Exhibit 10.6
SUBSCRIPTION AGREEMENT
Subscription Agreement, dated as of November 14, 2001, between NetWolves
Corporation, a New York corporation (the "Company") and Whiffletree Partners, LP
(the "Purchaser").
WHEREAS, the Purchaser desire to subscribe for, and the Company desires to
issue to the Purchaser, 500,000 shares (the "Shares") of the Company's common
stock (the "common stock") all upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
premises, covenants, representations and warranties herein contained, it is
hereby agreed as follows:
1. Subscription Price; Issuance.
In reliance on the representations and warranties contained herein and
subject to the terms and conditions hereof, the Purchaser hereby subscribes for
the Shares and concurrently with delivery hereof has paid to the Company an
amount equal to $2.00 per share or $1,000,000 in the aggregate (the "Purchase
Price"), in immediately available funds upon the execution and delivery of this
Agreement, and the Company will issue the Shares to the Purchaser immediately
upon receipt of the Purchase Price.
2. Representations and Warranties of the Company.
The Company represents and warrants to the Purchaser as follows:
2.1. Corporate Status. The Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it was incorporated with full corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted.
2.2. Authority of Agreement. The Company has the power and authority to
execute and deliver this Agreement and to carry out its obligations hereunder.
The execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and this Agreement
constitutes the valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the application of equitable principles and the availability of
equitable remedies. The issuance of the Shares are not and will not be subject
to preemptive rights or right of first refusal that have not been properly
waived or complied with.
2.3. No Conflicts. The execution, delivery and performance of this
Agreement and the other instruments and agreements to be executed, delivered and
performed by the Company pursuant hereto and the consummation of the
transactions contemplated hereby and thereby by the Company do not and will not,
with or without the giving of notice or the passage of time or both, violate or
conflict with or result in a breach or termination of any provision of, or
constitute a default under, the Certificate of Incorporation or the By-Laws of
the Company or any order, judgment, decree, statute, regulation, contract,
agreement (including the Material Contracts, as hereinafter defined), or any
other restriction of any kind or description to which the Company or its assets
may be bound or subject. The Company is not in violation of or (with or without
notice or lapse of time or both) in default under, any term or provision of its
Certificate of Incorporation or By-Laws or any indenture, loan or credit
agreement, note agreement, mortgage, security agreement, order, judgment,
decree, statute, regulation, contract or other agreement (including the Material
Contracts, as hereinafter defined), lease or other instrument, commitment or
arrangement to which the Company is a party or by which the Company's assets are
bound.
2.4 Fully Paid and Non-Assessable. Upon issuance of the Shares and payment
therefor pursuant to the terms hereof, each Share shall be validly issued, fully
paid and non-assessable.
2.5 Certificate and Bylaws. The copies of the Certificate of Incorporation
and Bylaws of the Company which have been delivered to (or made available for
inspection by) the Purchaser prior to the execution of this Agreement are true
and complete and have not been amended or repealed.
2.6 Qualification. The Company is duly qualified as a foreign corporation
and in good standing in the State of Florida. The Company is not qualified to do
business as a foreign corporation in any other jurisdiction and the failure to
be so qualified would not have a material and adverse effect on the business,
assets, property, or financial condition of the Company ("Material Adverse
Effect").
2.7 Capital Stock.
(a) As of the Closing Date, the authorized capital stock of the Company
will consist of (i) 2,000,000 shares of preferred stock, par value $.0033 per
share, none of which are issued and outstanding; and, (ii) 50,000,000 shares of
common stock of which 10,668,065 are issued and outstanding prior to giving
effect to the transaction contemplated by this Agreement and prior to giving
effect to the issuance of any shares of common stock pursuant to the exercise of
outstanding options and warrants, and the Company will have no authority under
its Certificate of Incorporation to issue any other capital stock. All such
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable.
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(b) As of the Closing Date, the Company has reserved a total of 6,918,000
shares of common stock for issuance upon the exercise of stock options or
purchase rights granted under its stock plans or under other stock option
agreements or warrants.
(c) Except as contemplated by this Agreement and as set forth in its SEC
Filings (as hereinafter defined), the Company has no outstanding subscription,
option, warrant, right of first refusal, preemptive right, call, contract,
demand, commitment, convertible security or other instrument, agreement or
arrangement of any character or nature whatever under which the Company is or
may be obligated to issue common stock, preferred stock or other equity security
of any kind.
2.8 Binding Obligations.
(a) This Agreement constitutes the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with its terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally, and by
general equitable principles.
(b) The Shares are duly authorized and, when issued and paid for in
accordance with the terms of this Agreement, will be duly authorized, validly
issued and outstanding, fully paid and nonassessable and free and clear of all
liens and restrictions, other than liens that might have been created or
suffered by any Purchaser with respect to its Shares and restrictions imposed by
the Securities Act (as hereinafter defined), state securities laws or this
Agreement.
2.9 Securities Laws. Subject to the accuracy of the representations and
warranties contained in Section 3, the offer, issue and sale of the Shares are
and will be (i) exempt from registration and prospectus delivery requirements of
the Securities Act, and (ii) in compliance with all applicable federal and state
securities laws.
2.10 Financial Statements. Included in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 2001 are the Company's audited balance
sheet (the "Balance Sheet") as of June 30, 2001 ("Form 10-K") (the "Balance
Sheet Date"), and the audited statement of operations for the year then ended
together with the related report of Xxxxxx Xxxxxxxx, LLP, independent certified
public accountants. The foregoing financial statements (i) are complete and
correct in all material respects and are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company at the Balance Sheet Date and other dates therein specified and the
results of operations and changes in financial position of the Company for the
periods therein specified, and (iii) have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior accounting periods, except that the unaudited financial statements are
subject to year-end audit adjustments and do not contain complete footnotes or
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statement of stockholders' equity. The Company, and/or its subsidiaries, has no
liabilities or obligations, either acquired or absolute, contingent or
otherwise, which are not reflected or provided for in the financial statements
except liabilities not in excess of $100,000 in the aggregate arising after the
Balance Sheet Date which were incurred in the ordinary course of business.
consistent in nature and amount with past practice.
2.11 Changes. Since the Balance Sheet Date, there has been no event which
would have a Material Adverse Effect. Since the Balance Sheet Date, the Company
has not (a) mortgaged, pledged or subjected to lien any of its material assets,
tangible or intangible, (b) sold, transferred or leased a material portion of
its assets, (c) cancelled or compromised any material debt or claim, or waived
or released any right, of material value, (d) suffered any physical damage,
destruction or loss (whether or not covered by insurance) having a material
effect, (e) declared or paid any dividends on or made any other distributions
with respect to, or purchased or redeemed, any of its outstanding equity
securities, or (f) suffered or experienced any material adverse change or loss
in its business.
2.12 Material Agreements of the Company. The Company is not a party to or
otherwise bound by any written or oral agreement, instrument or arrangement that
is material to the Company except for those agreements included as exhibits to
the Form 10-K ("Material Contracts"). The Company has furnished or made
available to the Purchaser true and complete copies of all such agreements and
all other agreements, instruments and other documents requested by any Purchaser
or its authorized representative. The Company is not in default of any Material
Contract.
2.13 Litigation. Except as disclosed in the 10-K, there is no action
pending and, to the best knowledge of the Company, there is no material action
threatened against the Company or its properties or assets. The Company is not
in default with respect to any order, writ, judgment, injunction, decree,
determination or award of any court or of any governmental entity.
2.14 Disclosure. The representations and warranties of the Company
contained herein, when read together with the Form 10-K do not contain any
untrue statement of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
2.15 Intellectual Property.
(a) To the best of the Company's knowledge, the Company has sufficient
title to and ownership of or rights to all patents, patent rights, patent
applications, inventions, trademarks, service marks, trade names, copyrights and
information, proprietary rights and processes necessary for the conduct of its
business, and the use by the Company of the foregoing does not conflict with or
constitute an infringement of the rights of others. The Company has sufficient
licenses, permits and other governmental authorizations required for the conduct
of its business as currently conducted and is not in default with respect
thereto, except as the failure to have any such license, permit or authorization
or any default with respect thereto would not have a Material Adverse Effect.
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(b) The Company has not received any communications alleging that it has
violated, has no knowledge that the Company has violated, or by conducting its
business, the Company will not, to the best of its knowledge, violate, any of
the patents, patent applications, inventions, trademarks, service marks, trade
names, copyrights or trade secrets, confidential information, proprietary rights
or processes of any other person.
2.16 Retirement Obligations. Except for a non-contributory 401(k) plan, the
Company does not have any Employee Benefit Plan as defined in the Employee
Retirement Income Security Act of 1974, as amended.
2.17 No Governmental Consent or Approval Required. Based in part on the
representations made by the Purchaser in Section 3 of this Agreement, no
authorization, consent, approval or other order of, declaration to, or
registration, qualification, designation or filing with, any federal, state or
local governmental agency or body is required by or from the Company for the
valid and lawful authorization, execution and delivery by the Company of this
Agreement or any other agreement entered into by the Company in connection with
this Agreement, and consummation of the transactions contemplated hereby or
thereby, or for the valid and lawful authorization, reservation, issuance, sale
and delivery of the Shares, other than the qualification (or taking of such
action as may be necessary to secure an exemption from qualification, if
available) of the offer and sale of the Shares under the New York Securities Law
and applicable federal securities laws, which filings and qualifications, if
required, will be accomplished in a timely manner so as to comply with such
qualification or exemption from qualification requirements.
2.18 Nasdaq Listing Compliance. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed on the Nasdaq Small
Cap Market and the Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Stock under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or de-listing
the Common Stock from the Nasdaq Small Cap Market, nor has the Company received,
nor has it any reason to believe it will receive, any notification that the
Commission or Nasdaq, Inc. is contemplating terminating such registration or
listing.
2.19 Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during
the 12 months preceding the date of this Agreement and such documents complied
as to form and substance in all material respects with the Commission's
requirements as of their respective filing dates, and the information contained
therein as of the date thereof did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under
which they were made not misleading.
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2.20 Compliance with Nasdaq Requirements. The Company shall comply with all
requirements of Nasdaq, Inc. with respect to the issuance of the Shares.
2.21 Eligibility to File Form S-3. The Company is currently eligible to
register the resale of common stock in a secondary offering on a registration
statement on Form S-3 under the Securities Act.
3. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
3.1. Status.
If the Purchaser is a corporation or other entity, the Purchaser is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with full power
and authority to execute, deliver and perform its obligations under this
Agreement. If the Purchaser is an individual, the Purchaser has legal capacity
to execute, deliver and perform his or her obligations under this Agreement.
3.2 Authority for Agreements.
The Purchaser has the power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance by the Purchaser of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Purchaser and this Agreement constitutes the valid and
legally binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization or other laws affecting the enforcement of creditors'
rights generally now or hereafter in effect and subject to the application of
equitable principles and the availability of equitable remedies.
3.3. No Conflicts.
The execution, delivery and performance of this Agreement and the other
instruments and agreements to be executed, delivered and performed by the
Purchaser pursuant hereto and the consummation of the transactions contemplated
hereby and thereby by the Purchaser does not and will not with or without the
giving of notice or the passage of time or both, violate or conflict with or
result in a breach or termination of any provision of, or constitute a default
under, the Certificate of Incorporation or the By-Laws of the Purchaser (if the
Purchaser is a corporation), any other organizational instrument (if the
Purchaser is a legal entity other than a corporation) or any order, judgment,
decree, statute, regulation, contract, agreement or any other restriction of any
kind or description to which the Purchaser is a party or by which the Purchaser
may be bound.
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3.4. Investor Representations and Acknowledgments.
(a) The Purchaser is acquiring the Shares for the Purchaser's own accounts
for investment only and not as nominee or agent and not with a view to, or for
sale in connection with, a distribution of the Shares or its components and with
no present intention of selling, transferring, granting a participation in or
otherwise distributing, the Shares or underlying common stock, all within the
meaning of the Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act") and any applicable state, securities or
blue-sky laws.
(b) The Purchaser is not a party or subject to or bound by any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
pledge the Shares or any part thereof to any person, and has no present
intention to enter into such a contract, undertaking, agreement or arrangement.
(c) The Purchaser acknowledges to the Company that:
(i) The Company has advised the Purchaser that the Shares have not
been registered under the Securities Act or under the laws of any state on
the basis that the issuance thereof contemplated by this Agreement is
exempt from such registration;
(ii) The Company's reliance on the availability of such exemption is,
in part, based upon the accuracy and truthfulness of the Purchaser's
representations contained herein;
(iii) The common stock cannot be resold without registration or an
exemption under the Securities Act and applicable state securities laws,
and that certificates representing the common stock will bear a restrictive
legend to such effect;
(iv) The Purchaser has evaluated the merits and risks of purchasing
the Shares, and has such knowledge and experience in financial and business
matters that the Purchaser is capable of evaluating the merits and risks of
such purchase, is aware of and has considered the financial risks and
financial hazards of purchasing the Shares, and is able to bear the
economic risk of purchasing the Shares, including the possibility of a
complete loss with respect thereto;
(v) The Purchaser has had access to such information regarding the
business and finances of the Company, including the Form 10-K, and has been
provided the opportunity to discuss with the Company's management the
business, affairs and financial condition of the Company and such other
matters with respect to the Company as would concern a reasonable person
considering the transactions contemplated by this Agreement and/or
concerned with the operation of the Company;
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(vi) Additional Representations and Warranties of Accredited
Investors. The Purchaser, by initialing the applicable paragraph below (a)
through (g) hereby represents and warrants that the Purchaser is an
"Accredited Investor", because the Purchaser comes within one or more of
the enumerated categories. The Purchaser has reviewed the Investor
Suitability Standards attached as Annex A hereto and confirms it is an
"Accredited Investor" as indicated below. Place your initials in the space
provided in the beginning of each applicable paragraph, thereby
representing and warranting as to the applicability to the Purchaser of the
initialed paragraph or paragraphs:
[ ] (a) any individual Purchaser whose net worth, or joint net worth
with that person's spouse at the time of his purchase, exceeds $1,000,000
(including any individual participant of a Xxxxx Plan, XXX or XXX Rollover
Purchaser);
[ ] (b) any individual Purchaser who had an income in excess of
$200,000 in each of the two most recent years or joint income with that
person's spouse in excess of $300,000 in each of those years and who
reasonably expects an income in excess of the same income level in the
current year (including any individual participant of a Xxxxx Plan, XXX or
XXX Rollover Purchaser);
[ ] (c) any corporation or partnership not formed for the specific
purpose of making an investment in the Shares, with total assets in excess
of $5,000,000;
[ ] (d) any trust, which is not formed for the specific purpose of
investing in the Shares, with total assets in excess of $5,000,000, whose
purchase is directed by a sophisticated person, as such term is defined in
Rule 506(b) of Regulation D under the Securities Act;
[ ] (e) any ERISA Plan if the investment decision is made by a plan
fiduciary, as defined in section 3(21) of ERISA, which is either a bank,
insurance company, or registered investment adviser, or the Plan has total
assets in excess of $5,000,000;
[X] (f) any entity in which all of the equity owners are Accredited
Investors under paragraphs (a), (b) or (c) above or any other entity
meeting required "Accredited Investor" standards under Rule 501 of
Regulation D under the Securities Act and applicable State securities law
criteria;
[ ] (g) other (please explain)
4. Registration of Restricted Stock.
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4.1 Required Registration.
(a) After 30 days from closing, the Purchaser can demand that the Company
file a registration statement covering the Shares. Within 14 business days after
demand the Company shall prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 under the
Securities Act or other appropriate Form in the event Form S-3 is not available,
covering the Shares and shall use commercially reasonable efforts to cause such
registration statement to become effective as expeditiously as possible and to
remain effective until the earliest to occur of (i) the date the Shares covered
thereby have been sold, (ii) the date by which all Shares covered thereby may be
sold under Rule 144 without restriction as to volume and each Purchaser owns
less than 1% of outstanding shares, or (iii) the date which is the 36-month
anniversary of the closing date for the Shares.
(b) Following the effectiveness of a registration statement filed pursuant
to this section, the Company may, at any time, suspend the effectiveness of such
registration for up to thirty (30) days, as appropriate (a "Suspension Period"),
by giving notice to the Purchaser, if the board of directors shall have
reasonably determined in good faith that the Company is required to disclose any
material corporate development which disclosure may have a Material Adverse
Effect on the Company. Notwithstanding the foregoing, no more than one
Suspension Period may occur during any twelve-month period, unless approved by
the Purchaser. The Company shall use its best efforts to limit the duration and
number of any Suspension Periods. The Purchaser of Shares agrees that, upon
receipt of any notice from the Company of a Suspension Period, the Purchaser
shall forthwith discontinue disposition of Shares covered by such registration
statement or prospectus until the Purchaser (i) is advised in writing by the
Company that the use of the applicable prospectus may be resumed, (ii) has
received copies of a supplemental or amended prospectus, if applicable, and
(iii) has received copies of any additional or supplemental filings which are
incorporated or deemed to be incorporated by reference into such prospectus.
(c) If the registration statement required to be filed pursuant to Section
4.1(a) has not been filed by the Company with the Commission by the 14th
business day following the demand date or has not been declared effective by the
Commission within 50 calendar days after the filing date (either event, a
"Registration Default"), then following such Registration Default and until such
Registration Default is cured by the Company filing such registration statement
with the Commission and such registration statement being declared effective by
the Commission (a "Registration Cure"), the Company shall pay to the Purchaser
an amount (the "Default Payment") equal to the product of (x) one thirtieth of
one percent of the purchase price of the shares acquired by such Purchaser on
the Closing Date, multiplied by (y) the number of days which elapse between the
date of the Registration Default and the date of the Registration Cure (the
"Registration Default Period"). The Default Payment may be paid in either cash
or additional shares of the Company's common stock, such form of payment to be
determined at the election of the Company each 30 days during the Registration
Default Period up to the 90th day following the date of the demand and
thereafter to be determined at the election of the Purchaser each 30 days during
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the Registration Default Period, with the number of additional Shares calculated
based upon the closing price of the Company's common stock on the Nasdaq Small
Cap Market on the trading day immediately prior to the end of the period with
respect to which such Default Payment relates. The Company and the Purchaser
agree that the damages resulting from a Registration Default would be difficult
or impossible to determine and that the Default Payment represents a reasonable
approximation of the anticipated damages. Accordingly, the Purchaser agrees that
the receipt of the Default Payment shall be Purchaser's sole and exclusive
remedy under this Agreement or otherwise for a Registration Default, and in no
event shall the Company be liable for any lost profits, consequential, special,
punitive or similar damages, no matter how identified, resulting from a
Registration Default. Notwithstanding the foregoing, Purchaser shall be entitled
to exercise the right to seek specific performance and other equitable remedies
with respect to the Company's obligations under the Agreement.
4.2 Registration Procedures. When the Company effects the registration of
the Shares under the Securities Act pursuant to Section 4.1(a) hereof, the
Company will, at its expense, as expeditiously as possible:
(a) In accordance with the Securities Act and the rules and regulations of
the Commission, prepare and file in accordance with Section 4.1(a), with the
Commission a registration statement with respect to the Shares and use its
commercially reasonable efforts to cause such registration statement to become
and remain effective for the period described herein, and prepare and file with
the Commission such amendments to such registration statement and supplements to
the prospectus contained therein as may be necessary to keep such registration
statement effective for such period and such registration statement and
prospectus accurate and complete for such period;
(b) Furnish to the Purchaser participating in such registration such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as the Purchaser may
reasonably request in order to facilitate the public offering of the Shares;
(c) Use its best efforts to register or qualify the Shares covered by such
registration statement under such state securities or blue sky laws of such
jurisdictions as the Purchaser may reasonably request within twenty (20) days
following the original filing of such registration statement, except that the
Company shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified;
(d) Notify the Purchaser participating in such registration, promptly after
it shall receive notice thereof, of the date and time when such registration
statement and each post-effective amendment thereto has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(e) Notify such Purchaser promptly of any request by the Commission for the
amending or supplementing of such registration statement or prospectus or for
additional information;
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(f) Prepare and file with the Commission, promptly upon the request of any
such Purchaser, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Purchaser, is required under
the Securities Act or the rules and regulations thereunder in connection with
the distribution of the Shares by such Purchaser;
(g) Cause to have prepared and filed with the Commission such reports or
opinions as may reasonably be requested by any underwriter, including
appropriate legal opinions and comfort letters, if applicable.
(h) Prepare and promptly file with the Commission, and promptly notify the
Purchaser of the filing of, such amendments or supplements to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event has occurred as the
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and
(i) Advise the Purchaser, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
(j) Furnish to the Purchaser and its legal counsel, promptly after the same
is prepared and publicly distributed, filed with the Commission, or received by
the Company, one copy of the registration statement and any amendment thereto,
and such number of copies of each prospectus, including each preliminary
prospectus, and all amendments and supplements thereto, and such other documents
as the Purchaser may reasonably request in order to facilitate the disposition
of the Shares. The Company shall promptly notify the Purchaser of the
effectiveness of any Registration Statement or post-effective amendments
thereto.
(k) Use commercially reasonable efforts to cause the listing and the
continuation of listing of all the Shares covered by any registration statement
on each securities exchange or quotation system upon which any other securities
of the Company is then listed or quoted.
(l) Provide a transfer agent and registrar, which may be a single entity,
for the Shares not later than the effective date of the registration statement.
(m) Cooperate with the Purchaser to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing the
Shares to be offered pursuant to the registration statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
Purchaser may reasonably request and register in such names as such Purchaser
may request, and, upon the written request of the transfer agent for the
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Company, within two business days of such request, the Company shall cause legal
counsel selected by the Company to deliver to the transfer agent and the
Purchaser an opinion (a "Transfer Opinion") of such counsel in a form reasonably
acceptable to the transfer agent and the Purchaser.
(n) Comply with all applicable laws related to a registration statement and
offering and sale of securities covered by the registration statement and all
applicable rules and regulations of governmental authorities in connection
therewith (including, without limitation, the Securities Act and the Exchange
Act).
4.3 Expenses. With respect to any registration effected pursuant to Section
4.1 hereof, all fees, costs and expenses of and incidental to such registration
and the public offering in connection therewith shall be borne by the Company,
provided, however, that the Purchaser shall bear its own legal fees and their
pro rata share of any underwriting discounts or commissions, if any.
4.4 Indemnification.
(a) The Company will indemnify and hold harmless the Purchaser which is
included in a registration statement pursuant to the provisions of Section 4
hereof and any underwriter (as defined in the Securities Act) for such
Purchaser, and any person who controls such Purchaser or such underwriter within
the meaning of the Securities Act, and any officer, director, employee, agent,
partner, member or affiliate of such Purchaser (for purposes of this Section
4.4(a), the "Indemnified Parties"), from and against, and will reimburse such
Purchaser and each such Indemnified Party with respect to, any and all claims,
actions, demands, losses, damages, liabilities, costs and expenses to which such
Purchaser or any such Indemnified Party may become subject under the Securities
Act or otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses arise out of or are based upon (i) violation of
securities laws; (ii) any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or (iii) any breach of any representation, warranty, agreement or covenant of
the Company contained herein; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, action, demand, loss,
damage, liability, cost or expense is caused by an untrue statement or alleged
untrue statement or omission or alleged omission so made in strict conformity
with information furnished by such Purchaser or such Indemnified Party in
writing specifically for use in the preparation thereof.
(b) The Purchaser, if included in a registration pursuant to the provisions
of Section 4 hereof will indemnify and hold harmless the Company, and any Person
who controls the Company within the meaning of the Securities Act, from and
against, and will reimburse the Company and such controlling Persons with
respect to, any and all losses, damages, liabilities, costs or expenses to which
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the Company or such controlling Person may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or are caused by the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was so made solely in reliance upon and in strict conformity
with written information furnished by such Purchaser specifically for use in the
preparation thereof; provided, however, that the liability of any Purchaser
pursuant to this subsection (b) shall be limited to an amount not to exceed the
net proceeds received by such Purchaser pursuant to the registration statement
which gives rise to such obligation to indemnify.
(c) Promptly after receipt by a party indemnified pursuant to the
provisions of paragraph (a) or (b) of this Section 4.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of paragraph (a)
or (b), notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 4.4 and shall not relieve the indemnifying party from liability under
this Section 4.4 unless such indemnifying party is materially prejudiced by such
omission. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of such paragraph
(a) or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall be liable to an indemnified
party for any settlement of any action or claim without the consent of the
indemnifying party. No indemnifying party will consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation and no
settlement can have non-monetary remedies.
(d) If the indemnification provided for in subsection (a) or (b) of this
Section 4.4 is held by a court of competent jurisdiction to be unavailable to a
party to be indemnified with respect to any claims, actions, demands, losses,
damages, liabilities, costs or expenses referred to therein, then each
indemnifying party under any such subsection, in lieu of indemnifying such
indemnified party thereunder, hereby agrees to contribute to the amount paid or
payable by such indemnified party as a result of such claims, actions, demands,
losses, damages, liabilities, costs or expenses in such proportion as is
14
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such claims, actions, demands, losses, damages,
liabilities, costs or expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount any Purchaser shall be obligated
to contribute pursuant to this subsection (d) shall be limited to an amount not
to exceed the net proceeds received by such Purchaser pursuant to the
registration statement which gives rise to such obligation to contribute. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution hereunder from
any person who was not guilty of such fraudulent misrepresentation.
4.5 Reporting Requirements Under the Exchange Act. The Company shall timely
file such information, documents and reports as the Commission may require or
prescribe under Section 13 of the Exchange Act. The Company acknowledges and
agrees that the purposes of the requirements contained in this Section 4.5 are
to enable the Purchaser to comply with the current public information
requirement contained in paragraph (c) of Rule 144 should any such Purchaser
ever wish to dispose of any of the Shares without registration under the
Securities Act in reliance upon Rule 144 (or any other similar exemptive
provision).
4.6 Stockholder Information. The Company may require the Purchaser to
furnish the Company such information with respect to the Purchaser and the
distribution of its Shares as the Company may from time to time reasonably
request in writing as shall be required by law or by the Commission in
connection therewith.
5. Further Assurances.
At any time and from time to time after the date hereof, each party shall,
without further consideration, execute and deliver to the other such other
instruments or documents and shall take such other actions as the other may
reasonably request to carry out the transactions contemplated by this Agreement.
6. Miscellaneous.
Any party may waive compliance by the other with any of the provisions of
this Agreement. No waiver of any provision shall be construed as a waiver of any
other provision. Any waiver must be in writing. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement may not be modified
or amended except in writing signed by both parties hereto. This Agreement may
be executed in several counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. This Agreement
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of New York, applicable to contracts made and
15
to be performed in New York. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the successors and assigns of the parties
hereto. This Agreement shall not be assignable by either party without the prior
written consent of the other, such consent not to be unreasonably withheld. The
rights and obligations contained in this Agreement are solely for the benefit of
the parties hereto and are not intended to benefit or be enforceable by any
other party, under the third party beneficiary doctrine or otherwise.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
NETWOLVES CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board
WHIFFLETREE PARTNERS, LP
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxx
Title: General Partner Member
Tax ID# 00-0000000
