant" shall mean and include this Warrant and any Warrant or
Warrants hereafter issued as a consequence of the exercise or transfer of this
Warrant in whole or in part.
The number of shares of Common Stock issuable upon the exercise of the
Warrant (the "WARRANT SHARES") and the Warrant Price may be adjusted from time
to time as hereinafter set forth.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
"AFFILIATE" of any specified Person means any other Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power
--------------------
(1) The initial warrant price shall be equal to 50% of the Average Share Price
(as defined in the Standby Securities Purchase Agreement) on the date of
termination of the Standby Securities Purchase Agreement.
(2) The term of the warrant shall be one year from the date of issuance.
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. No Person shall be deemed an Affiliate of another Person solely by
virtue of the fact that both Persons own shares of the Company's capital stock.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday and
any day on which banking institutions in the State of New York are authorized by
Law or other governmental action to close.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"PERSON" means an individual, a corporation, partnership, limited
liability company, association, trust or any other entity or organization,
including a government, a political subdivision or an agency or instrumentality
thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"TERM OF THIS WARRANT" shall mean the period beginning on the date
of initial issuance hereof and ending on July 31, 2006.
"TRANSFER" means the offer, sale, donation, assignment (as
collateral or otherwise), mortgage, pledge, grant, hypothecation, encumbrance,
gift, bequest or transfer or disposition of any security.
"WARRANT PRICE" shall mean $____ per share(3), subject to adjustment
in accordance with Section 5 hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1 Procedure for Exercise of Warrant. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 10
hereof at any time and from time to time during the Term of this Warrant, as
follows:
(a) (i) a duly executed Notice of Exercise in the form of
Exhibit A attached hereto, (ii) cash, a certified or official bank check
payable to the order of the Company, or a wire transfer of funds to the
Company's account, in each case in the amount of the Warrant Price for
each share being purchased and any amount required to be paid by the
Holder on account of a transfer of a Warrant or Warrant Shares pursuant to
Section 3 hereof, and (iii) this Warrant; or
---------------------------
(3) The initial warrant price shall be equal to 50% of the Average Share Price
(as defined in the Standby Securities Purchase Agreement) on the date of
termination of the Standby Securities Purchase Agreement.
2
(b) by surrender of this Warrant (with the Notice of Cashless
Exercise attached hereto as Exhibit B duly executed) to the Company at its
office as set forth in the Notice of Cashless Exercise attached hereto, or
at such other place as is designated in writing by the Company, 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 (which shall include both the
number of Warrant Shares issued to the Holder and the number
of Warrant Shares subject to the portion of the Warrant being
cancelled in payment of the Warrant Price).
A = the Fair Market Value (determined pursuant to Section 7)
as of the exercise date.
B = the Warrant Price then in effect.
2.2 In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder or, subject to compliance with
Section 6.2, such other name or names as may be designated by the Holder, shall
be delivered to the Holder hereof within a reasonable time, not exceeding three
Business Days, after the rights represented by this Warrant shall have been so
exercised; and, unless this Warrant has expired, a new Warrant representing the
number of shares with respect to which this Warrant shall not then have been
exercised shall also be issued to the Holder hereof within such time. The person
in whose name any certificate for shares of Common Stock is issued upon exercise
of this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Holder shall have complied with
the conditions for exercise of this Warrant set forth above, irrespective of the
date of delivery of such certificate, except that, if the date of such
compliance is a date when the stock transfer books of the Company are closed,
such person shall be deemed to have become the holder of such shares at the
close of business on the next succeeding date on which the stock transfer books
are open. Notwithstanding anything in the foregoing to the contrary, for
purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that Warrant Shares issued in a cashless exercise
transaction pursuant to Section 2.1(b) above shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares shall be
deemed to have commenced, on the issue date of this Warrant.
2.3 Transfer Restriction Legend. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
3
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "SECURITIES ACT")
AND/OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SHARES MAY
NOT be OFFERED OR sold or transferred EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
REGISTRATION AND/OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES
LAWS, (B) IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND REGISTRATION AND/OR QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS PROVIDED THAT AT THE ISSUER'S
REQUEST, THE TRANSFEROR THEREOF SHALL HAVE DELIVERED TO THE ISSUER
AN OPINION OF COUNSEL (WHICH OPINION SHALL BE IN FORM, SUBSTANCE AND
SCOPE REASONABLY SATISFACTORY TO THE ISSUER FROM COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER) TO THE EFFECT THAT SUCH SECURITIES MAY
BE SOLD OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION, OR (C) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE
144 PROMULGATED UNDER THE SECURITIES ACT."
Any certificate issued at any time in exchange or substitution for
any certificate bearing such legend shall also bear such legend unless, in the
opinion of counsel for the Holder thereof (which counsel shall be satisfactory
to the Company) the securities represented thereby are not, at such time,
required by law to bear such legend. The foregoing legend shall be removed from
the certificates representing any Warrant Shares, at the request of the Holder
thereof, at such time as they become eligible for resale pursuant to Rule 144(k)
under the Securities Act or as they have been sold pursuant to a registration
statement declared effective by the Securities and Exchange Commission or
pursuant to Rule 144 under the Securities Act. At the request of the Company,
the Company shall have the right to receive an opinion of counsel for the
Holder, reasonably satisfactory to the Company, to the effect that the transfer
of the Warrant Shares is exempt from the registration requirements of the
Securities Act, prior to the removal of the legend if the request for removal is
being made pursuant to Rule 144 or Rule 144(k) under the Securities Act.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company shall at all times
reserve and keep available out of its authorized but unissued Common Stock (or
out of shares of Common Stock held in its treasury) solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant. The Company covenants and agrees
that all shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant shall, upon issuance, be validly issued,
fully paid and nonassessable, and free from all taxes, liens, preemptive rights
and charges with respect to the issue thereof. The Company shall take all such
actions as may be necessary to
4
ensure that all such Warrant Shares may be so issued without violation by the
Company of any applicable law or governmental regulation or any requirements of
any domestic securities exchange or quotation system upon which shares of Common
Stock or other securities constituting Warrant Shares may be listed or quoted
(except for official notice of issuance which shall be immediately delivered by
the Company upon each such issuance). The Company further covenants and agrees
that it shall pay when due and payable any and all federal and state documentary
or stamp taxes (other than federal or state income taxes) which may be payable
in respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant, except that, if Warrant
Shares or new Warrants shall be registered in a name or names other than the
name of the Holder, funds sufficient to pay all transfer taxes payable as a
result of such transfer shall be paid by the Holder at the time of delivery of
the Notice of Exercise.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5(a), Section 5(b), Section 5(c) or Section
5(f), the number of Warrant Shares shall be changed to the number determined by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of Warrant Shares purchasable immediately prior to such adjustment
and dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT. The Warrant Price and the terms of the Warrant
shall be subject to adjustment from time to time as follows:
(a) If, at any time during the Term of this Warrant, the
Company shall make or issue, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Warrant
Price then in effect immediately before such event shall be decreased as
of the time of such issuance by multiplying the Warrant Price then in
effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
(b) If, at any time during the Term of this Warrant, the
number of shares of Common Stock outstanding is increased by a subdivision
or split-up of shares of Common Stock, then, immediately after the date
fixed for the determination of holders of Common Stock entitled to receive
shares in such subdivision or split-up, the Warrant Price in effect
immediately before the subdivision or split-up shall be appropriately
decreased so that the number of shares of Common Stock issuable upon the
exercise hereof shall be increased in proportion to such increase in
outstanding shares.
5
(c) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock or reverse stock split, then, immediately
after the effective date for such combination, the Warrant Price in effect
immediately prior to such combination or reverse stock split shall be
appropriately increased so that the number of shares of Common Stock issuable
upon the exercise hereof shall be decreased in proportion to such decrease in
outstanding shares.
(d) If, at any time during the Term of this Warrant, the Company
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company (other than shares of Common Stock) or in cash or
other property (other than dividends or distributions for which an adjustment
is made pursuant to other provisions of this Section 5 or regular cash
dividends paid out of earnings or earned surplus, determined in accordance
with generally accepted accounting principles), then and in each such event
provision shall be made so that the Holder shall receive upon the exercise
hereof, in addition to the number of shares of Common Stock issuable
hereunder, the kind and amount of securities of the Company, cash or other
property which the Holder would have been entitled to receive had this
Warrant been exercised on the effective date fixed for the determination of
holders of Common Stock entitled to receive a dividend or distribution in
such event and had the Holder thereafter, during the period from such date to
and including the exercise date, retained any such securities receivable
during such period, giving application to all adjustments called for during
such period under this Section 5 with respect to the rights of the Holder.
(e) In the case of any proposed consolidation or merger of the
Company with another entity, or the proposed sale of all or substantially all
of its assets to another person or entity, or any proposed consolidation,
reorganization, recapitalization, or reclassification of the capital stock of
the Company or other transaction, then, as a condition of such consolidation,
merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction, the Company shall give 30 days' prior
written notice thereof to the Holder hereof and lawful and adequate provision
shall be made whereby the Holder shall thereafter have the right to receive
upon the basis and upon the terms and conditions specified herein, in lieu of
the Warrant Shares immediately theretofore purchasable hereunder, such shares
of stock, securities, cash or assets as may (by virtue of such consolidation,
merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction) be issued or payable with respect to
or in exchange for the number of Warrant Shares purchasable hereunder
immediately before such consolidation, merger, sale, reorganization,
recapitalization, reclassification or other transaction. In any such case
appropriate provision shall be made with respect to the rights and interests
of the Holder to the end that the provisions hereof shall thereafter be
applicable as nearly as may be practicable, in relation to any shares of
stock, securities, cash or assets thereafter deliverable upon the exercise of
this Warrant. Notwithstanding the foregoing sentences, if (x) there shall
occur any consolidation, merger, sale, consolidation, reorganization,
recapitalization or other transaction in which the Common Stock is converted
into or exchanged for anything other than solely equity securities, and (y)
the common stock of the acquiring or surviving company (which shall be
understood to mean the ultimate parent of such company, if such company is
not publicly traded and its ultimate parent is publicly traded) is publicly
traded, then, as part of such
6
consolidation, merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction, (i) the Holder shall have the right
thereafter to receive upon the exercise hereof such number of shares of
common stock of the acquiring or surviving company as is determined by
multiplying (A) the number of shares of Common Stock subject to this Warrant
immediately prior to such consolidation, merger, sale, consolidation,
reorganization, recapitalization, reclassification or other transaction by
(B) a fraction, the numerator of which is the Fair Market Value (as defined
below) per share of Common Stock as of the effective date of such
consolidation, merger, sale, consolidation, reorganization, recapitalization,
reclassification or other transaction, as determined pursuant to Section 7,
and the denominator of which is the fair market value per share of common
stock of the acquiring or surviving company as of the effective date of such
transaction, as determined in good faith by the Board of Directors of the
Company (using the principles set forth in Section 7 to the extent
applicable), and (ii) the exercise price per share of common stock of the
acquiring or surviving company shall be the Warrant Price divided by the
fraction referred to in clause (B) above. The Company shall not effect any
such consolidation, merger, sale, reorganization, recapitalization,
reclassification or other transaction unless, prior to the consummation
thereof, the successor entity (if other than the Company) resulting from such
consolidation, merger, sale, reorganization, recapitalization,
reclassification or other transaction (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument the
obligation to deliver to each Holder of Warrants such shares of stock,
securities, cash or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to acquire upon exercise of Warrants.
(f) If at any time the Company shall issue or sell any Common Stock
(other than Common Stock issued (a) pursuant to the Company's existing or
future stock option plans or pursuant to any other existing or future Common
Stock related director or employee compensation plan of the Company approved
by the board of directors of the Company (the "BOARD OF DIRECTORS"), (b) as
consideration for the acquisition of a business or of assets, (c) to the
Company's joint venture partners in exchange for interests in the relevant
joint venture, (d) upon conversion of any shares of any series of preferred
stock or as the payment of a dividend with respect to any series of preferred
stock outstanding on the date hereof or the issuance of which caused an
adjustment under the other provisions of this Section 5 or (e) upon the
exercise or conversion of any security the issuance of which caused an
adjustment under the other provisions of this Section 5 for a consideration
per share less than the Warrant Price then in effect, or shall issue any
options, rights, warrants or other securities convertible into or exercisable
or exchangeable for Common Stock (other than such securities paid as
dividends on any class of preferred stock outstanding on the date hereof or
the issuance of which caused an adjustment under the other provisions of this
Section 5) having a conversion, exercise or exchange price, together with the
issue price of such securities, per share of Common Stock less than the
Warrant Price then in effect, the Warrant Price to be in effect after such
issuance or sale shall be determined by multiplying the Warrant Price in
effect immediately prior to such issuance or sale by a fraction, (i) the
denominator of which shall be the sum of (w) the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus (x) the
number of additional shares of Common Stock to be issued or sold (or, in the
case of any options, rights, warrants or other convertible, exercisable or
exchangeable securities, issued on conversion, exercise or exchange), and
(ii) the numerator of which shall be the sum of (y) the number of shares of
7
Common Stock outstanding immediately prior to such issuance and sale plus (z)
the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of additional shares of Common
Stock so issued or sold (or issuable on conversion, exercise or exchange)
would purchase at the Warrant Price in effect on the date of such issuance or
sale. In case any portion of the consideration to be received by the Company
shall be in a form other than cash, the fair market value (determined in
accordance with the principles set forth in Section 7 to the extent
applicable) of such non-cash consideration shall be utilized in the foregoing
computation. Such adjustment shall be made successively whenever any such
issuance or sale is made, and shall become effective immediately after such
issuance or sale. If all the Common Stock deliverable upon exercise,
conversion or exchange of securities convertible into Common Stock have not
been issued when such securities are no longer outstanding, then the Warrant
Price shall promptly be readjusted to the Warrant Price which would then be
in effect had the adjustment upon the issuance of such securities been made
on the basis of the actual number of Common Stock issued upon conversion,
exercise or exchange of such securities.
(g) Whenever the Warrant Price shall be adjusted as provided in this
Section 5, the Company shall promptly prepare a statement showing the facts
requiring such adjustment and the Warrant Price and number of Warrant Shares
that shall be in effect after such adjustment, setting forth in reasonable
detail and certifying the calculation of such adjustment. The Company shall
cause a copy of such statement to be sent by mail, first class postage
prepaid, to each Holder at its, his or her address appearing on the Company's
records. The Company shall, as promptly as reasonably practicable after the
written request at any time of the Holder (but in any event not later than 10
days thereafter), furnish or cause to be furnished to the Holder a
certificate setting forth (i) the Warrant Price then in effect and (ii) the
number of shares of Common Stock and the amount, if any, of other securities,
cash or property which then would be received upon the exercise of this
Warrant.
(h) Adjustments made pursuant to this Section 5 shall be made on the
date such dividend, subdivision, split-up, reverse stock split, combination,
distribution, issuance, sale, consolidation, reorganization,
recapitalization, reclassification or other transaction, as the case may be,
is made, and shall become effective at the close of business on the day such
event becomes effective.
SECTION 6. OWNERSHIP.
6.1 Ownership of Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Section 6.
6.2 Transfer and Replacement.
(a) No Holder shall Transfer this Warrant other than (i) a Transfer
to one or more of its Affiliates or (ii) if the Company first shall have been
furnished with an opinion of legal counsel, reasonably satisfactory to the
Company, to the effect that such Transfer is
8
exempt from the registration requirements of the Securities Act.
Notwithstanding the foregoing, no registration or opinion of counsel shall be
required for, and a Transfer shall be permitted in the event of, a Transfer
by a Holder which is a partnership to a partner of such partnership or a
retired partner of such partnership or to the estate of any such partner or
retired partner, or a Transfer by a Holder which is a limited liability
company to a member of such limited liability company or a retired member or
to the estate of any such member or retired member, provided that the
transferee in each case agrees in writing to be subject to the terms of this
Section 6. Any attempt to Transfer this Warrant other than in accordance with
this Section 6 shall be null and void and no right, title or interest in or
to such Warrant shall be Transferred to the purported transferee, buyer,
donee, assignee or encumbrance holder. The Company will not give, and will
not permit the Company's transfer agent to give, any effect to such attempted
Transfer in its stock records.
(b) Subject to Section 6.2(a), this Warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the
Holder hereof in person or by duly authorized attorney, together with a
properly executed Assignment (in the form of Exhibit C or Exhibit D hereto,
as the case may be) and a new Warrant or Warrants, of the same tenor as this
Warrant but registered in the name of the transferee or transferees (and in
the name of the Holder, if a partial transfer is effected) shall be promptly
made and delivered by the Company upon surrender of this Warrant duly
endorsed, at the office of the Company referred to in Section 9 hereof. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft or destruction, and, in such case, of indemnity or security reasonably
satisfactory to it, and upon surrender of this Warrant if mutilated, the
Company shall promptly make and deliver a new Warrant of like tenor, in lieu
of this Warrant. This Warrant shall be promptly cancelled by the Company upon
the surrender hereof in connection with any transfer or replacement. Except
as otherwise provided above, in the case of the loss, theft or destruction of
a Warrant, the Company shall pay all expenses, taxes and other charges
payable in connection with any transfer or replacement of this Warrant, other
than documentary or stamp taxes (if any) payable in connection with a
transfer of this Warrant, which shall be payable by the Holder. The Holder
shall not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
SECTION 7. FRACTIONAL SHARES. Fractional shares shall not be issued upon
the exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 7, be entitled under the terms hereof to receive
a fractional share upon the complete exercise of this Warrant, the Company
shall, upon the exercise of this Warrant for the largest number of whole shares
then called for, pay a sum in cash equal to the excess of the Fair Market Value
of such fractional share over the Warrant Price for such fractional share on the
exercise date.
(a) The Fair Market Value per share of Common Stock shall be
determined as follows:
(i) If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market or another nationally recognized trading
system as of the exercise date, the Fair Market Value per share of Common Stock
shall be deemed to be the
9
average of the high and low reported sale prices per share of Common Stock
thereon on the trading day immediately preceding the effective date or the
exercise date, as applicable (provided that if no such price is reported on such
day, the Fair Market Value per share of Common Stock shall be determined
pursuant to clause (ii)).
(ii) If the Common Stock is not listed on a national
securities exchange, the Nasdaq National Market or another nationally recognized
trading system as of the effective date or the exercise date, as applicable, the
Fair Market Value per share of Common Stock shall be deemed to be the amount
most recently determined by the Board to represent the fair market value per
share of the Common Stock (including without limitation a determination for
purposes of granting Common Stock options or issuing Common Stock under any
plan, agreement or arrangement with employees of the Company); and, upon request
of the Holder, the Board (or a representative thereof) shall, as promptly as
reasonably practicable but in any event not later than 3 Business Days after
such request, notify the Holder of the Fair Market Value per share of Common
Stock and furnish the Holder with reasonable documentation of the Board's
determination of such Fair Market Value. Notwithstanding the foregoing, if the
Board has not made such a determination within the three-month period prior to
the exercise date, then (A) the Board shall make, and shall provide or cause to
be provided to the Holder notice of, a determination of the Fair Market Value
per share of the Common Stock within 15 days of a request by the Holder that it
do so, and (B) payment in cash with respect to any fractional share as required
by Section 7 hereof shall be delayed until such determination is made and notice
thereof is provided to the Holder (it being understood that this shall not
prevent the Holder, at its option, from exercising the Warrant prior to such
determination).
SECTION 8. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder:
8.1 Certain Actions. The Company shall not amend its charter to
eliminate as an authorized class of capital stock that class denominated as
"Common Stock" on the date hereof. The Company shall not by any action avoid or
seek to avoid the observance or performance of any terms of this Warrant or
impair or diminish its value, but shall at all times in good faith assist in the
carrying out of all such terms of Warrant. Without limiting the generality of
the foregoing, the Company shall obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
8.2 Shall Bind Successors. This Warrant and the rights evidenced
hereby shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of the Holder and its permitted assigns to the extent
permitted by Section 6.2.
8.3 No Exercise Interference; Par Value. Other than in accordance
with Section 6.2, the Company shall not close its books against the transfer of
this Warrant or of any Warrant Shares issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company shall from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Warrant Shares
acquirable upon exercise of this Warrant is at all times equal to or less than
the Warrant Price then in effect.
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8.4 Notices of Certain Actions. The Company shall give written
notice to the Holder in the event (A) the Company closes its books or takes a
record (1) with respect to any dividend or distribution upon the Common Stock,
or for the purpose of entitling or enabling any stockholder to receive any other
right, or (2) with respect to any pro rata subscription offer to holders of
Common Stock, or (B) of any recapitalization, reorganization, reclassification,
consolidation, merger, dissolution, liquidation or sale of all or substantially
all of the Company's assets or other transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities, cash or assets with respect to or in
exchange for Common Stock. Such notice shall be sent at least ten days prior to
the record date or effective date for the event specified in such notice.
SECTION 9. NOTICES. Any notice or other document required or
permitted to be given or delivered to the Holder shall be delivered at, or sent
by certified or registered mail to, the Holder at such address as shall have
been furnished to the Company in writing by the Holder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the Company at its
address for notices set forth on the signature page hereto or to such other
address as shall have been furnished in writing to the Holder by the Company.
Any notice so addressed and mailed by registered or certified mail shall be
deemed to be given when so mailed. Any notice so addressed and otherwise
delivered shall be deemed to be given when actually received by the addressee.
SECTION 10. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This
Warrant shall not entitle the Holder to any of the rights of a stockholder of
the Company (including, without limitation, any preemption rights, voting rights
or rights to dividends) except upon exercise in accordance with the terms
hereof. Notwithstanding the foregoing, in the event (i) the Company effects a
split of the Common Stock by means of a stock dividend and the Warrant Price of
and the number of Warrant Shares are adjusted as of the date of the distribution
of the dividend (rather than as of the record date for such dividend), and (ii)
the Holder exercises this Warrant between the record date and the distribution
date for such stock dividend, the Holder shall be entitled to receive, on the
distribution date, the stock dividend with respect to the shares of Common Stock
acquired upon such exercise, notwithstanding the fact that such shares were not
outstanding as of the close of business on the record date for such stock
dividend. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 11. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 12. WARRANT REGISTER. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Holder may change its address as shown on the warrant
register by written notice to the Company requesting such change.
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SECTION 13. AMENDMENTS. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the Holder and the Company. The headings in this Warrant are for
purposes of reference only and shall not affect the meaning or construction of
any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Warrant to be signed by
their duly authorized officers this ________ day of ____________, 2005.
DDi CORP.
____________________________
Name:
Title:
[HOLDER]:
____________________________
____________________________
Name:
Title:
Address:
____________________________
____________________________
____________________________
Attention:
Facsimile:
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EXHIBIT A
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE ATTACHED WARRANT
The undersigned hereby exercises the right to purchase shares of Common Stock
which the undersigned is entitled to purchase by the terms of the attached
Warrant according to the conditions thereof, and herewith makes payment of
$_______________ therefor in cash.
All shares to be issued pursuant hereto shall be issued in the name of, and the
initial address of such person to be entered on the books of DDi CORP. shall be:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
The shares are to be issued in certificates of the following denominations:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
[Type Name of Holder]
By: ________________
Title: ________________
Date: ________________
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EXHIBIT B
FORM OF NOTICE OF CASHLESS EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE ATTACHED WARRANT
PURSUANT TO SECTION 2.1(b)
The undersigned hereby irrevocably elects to exchange its Warrant
for ___________ Warrant Shares pursuant to the cashless exercise provisions of
the within Warrant, as provided for in Section 2.1(b) of such Warrant, and
requests that a certificate or certificates for such Warrant Shares be issued in
the name of and delivered to:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares which
the undersigned is entitled to purchase in accordance with the within Warrant,
that a new Warrant for the balance of the Warrant Shares covered by the within
Warrant be registered in the name of, and delivered to, the undersigned at the
address stated below.
Dated: ___________________________ Name ___________________________________
(Print)
Address: _______________________________________________________________________
________________________________
(Signature)
15
EXHIBIT C
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT
FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the attached Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer said Warrant on the books of DDi CORP., with full power of
substitution.
[Type Name of Holder]
By: ________________
Title: ________________
Date: ________________
NOTICE:
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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EXHIBIT D
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT
FOR VALUE RECEIVED, _______________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ______________ shares of Common Stock under and pursuant to the
attached Warrant, and (ii) on a non-exclusive basis, all other rights of the
undersigned under and pursuant to the attached Warrant, it being understood that
the undersigned shall retain, severally (and not jointly), with the
transferee(s) named herein, all rights assigned on such non-exclusive basis. The
undersigned does hereby irrevocably constitute and appoint
__________________________ Attorney to transfer said Warrant on the books of DDi
CORP., with full power of substitution.
[Type Name of Holder]
By: ________________
Title: ________________
Date: ________________
NOTICE:
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
17
