EXHIBIT 10.23
SERIES C PREFERRED STOCK PURCHASE WARRANT
THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES C PREFERRED STOCK WHICH MAY
BE PURCHASED PURSUANT TO THE EXERCISE OF THIS WARRANT (THE "SHARES"), WILL BE
ACQUIRED SOLELY FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
OF SERIES C PREFERRED STOCK ISSUABLE HEREUNDER OR ANY SHARES INTO WHICH SUCH
SHARES ARE CONVERTIBLE, (TOGETHER, THE "SECURITIES") HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH DISPOSITION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE
SECURITIES LAWS.
No. 8
Void after October 21, 2009
2BRIDGE SOFTWARE
WARRANT TO PURCHASE 11,722 SHARES OF SERIES C PREFERRED STOCK
____________
THIS CERTIFIES THAT, for value received, Comdisco, Inc. (the "Holder") is
entitled to subscribe for and purchase from 2Bridge Software, a California
corporation (the "Company"), shares of the Company's fully paid and
nonassessable Series C Preferred Stock (the "Shares"), in the amounts and at the
price per share set forth in Section 1 below (as adjusted pursuant to Section 4
hereof), subject to the provisions and upon the terms and conditions hereinafter
set forth.
This Warrant is subject to the following terms and conditions:
1. Number and Price of Shares.
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(a) The Holder shall have the right to purchase 11,722 Shares, which
is equal to one hundred twenty-five thousand dollars ($25,000) divided by the
Exercise Price, as defined in Section 1(b) below.
(b) The exercise price per Share ("Exercise Price") shall be equal to
$2.1328 per Share.
2. Method of Exercise; Payment.
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(a) Cash Exercise. The purchase rights represented by this Warrant
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may be exercised by the Holder, in whole or in part, from time to time by: (i)
the surrender of this Warrant (with the notice of exercise form (the "Notice of
Exercise") attached hereto as Exhibit A duly executed) at the principal office
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of the Company; (ii) the execution of a Series C Preferred Stock Purchase
Agreement and all exhibits thereto, including without limitation an Amended and
Restated Investor Rights Agreement, Voting Agreement, and Co-Sale Agreement
(collectively, the "Series C Transaction Documents"); and (iii) by the payment
to the Company of an amount equal to the Exercise Price multiplied by the number
of the Shares being purchased, which amount may be paid, at the election of the
Holder, by wire transfer or certified check payable to the order of the Company.
The person or persons in whose name(s) any certificate(s) representing Shares
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised.
(b) Net Issue Exercise. In lieu of exercising this Warrant
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pursuant to Section 2(a) hereof, the Holder may elect to receive a number of
Shares equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant and the fully executed
Series C Transaction Documents at the principal office of the Company, together
with the Notice of Exercise in which alternative No. 1 is initiated by the
Holder. In such event, the Company shall issue to the Holder a number of Shares
computed using the following formula:
X = Y (A-B)
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A
Where X = the number of Shares to be issued to the Holder.
Y = the number of Shares subject to this warrant.
A = the fair market value of one share of the Company's Series C
Preferred Stock.
B = the Exercise Price (as adjusted to the date of such
calculation).
(c) Fair Market Value. For purposes of this Section 2, the fair
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market value of the Company's Series C Preferred Stock shall mean:
(i) The average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
---------------
Journal for the ten trading days prior to the date of determination of fair
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market value multiplied by the number of shares of Common Stock into which each
share of Series B Preferred Stock is convertible;
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(ii) If the Company's Common Stock is not traded Over-The-
Counter or on an exchange, the fair market value of the Series C Preferred Stock
per share shall be the price per share which the Company could obtain from a
willing buyer for shares sold by the Company from authorized but unissued shares
of Series C Preferred Stock as such price shall be agreed by the parties hereto,
or if agreement cannot be reached within five (5) business days of delivery of
the notice pursuant to Section 2(b) hereof, as shall be determined by a panel of
appraisers. One appraiser shall be selected by the Holder, one appraiser shall
be chosen by the Company and the third appraiser shall be chosen by the first
two appraisers. If the appraisers cannot reach agreement as to the fair market
value on the foregoing basis on or before the thirtieth (30th) day following the
Holder's notice of election pursuant to Section 2(b), then each appraiser shall
deliver its appraisal and the appraisal which is neither the highest nor the
lowest shall be the fair market value of a share of Series C Preferred Stock. In
the event that the Holder fails to choose an appraiser or the three appraisers
fail to deliver an appraisal on or before the thirtieth (30th) day after such
notice, the appraisal of the appraiser selected by the Company shall control and
shall be fair market value for the purposes of this Warrant. The cost of the
appraiser selected by each party shall be borne by that party and the cost of
the third appraiser shall be borne one-half (1/2) by each party. Appraisers
selected under this Section 2(c) must be unaffiliated with the Holder and the
Company and must have reasonable professional qualifications for the appraisal.
(d) Stock Certificates. In the event of any exercise of the rights
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represented by this Warrant, certificates for the Shares so purchased shall be
delivered to the Holder within a reasonable time and, unless this Warrant has
been fully exercised or has expired, a new Warrant representing the Shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.
(e) Condition of Exercise Unless exercised pursuant to an effective
---------------------
registration statement under the Act which includes the Shares so exercised, it
shall be a condition to any exercise of this Warrant that the Company shall have
received, at the time of such exercise, a representation in writing from the
Holder in the form attached hereto as Exhibit A-1, that the Shares being issued
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upon exercise are being acquired for investment and not with a view to any sale
or distribution thereof.
3. Stock Fully Paid; Reservation of Shares. All of the Shares issuable
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upon the exercise of the rights represented by this Warrant will, upon issuance
and receipt of the Exercise Price therefor, be fully paid and nonassessable, and
free from all preemptive rights, rights of first refusal or first offer, taxes,
liens and charges with respect to the issuance thereof. During the period within
which the rights represented by this Warrant may be exercised, the Company shall
at all times have authorized and reserved for issuance sufficient shares of its
Series C Preferred Stock and Common Stock to provide for the exercise of the
rights represented by this Warrant.
4. Adjustment of Exercise Price and Number of Shares. The number and
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kind of Shares purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Stock Splits, Dividends and Combinations. In the event that the
----------------------------------------
Company shall at any time subdivide the outstanding shares of Series C Preferred
Stock, or shall issue a stock
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dividend on its outstanding shares of Series C Preferred Stock, the number of
Shares issuable upon exercise of this Warrant immediately prior to such
subdivision or to the issuance of such stock dividend shall be proportionately
increased, and the Exercise Price shall be proportionately decreased, and in the
event that the Company shall at any time combine the outstanding shares of
Series C Preferred Stock, the number of Shares issuable upon exercise of this
Warrant immediately prior to such combination shall be proportionately
decreased, and the Exercise Price shall be proportionately increased, effective
at the close of business on the date of such subdivision, stock dividend or
combination, as the case may be.
(b) Price Adjustments. If at any time the Company issues or sells
-----------------
any shares of its Preferred Stock for a consideration per share less than the
then effective Exercise Price, then and in each such case, the Exercise Price
for the Shares will be reduced to a price (calculated to the nearest cent)
determined by multiplying such applicable Exercise Price by a fraction (a) the
numerator of which will be the number of shares of Preferred Stock outstanding
(or so deemed) immediately prior to such issuance or sale plus the number of
shares of Series C Preferred Stock which the aggregate consideration received by
the Company for such issuance or sale would purchase at such applicable Exercise
Price, and (b) the denominator of which will be the number of shares of
Preferred Stock outstanding (or so deemed) immediately after the Preferred Stock
proposed to be issued or sold is issued or sold; provided that such fraction
will in no event be greater than one (1). For purposes of this Section 4(b), the
Shares will be deemed to be outstanding on the date hereof.
For the purpose of making any adjustment in the Exercise Price as provided
above, the consideration received by the Company for any issuance or sale of
Preferred Stock will be computed:
(A) to the extent it consists of cash, as the amount of cash
received by the Company before deduction of any offering expenses payable by the
Company and any underwriting or similar commissions, compensation, or
concessions paid or allowed by the Company in connection with such issuance or
sale;
(B) to the extent it consists of property other than cash, at
the fair market value of that property as determined in good faith by the
Company's Board of Directors; and
(C) if Preferred Stock is issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Preferred Stock.
No adjustment to the Exercise Price pursuant to this Section 4(b) shall
affect the number of Warrants to be issued pursuant to Section 1(a) herein.
(c) Recapitalizations. If at any time or from time to time there
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shall be a recapitalization of the Series C Preferred Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 4), provision shall be made so that the Holder of this
Warrant will thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company to
which a Holder of Series B
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Preferred Stock would have been entitled on such recapitalization. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Section 4 with respect to the rights of the Holder of this Warrant after
the recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Exercise Price then in effect and the number of shares
issuable upon exercise of this Warrant) shall be applicable after that event in
as nearly an equivalent manner as may be practicable.
(d) Merger. If at any time there shall be a capital reorganization
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of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation, whether or not the Company is the surviving corporation, other than
as provided for in Section 10(a) herein (a "Merger Event"), then as a part of
such Merger Event, lawful provision shall be made so that the Holder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of stock or other securities of the successor corporation resulting from
such Merger Event, equivalent in value to that which would have been issuable if
Holder had exercised this Warrant immediately prior to the Merger Event. In any
such case, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights and interest of the Holder after the Merger
Event to the end that the provisions of this Warrant (including adjustments of
the Exercise Price and number of Shares purchasable) shall be applicable to the
greatest extent possible.
(e) Notices. Upon any adjustment of the Exercise Price and any
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increase or decrease in the number of Shares purchasable upon the exercise of
this Warrant in accordance with Section 3 hereof, then, and in each such case,
the Company, within thirty (30) days thereafter, shall give written notice
thereof to the Holder at the address of such Holder as shown on the books of the
Company which notice shall state the Exercise Price as adjusted and, if
applicable, the increased or decreased number of Shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each. Any written notice by the Company required or permitted
hereunder shall be given by hand delivery or first class mail, postage prepaid,
addressed to the Holder at the address shown on the books of the Company for the
Holder.
5. Restrictions on Transfer.
------------------------
(a) Xxxxxx agrees not to make any disposition of all or any portion
of the Shares or the Warrant unless and until:
(i) There is then in effect a registration statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(ii) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the transferee has
agreed in writing to be bound by this Section 5. If reasonably requested by the
Company, Xxxxxx shall furnish the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
of such
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shares under the 1933 Act. Notwithstanding the foregoing, the restrictions
imposed upon the transferability of any of the Shares or rights to acquire
Shares do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owners, and shall terminate as to any particular Shares when a letter shall have
been issued to Holder at its request by the staff of the Securities and Exchange
Commission or a ruling shall have been issued to the Holder at its request by
such Commission stating that no action shall be recommended by such staff or
taken by such Commission, as the case may be, if such security is transferred
without registration under the 1933 Act in accordance with the conditions set
forth in such letter or ruling and such letter or ruling specifies that no
subsequent restrictions on transfer are required. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.
(b) Notwithstanding the above, the Shares shall also be subject to
all restrictions on transfer set forth in the Series C Transaction Documents,
including without limitation a 180 day market standoff period upon the Company's
initial public offering.
6. Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Exercise Price then in effect.
7. Representations and Warranties by the Company.
---------------------------------------------
(a) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Holder of the right to acquire Shares, have been duly
authorized by all necessary corporate action on the part of the Company. This
Warrant is consistent with the Company's Amended and Restated Articles of
Incorporation, and does not contravene any law or governmental rule, regulation
or order applicable to it, and does not and will not contravene any provision
of, or constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound. This Warrant
constitutes a legal, valid and binding agreement of the Company, enforceable in
accordance with its respective terms.
(b) Consents and Approvals. No consent or approval of, giving of
----------------------
notice to, registration with, or taking of any other action in respect of any
state, Federal or other governmental authority or agency is required with
respect to the execution, delivery and performance by the Company of its
obligations under this Warrant, except for the filing of notices pursuant to
Regulation D under the 1933 Act and any filing required by applicable state
securities law, which filings shall be made by the time required thereby.
(c) Xxxxxx's Additional Rights. The Series C Preferred Stock shall
--------------------------
have anti-dilution rights, registration rights, and information rights
substantially similar to those rights given to holders of the Company's Series C
Preferred Stock, which rights shall be set forth in the Series C Transaction
Documents.
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(d) Other Commitments to Register Securities. Except as set forth
----------------------------------------
(i) herein, (ii) in the Investor Rights Agreement dated as of January 17, 1997,
(iii) the Warrants issued to Holder as of November 20, 1997, March 11, 1998,
July 23, 1999, and the date hereof, and (iv) the warrant issued to Imperial Bank
on May 1, 1999, the Company is not, pursuant to the terms of any other agreement
currently in existence, under any obligation to register under the Securities
Act any of its presently outstanding securities or any of its securities which
may hereafter be issued.
(e) Exempt Transaction. Subject to the accuracy of the Holder's
------------------
representations in this Section 11 and any filing necessary to obtain a state
securities law exemption, the issuance of Shares upon exercise of this Warrant
will constitute a transaction exempt from (i) the registration requirements of
Section 5 of the Securities Act, and (ii) the qualification requirements of the
applicable state securities laws.
(f) Compliance with Rule 144. At the written request of Xxxxxx, who
------------------------
proposes to sell Warrant Shares issuable upon the exercise of this Warrant in
compliance with Rule 144 promulgated by the Securities and Exchange Commission,
the Company shall furnish to Holder, within ten (10) days after receipt of such
request, a written statement confirming the Company's compliance with the filing
requirements of the Securities and Exchange Commission as set forth in such
Rule, as such Rule may be amended from time to time.
8. Representations and Warranties by the Holder. Holder represents and
--------------------------------------------
warrants to the Company as follows:
(a) This Warrant is being acquired for Xxxxxx's own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Act, and the
Holder has no present intention of selling or engaging in any public
distribution thereof pursuant to a registration or exemption.
(b) Holder understands that the Warrant and the Shares have not been
registered under the Act by reason of their issuance in a transaction exempt
from the registration and prospectus delivery requirements of the Act pursuant
to Section 4(2) thereof, and that they must be held by Holder indefinitely, and
that Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Act or is exempted from such registration. The Holder further understands that
the Shares have not been qualified under the California Securities Law of 1968
(the "California Law") by reason of their issuance in a transaction exempt from
the qualification requirements of the California Law pursuant to Section
25102(f) thereof, which exemption depends upon, among other things, the bona
fide nature of the Holder's investment intent expressed above.
(c) The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
purchase of this Warrant and the Shares purchasable pursuant to the terms of
this Warrant and of protecting its interests in connection therewith.
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(d) The Holder is able to bear the economic risk of the purchase of
the Shares pursuant to the terms of this Warrant.
9. Rights of Stockholders. Nothing contained herein shall confer upon
----------------------
Holder any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issuance of stock, reclassification of
stock, change of par value, consolidation, merger, conveyance, or otherwise) or
to receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
10. Expiration of Warrant.
---------------------
(a) This Warrant shall expire and shall no longer be exercisable as
of the earlier of:
(i) 5:00 p.m., California local time, on October 21, 2009;
(ii) five (5) years after the Company's initial public offering
under the Securities Act of 1933, as amended;
(iii) the automatic conversion of the Series C Preferred Stock
of the Company into Common Stock of the Company, according to the terms of the
Series C Transaction Documents, provided that Company provides Holder with at
least thirty (30) days notice of such automatic conversion and that it gives
Holder an option in Holder's sole discretion to either exercise the Warrant or
cause Company to replace the Warrant with a Warrant to Purchase Common Stock on
substantially the same terms as those set forth herein;
(iv) a consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger with another
corporation in which the Company's stockholders immediately preceding such
consolidation or merger own at least 50% of the voting securities of the
successor entity following such consolidation or merger and which does not
result in any reclassification of the Shares issuable upon exercise of this
Warrant); or
(v) a sale of all or substantially all of the assets of the
Company.
11. Miscellaneous.
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(a) This Warrant is being delivered in the State of California and
shall be construed and enforced in accordance with and governed by the laws of
such State. The parties expressly stipulate that any litigation under this
Warrant shall be brought in the State courts of the Counties of Santa Xxxxx or
San Francisco, California and in the United States District Court for the
Northern District of California. The parties agree to submit to the jurisdiction
and venue of those courts. Notwithstanding the foregoing, any claim or dispute
involving questions of usury law as it applies to the Warrant shall be governed
by the laws of Illinois.
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(b) The headings in this Warrant are for purposes of reference only,
and shall not limit or otherwise affect any of the terms hereof.
(c) The terms of this Warrant shall be binding upon and shall inure
to the benefit of any successors in interest of the Company or the Holder. This
Warrant and all rights hereunder are not assignable or transferable by Company
or Holder, except for such permitted transfers to successors in interest and in
accordance with Section 5 herein, and any attempt to assign or transfer the
rights hereunder shall be void and of no further effect.
(d) This Warrant and the other documents delivered pursuant hereto,
including without limitation the Series C Transaction Documents, constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
(e) The Company shall not, by amendment of its Amended and Restated
Articles of Incorporation, or through any other means, directly or indirectly,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant and shall at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(f) Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver to the holder of record, in lieu thereof, a
new Warrant of like date and tenor.
(g) This Warrant and any provision hereof may be amended, waived or
terminated only by an instrument in writing signed by the Company and Holder.
[The remainder of this page is intentionally left blank]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Issued this 21st day of October, 1999.
2BRIDGE SOFTWARE
By: /s/ Xxxxxx Xxxxx
-----------------------------
Title: SVP and CFO
--------------------------
Acknowledged and Accepted:
COMDISCO, INC.
By:_________________________________
Title:_______________________________
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EXHIBIT A
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NOTICE OF EXERCISE
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TO: 2BRIDGE SOFTWARE
Attention: President
1. In lieu of exercising the attached Warrant for cash or check, the
undersigned hereby elects to effect the net issuance provision of Section 2(b)
of this Warrant and receive ____________ (leave blank if you choose Alternative
No. 2 below) shares of Series C Preferred Stock pursuant to the terms of this
Warrant. (Initial here if the undersigned elects this alternative). ___________.
2. The undersigned hereby elects to purchase _______________ (leave blank
if you choose alternative No. 1 above) shares of Series C Preferred Stock of
2Bridge Software pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
3. Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other name as
is specified below:
________________________
(Name)
________________________
________________________
(Address)
4. The undersigned hereby represents and warrants that the aforesaid
shares of Series C Preferred Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof, and that the undersigned has no present intention
of distributing or reselling such shares except pursuant to a registration or
exemption, and all representations and warranties of the undersigned set forth
in Section 8 of the attached Warrant are true and correct as of the date hereof.
In support thereof, the undersigned agrees to execute an Investment
Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1.
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________________________
(Signature and Date)
Title: _________________
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EXHIBIT A-l
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INVESTMENT REPRESENTATION STATEMENT
PURCHASER: COMDISCO, INC.
COMPANY: 2BRIDGE SOFTWARE
SECURITY: SERIES C PREFERRED STOCK ISSUED UPON EXERCISE OF THE SERIES C
PREFERRED STOCK PURCHASE WARRANT ISSUED ON OCTOBER 21, 1999
AMOUNT: _______________ SHARES
DATE: ___________________, ______
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Company the following:
(a) I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act") except
pursuant to a registration of exemption.
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions.
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The Securities may be resold in certain limited circumstances subject to
the provisions of Rule 144, which requires among other things: (1) the
availability of certain public information about the Company, (2) the resale
occurring not less than one year, and in some circumstances two years, after the
party has held, within the meaning of Rule 144, the securities to be sold; and,
in the case of an affiliate, or of a non-affiliate who has held the securities
less than two years, and in some circumstances three years, (3) the sale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I agree, in connection with the Company's initial underwritten public
offering of the Company's securities, (1) not to sell, make short sale of, loan,
grant any options for the purchase of, or otherwise dispose of any shares of
Common Stock of the Company held by me (other than those shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the Company's
securities for one hundred eighty (180) days from the effective date of such
registration, and (2) I further agree to execute any agreement reflecting (1)
above as may be requested by the underwriters at the time of the public
offering; provided however that the officers and directors of the Company who
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own the stock of the Company also agree to such restrictions.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
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