WAIVER AGREEMENT
WAIVER AGREEMENT, dated as of January 24, 2000 (this
"Agreement"), among Winfield Capital Corp., a New York corporation (the
"Principal Stockholder"), USANi Sub LLC, a Delaware limited liability company
("Parent") and Xxxxxxxxxx.xxx Inc, a California corporation (the "Company").
WHEREAS, the Company and Parent propose to enter into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides for, among other things, the merger of the Company
(the "Merger") with a wholly owned subsidiary of a newly formed Delaware
corporation ("Newco") and the concurrent contribution by Parent to Newco of all
of the outstanding limited liability interests of Internet Shopping Network LLC,
a Delaware limited liability company ("ISN");
WHEREAS, the Principal Stockholder is (a) the owner of one or
more of the following securities: (i) shares of common stock of the Company, no
par value ("Company Common Stock"), and (ii) warrants to acquire Company Common
Stock, in each case listed on Schedule 1, and (b) party to certain agreements
with the Company identified on Schedule 2 (the "Company Agreements"); and
WHEREAS, in order to induce Parent to enter into the Merger
Agreement, the Principal Stockholder has agreed to enter into this Agreement
with respect to (a) all the shares of Company Common Stock now owned, whether
beneficially or of record, and which may hereafter be acquired by the Principal
Stockholder upon exercise of the Warrants (as defined below) and any shares of
Company Common Stock over which the Principal Stockholder has investment power
or voting power, each within the meaning of Rule 13d-3(a) of the Securities
Exchange Act of 1934, as amended (the "Shares"), and all warrants to acquire
Shares now owned (the "Warrants"), and (b) the Company Agreements to which the
Principal Stockholder is a party.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE 1
Section 1.1 Acknowledgment. The Principal Stockholder
acknowledges receipt and review of a copy of the Merger Agreement.
Section 1.2 Waiver of Company Agreements. The Principal
Stockholder hereby irrevocably and forever waives, and agrees to the
modifications of its rights under, the provisions of the Company Agreements
identified on Schedule 2
and as limited and qualified by Schedule 2 which is incorporated herein by
reference, and hereby irrevocably and forever waives or modifies, as the case
may be, any similar provision contained in any other agreement or arrangement
between the Principal Stockholder and the Company.
Section 1.3 Waiver of Dissenters' Rights. The Principal
Stockholder hereby irrevocably and forever waives any rights the Principal
Stockholder may have, as a result of the Merger, to demand payment for any
Shares beneficially owned by the Principal Stockholder pursuant to Section 1300
et. seq. of California Law or to otherwise qualify as a "dissenting shareholder"
as such term is used in such sections of California Law.
Section 1.4 Termination of Waivers. Notwithstanding the
foregoing, the waivers and modifications effected in Sections 1.2 and 1.3 shall
be of no further force and effect and shall be treated as if they had never been
granted if: (a) the Merger Agreement is not executed prior to February 15, 2000;
(b) the Merger is not consummated prior to July 31, 2000; (c) the Merger
Agreement is amended in a manner materially adverse to the Principal
Stockholder; (d) any party materially breaches its obligations under the Merger
Agreement and such breach has a material adverse effect on the Principal
Stockholder; or (e) the Merger Agreement is otherwise terminated pursuant to its
terms prior to the consummation of the Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL STOCKHOLDER
The Principal Stockholder hereby represents and warrants to
Parent as follows:
Section 2.1 Authority Relative to This Agreement. The Principal
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby and no other proceedings on the part of the
Principal Stockholder is necessary to authorize this Agreement or to consummate
such transactions. This Agreement has been duly and validly executed and
delivered by the Principal Stockholder and, assuming the due authorization,
execution and delivery by Parent and the Company, constitutes a legal, valid and
binding obligation of the Principal Stockholder, enforceable against the
Principal Stockholder in accordance with its terms.
Section 2.2 No Conflict. (a) The execution and delivery of this
Agreement by the Principal Stockholder do not, and the performance of this
Agreement by the Principal Stockholder will not, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to the Principal
Stockholder or
by which the Shares or the Warrants are bound or affected or (ii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien (as defined below) on any of the Shares or the Warrants
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Principal Stockholder is a party or by which the Principal Stockholder or the
Shares or the Warrants are bound or affected, except for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by the Principal Stockholder of its obligations under this
Agreement.
(b) The execution and delivery of this Agreement by the Principal
Stockholder do not, and the performance of this Agreement by the Principal
Stockholder will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any court or arbitrator or any governmental
body, agency or official except for applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay the performance by the
Principal Stockholder of its obligations under this Agreement.
Section 2.3 Title to the Shares. As of the date hereof, the
Principal Stockholder is the record and beneficial owner of, or has voting power
or investment power over, the Shares, and is the record and beneficial owner of
the Warrants, listed on Schedule 1. Such Shares and Warrants are all the
securities of the Company owned, either of record or beneficially, by the
Principal Stockholder or in which the Principal Stockholder has voting or
investment power and the Principal Stockholder owns no other rights or interests
exercisable for or convertible into any securities of the Company. Except as
identified on Schedule 3, all of the Shares and Warrants referred to above are
owned free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreement, limitations on the Principal Stockholder's
voting rights, charges and other encumbrances of any nature whatsoever, but
excluding standard margin rules applicable to the Shares or the Warrants
(collectively, "Liens") except, with respect to the Warrants, the Warrant
Agreements pursuant to which such Warrants were issued. The Principal
Stockholder has not appointed or granted any proxy, which appointment or grant
is still effective, with respect to the Shares.
ARTICLE 3
COVENANTS OF THE PRINCIPAL STOCKHOLDER
Section 3.1 No Inconsistent Agreement. The Principal Stockholder
hereby covenants and agrees that it shall not enter into any agreement or grant
a proxy or power of attorney with respect to the Shares or Warrants which is
inconsistent with this Agreement.
Section 3.2 Transfer Restriction.
(a) The Principal Stockholder hereby covenants and
agrees that it shall not sell, give, assign, hypothecate, pledge, encumber,
grant a security interest in or otherwise dispose of, whether by operation of
law or by agreement or otherwise (each a "Transfer"), from the date hereof until
the earlier of (i) termination of this Agreement or (ii) termination of the
Merger Agreement, any Shares or Warrants, or any right, title or interest
therein or thereto; provided, however, that, notwithstanding the foregoing, the
Principal Stockholder may engage in ordinary course hedging transactions and may
sell Shares in open market transactions that comply with Rule 144(f) under the
Securities Act of 1933 (without regard to any other requirements of Rule 144).
(b) Notwithstanding the foregoing, the Principal
Stockholder may Transfer any Shares, Options or Warrants, or any right, title or
interest therein or thereto, to any of its subsidiaries or controlled
affiliates; provided that, prior to such Transfer, any transferee thereof shall
execute and deliver an agreement by which it shall become a party to and be
bound by the applicable terms and provisions of this Agreement, in form and
substance reasonably satisfactory to Parent.
(c) Notwithstanding the foregoing, if Parent
permits any stockholder that is a party to an agreement containing restrictions
on transfer of the type contained herein (the "Transferring Stockholder") to
Transfer any Shares, Warrants or options to purchase Company Common Stock (the
"Options") after the date hereof and prior to the termination of the Merger
Agreement, which Transfer would otherwise be prohibited by such agreement, then
Parent shall permit the Principal Stockholder, upon its request, to Transfer a
number of Shares or Warrants equal to the product of (i) the number of Shares,
Warrants or Options Transferred by the Transferring Stockholder divided by the
number of Shares, Warrants or Options owned by the Transferring Stockholder as
of the date of such Transfer, and (ii) the number of Shares or Warrants owned by
the Principal Stockholder as of the date of such Transfer, in each case,
treating all Options and Warrants as Shares on an as- converted basis (without
giving effect to any restrictions or limitations on the exercise of such Option
or Warrant).
Section 3.3 Exercise Restriction. The Principal Stockholder
hereby agrees not to exercise any of its Warrants from the date of this
Agreement until the earlier of (i) termination of this Agreement or (ii)
consummation of the Merger; provided that the Principal Stockholder may exercise
its Warrants if it immediately sells the Shares received pursuant to such
exercise in a transaction that complies with Section 3.2(a) hereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Authority Relative to this Agreement. Parent has full
right, power and authority to enter into and perform this Agreement and this
Agreement has been duly authorized, executed and delivered by Parent and is a
valid and binding agreement of Parent and enforceable against Parent in
accordance with its terms.
Section 4.2 No Conflict. (a) The execution and delivery of this
Agreement by Parent do not, and the performance of this Agreement by Parent will
not, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent.
(b) The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any court or arbitrator or any governmental body, agency or official except
for applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay the performance by Parent of its obligations under this
Agreement.
Section 4.3 Other Agreements. Concurrently with the execution
hereof, Parent and the Company are entering into separate waiver agreements with
Intel Corporation, Xxxxxxxx Capital Management, Inc. and Castle Creek Technology
Partners, LLC waiving certain provisions of agreements between such parties and
the Company similar to the waivers contained in Schedule 2. Such waivers are not
materially more favorable to such other parties than the waivers applicable to
the Principal Stockholder hereunder. Following the date hereof, neither Parent
nor the Company shall enter into an agreement (or amend an existing agreement)
containing waivers similar to the waivers contained in Schedule 2 that are more
favorable to the other party (when taken as a whole) than those applicable to
the Principal Stockholder hereunder, unless Parent and the Company also offer
such more favorable terms to the Principal Stockholder.
ARTICLE 5
MISCELLANEOUS
Section 5.1 Termination. This Agreement shall terminate upon the
earlier of: (i) the consummation of the Merger; (ii) February 15, 2000, if the
Merger Agreement is not executed prior to such date; (iii) July 31, 2000, if the
Merger is not consummated prior to such date; (c) the amendment of the Merger
Agreement in a manner materially adverse to the Principal Stockholder; (d) the
material breach by any party of its obligations under the Merger Agreement with
such breach having a material adverse effect on the Principal Stockholder; or
(e) the termination of the Merger Agreement pursuant to its terms prior to the
consummation of the Merger; provided that (x) the representations and warranties
contained herein shall survive the termination hereof and (y) Subject to Section
1.4, Section 1.2 hereof shall survive consummation of the Merger; provided,
further, that the agreements of the Company and Parent set forth in Schedule 2
and 4 hereof, respectively relating to the extension of the Warrants and
cashless exercise, shall survive the termination hereof or consummation of the
Merger, as the case may be.
Section 5.2 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
Section 5.3 Definitions. Unless otherwise defined herein, all
capitalized terms shall have the definitions assigned to such terms in the
Merger Agreement.
Section 5.4 Entire Agreement. This Agreement constitutes the
entire agreement among Parent, the Company and the Principal Stockholder with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
Section 5.5 Amendment. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto.
Section 5.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent
permitted by applicable law in a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated.
Section 5.7 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York regardless
of the laws that might otherwise govern under applicable principles of conflicts
of law.
Section 5.8 Jurisdiction. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
shall be brought in the courts of the State of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum.
IN WITNESS WHEREOF, Parent and the Principal Stockholder have
caused this Agreement to be duly executed as of the date first written above.
USANi SUB LLC
By: /s/ Xxxx Xxxxxxxxxxxx
-------------------------
Name: Xxxx Xxxxxxxxxxxx
Title: Vice President
WINFIELD CAPITAL CORP.
By: /s/ Xxxx X. Xxxxxx
----------------------
Name: Xxxx X. Xxxxxx
Title: Chief Executive Officer
XXXXXXXXXX.XXX, INC.
By: /s/ X. Xxxxxxxxx
--------------------
Name: X. Xxxxxxxxx
Title: President and Co-CEO
Schedule 1
Number of Shares
owned beneficially Number of
or of record 1/ Warrants Owned
-------------- --------------
47,000 55,616
--------
1/ Other than Shares issuable upon exercise of Warrants, which are listed
in the next column.
Schedule 2
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
Winfield Capital Securities Purchase ss.IV(3) Company covenants to N/A, 2/ except that (i) the
Corp. ("Winfield Agreement, dated as maintain its status as an Company will maintain its
Capital") of April 7, 1999, issuer required to file status as an issuer required to
among Winfield reports under the file reports under the Exchange
Capital, the Company Exchange Act. Act until consummation of the
and the other investors Merger and (ii) Parent will
named therein cause Newco to maintain its
status as an issuer required to
file reports under the Exchange
Act from consummation of the
Merger until termination of the
Warrants; provided that, this
provision, as so modified by
clause (ii), shall not prohibit
Newco from consummating a merger
or other "going private"
transaction.
ss.IV(5) Prohibition on certain N/A, except that this provision
below-market issuances of will continue to apply to
equity, equity-like or issuances by the Company prior
equity-linked securities. to Closing of the Merger other
than issuances contemplated by
the Merger Agreement or the
Credit Agreement.
--------
2/ "N/A" means the provision shall have no further force or effect and any and all claims arising under such provision (whether
before or after the date of this Waiver Agreement) are hereby expressly waived, subject in each case to the provisions of Section
1.2 and Section 1.4 of this Waiver Agreement.
* Description may not be complete. Entire provision is incorporated herein by reference.
2
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.IV(6) Prohibition on issuance or N/A, except that this provision
transfer of any debt or will continue to apply to
security of the Company's issuances or transfers prior to
subsidiaries. Closing of the Merger.
ss.IV(10) Company agrees to N/A, except that (i) the
maintain listing on Company will maintain its
NASDAQ or other listing or authorization for
exchange until certain date trading on NASDAQ until
and to pay penalties for consummation of the Merger
days not listed. and (ii) Parent will cause
Newco to maintain its listing or
authorization for trading on
NASDAQ or other exchange from
consummation of the Merger until
termination of the Warrants;
provided that, this provision, as
so modified by clause (ii), shall
not prohibit Newco from
consummating a merger or other
"going private" transaction.
Put right if not listed for
more than 30 days in any
12-month period. N/A. See Schedule 4.
* Description may not be complete. Entire provision is incorporated herein by reference.
3
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.V(1) Company agrees to N/A, except that this provision
remove legend on shares, will continue to apply to the
warrants and shares Company prior to Closing of
underlying such warrants the Merger. Following Closing
that are issued pursuant to of the Merger, Parent will
these agreements. cause Newco to remove such
legends only upon Newco's receipt
of customary and reasonable
documentation from the holder
that the relevant security is
registered or able to be sold
without registration.
ss.(V)(3) Company agrees to pay N/A, except that this provision
penalty upon failure to will continue to apply to the
remove legend (as Company prior to Closing of
described above). the Merger. Following Closing
of the Merger, if the failure to
remove the legend results from
Newco acting in a willful and
capricious manner, Newco will pay
penalty equal to 1/10 of 1% of
the fair market value of the
Common Stock and Common Stock
underlying the Warrants then held
by Winfield Capital for every day
that such failure continues
beginning on the 10th day
following such failure.
* Description may not be complete. Entire provision is incorporated herein by reference.
4
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.VIII(10) Indemnification Provision waived only with
provisions. respect to claims for
indemnification known to
Winfield Capital on or prior to
the date of the Merger
Agreement.
* Description may not be complete. Entire provision is incorporated herein by reference.
5
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
Winfield Capital Each of the warrants, Exercise price of the If, at any time following the
dated April 7, 1999, warrants. consummation of the Merger
issued by the and prior to 4/7/2001, Winfield
Company to Winfield Capital desires in good faith to
Capital sell shares of Newco Common
Stock issuable upon exercise of
the warrants, and, at such time
a registration statement
permitting the sale of such
shares is not effective, Winfield
Capital may request Newco to
effect a demand registration of
such shares and, if a
registration statement is not
effective within 30 days of such
demand, and Winfield Capital
exercises its warrants within
five days following such 30 day
period, and commits to sell the
underlying shares into the
market pursuant to Rule 144 as
soon as reasonably practicable
following such exercise, the
exercise price of the warrants
so exercised shall be reduced
by $1.00 per underlying share.
* Description may not be complete. Entire provision is incorporated herein by reference.
6
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.3(c) Company agrees to N/A, except that (i) the
maintain listing on Company will maintain its
NASDAQ or other listing or authorization for
exchange until certain date trading on NASDAQ until
and to pay penalties for consummation of the Merger
every day not listed. and (ii) Parent will cause
Newco to maintain its listing or
authorization for trading on
NASDAQ or other exchange from
consummation of the Merger until
termination of the Warrants;
provided that, this provision, as
so modified by clause (ii), shall
not prohibit Newco from
consummating a merger or other
"going private" transaction.
Put right if not listed for
more than 30 days in any
12-month period. N/A
* Description may not be complete. Entire provision is incorporated herein by reference.
7
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.4(a) Anti-dilution adjustment to Provision waived with respect
exercise price and number to any of the following
of shares upon below- transactions to the extent that
market issuances. such transaction would
otherwise require an adjustment
under Section 4(a): (i) any
issuance (or deemed issuance) of
securities contemplated by the
Merger Agreement or the Credit
Agreement; or (ii) any issuance
(or deemed issuance) of
securities by Newco as
consideration in an acquisition
of or from a third party or in
connection with a merger with a
third party anytime after the
Effective Time of the Merger;
provided that, with respect to
clause (ii), the principal
purpose of such transaction is
not to raise capital, and such
third party is not a controlled
affiliate of Newco or such
transaction (a) has been approved
by a special committee of the
Board of Directors comprised
solely of independent directors
and
* Description may not be complete. Entire provision is incorporated herein by reference.
8
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
such special committee has
recommended that the stockholders
of Newco vote in favor thereof
and (b) Newco has received from a
nationally recognized investment
banking firm a written opinion
addressed to such special
committee, for inclusion in the
proxy statement to be delivered
to the stockholders,
substantially to the effect that
such transaction is fair to Newco
or to Newco's stockholders (other
than any stockholder that,
together with its affiliates,
beneficially owns equity
securities representing more than
50% of the combined voting power
of all outstanding equity
securities of Newco ordinarily
entitled to vote in the election
of directors) from a financial
point of view.
ss.4(e)(b)(ii) Right to receive 125% of N/A
Black-Scholes Amount upon
a Major Transaction (as defined
in each warrant).
* Description may not be complete. Entire provision is incorporated herein by reference.
9
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.4(l) Adjustment to exercise
price and number of
shares upon certain
dispositions of the
Company Common Stock by
Xxxxxxxxx.
Xxxxxxxx Capital Each of the warrants, ss.2 Period of Exercise The Exercise Period of the
dated April 7, 1999 warrants shall be extended to
issued by the 4/7/2002.
Company to Winfield
Capital and
terminating on
April 7, 2000 and
July 7, 2000.
Winfield Capital Registration Rights ss.2.1(d) Put right if sales of all N/A. See Schedule 4.
Agreement, dated as Registrable Securities
of April 7, 1999, cannot be made pursuant
among Winfield to the registration
Capital, the Company statement for more than 30
and the other investors days in any 12-month
named therein period.
ss.2.3 Penalty for each day on N/A. See Schedule 4.
which sales of Registrable
Securities cannot be made
pursuant to the registration
statement.
* Description may not be complete. Entire provision is incorporated herein by reference.
10
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.3.1 Company covenants to N/A. See Schedule 4.
maintain effectiveness of
registration statement for
certain period of time.
ss.3.13 Company agrees to N/A, except that (i) the
maintain listing on Company will maintain its
NASDAQ or other listing or authorization for
exchange. trading on NASDAQ until
consummation of the Merger and
(ii) Parent will cause Newco to
maintain its listing or
authorization for trading on
NASDAQ or other exchange from
consummation of the Merger until
termination of the Warrants;
provided that, this provision, as
so modified by clause (ii), shall
not prohibit Newco from
consummating a merger or other
"going private" transaction.
ss.3.19 Company covenants not to N/A. See Schedule 4.
grant certain registration
rights to certain other
equityholders
* Description may not be complete. Entire provision is incorporated herein by reference.
11
Name of Principal Provision
Stockholder Name of Agreement Waived Description of Provision* Modification of Provision
----------- ----------------- ------ ------------------------- -------------------------
ss.3.15 Company agrees to N/A. See Schedule 4.
provide opinion of counsel
within two days following
effectiveness of
registration statement filed
pursuant to these
agreements.
ss.6 Indemnification Provision waived only with
provisions. respect to claims for
indemnification known to
Winfield Capital on or prior to
the date of the Merger
Agreement.
ss.8 Company covenants to N/A, except that (i) the
maintain its status as an Company will maintain its
issuer required to file status as an issuer required to
reports under the file reports under the Exchange
Exchange Act. Act until consummation of the
Merger and (ii) Parent will cause
Newco to maintain its status as
an issuer required to file
reports under the Exchange Act
from consummation of the Merger
until termination of the
Warrants; provided that, this
provision, as so modified by
clause (ii), shall not prohibit
Newco from consummating a merger
or other "going private"
transaction.
* Description may not be complete. Entire provision is incorporated herein by reference.
12
Schedule 3
Liens
-----
None
13
Schedule 4
Registration Rights
Immediately upon effectiveness of Newco's S-4 until consummation
of the Merger, the Company will take all reasonable action to reinstate the
effectiveness of the S-3 registration statement pursuant to which the Principal
Stockholder's Warrant Shares are registered until the Closing.
Immediately following consummation of the Merger, Newco will
provide the existing outside warrantholders of the Company, including the
Principal Stockholder and any of its permitted assignees (collectively, the
"Warrantholders"), with a total of six demand registrations and piggyback
registration rights provided that the Principal Stockholder shall be entitled to
at least two such demands. Newco will use its best efforts to keep each such
registration in effect for the earlier of (i) 90 days following the effective
time of such registration statement and (ii) the time when all shares subject to
such registration statement have been sold (the "Effectiveness Period"). No
demand may be made within 90 days following the Effectiveness Period.
Demand registrations are subject to suspensions at any time for
periods not to exceed 90 days (which right Newco may not exercise more than
twice in any 12-month period) if such registration would interfere with any
financing, acquisition or other material transaction involving Newco or any of
its affiliates or would otherwise require disclosure of material non-public
information which Newco reasonably believes would be harmful to disclose at such
time. The terms of the Warrants held by the Warrantholders shall be extended for
(a) the period of time between signing of the Merger Agreement and the
effectiveness of the registration statement on Form S-4 relating to the Merger
and (b) following effectiveness of such registration statement, the aggregate
periods of time for which all such suspensions are in effect and (without
duplication) for which an effective registration statement is not effective
following a demand therefor.
Newco will not be required to register shares following a demand
unless at least 250,000 shares (as adjusted for stock splits and stock
combinations), including shares to be included pursuant to piggyback
registrations, or, if lower, a number of shares equal to the number of shares
then beneficially owned by the Warrantholders requested such demand (not below
100,000 shares) are included in such registration statement.
Newco will use its best efforts to cause registered shares to be
qualified for sale under all applicable blue sky laws unless such qualification
would require Newco to qualify to do business in any state or if it would
subject Newco to additional taxation.
Registration rights obligations with respect to the Shares will
end upon the earlier of (i) the date on which all of the Shares have been sold
and (ii) the date on which all of the Shares (in the reasonable opinion of
counsel to the Warrantholder)
14
may be immediately sold to the public pursuant to Rule 144(k). On or following
April 7, 2000, the Company will permit cashless exercise of the Warrants upon
request of any Warrantholders if, at such time, the S-3 registration statement
pursuant to which such Warrantholder's Shares are registered would not permit
the sale of such Shares or, if no such registration statement is then effective.
Following consummation of the Merger, Newco will agree to permit cashless
exercise of warrants upon request of any Warrantholders.
All expenses incurred in connection with a registration (other
than (i) fees and disbursements of counsel to the selling stockholder and (ii)
underwriting discounts and commissions, if any) shall be borne by Newco.
The registration rights set forth herein are subject to the
condition that the selling stockholder shall provide Newco with such information
with respect to shares of common stock to be registered, the plans for the
proposed distribution thereof and such other information as, in the reasonable
opinion of Newco is necessary to enable Newco to include in such registration
statement all material facts required to be disclosed with respect to such
offering.
