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Exhibit 4
Form of Subscription Agreement
SUBSCRIPTION AGREEMENT
International Meta Systems, Inc.
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Sixth Floor
El Segundo, California 91403
USA
Paragon Capital Management LLC,
as Placement Agent
P.O. Box 309
Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman
Cayman Islands
British West Indies
Dear Sirs:
The undersigned (hereinafter the "Purchaser"), pursuant to an offering (the
"Offering") of securities pursuant to a Confidential Private Placement
Memorandum (the "Memorandum") dated March 4, 1996: (a) hereby subscribes for the
number of shares of common stock, par value $0.0001 per share (the "Shares") of
International Meta Systems, Inc., a Delaware corporation (the "Company"), at a
purchase price of $1.00 per Share, and for the aggregate purchase price set for
in Section 4(b) hereof (the "Purchase Price"), payable to the Company, subject
to the terms and conditions of this Subscription Agreement, and (b) requests
that such Shares be registered in the name set forth below. All references to
Dollars herein are to lawful currency of the United States of America.
1. THE PURCHASER HEREBY ACKNOWLEDGES, REPRESENTS AND AGREES THAT:
(a) The Purchaser understands and acknowledges that the Shares have not
been and, subject to paragraph 1(d) below, will not be registered under the
United States Securities Act of 1933, as amended (the "Securities Act") or any
other applicable securities law, and may not be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of unless either registered pursuant
to, or in a transaction exempt from registration under, the Securities Act or
any other applicable securities law.
(b) (i) The Purchaser is an "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act (an
"Accredited Investor") that is purchasing for its own account or that is a bank
(as defined in Section
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3(a)(2) under the Securities Act) or a savings and loan association or other
institution (as described in Section 3(a)(5)(A) under the Securities Act) that
is purchasing as a fiduciary for the account of one or more institutional
investors (each an "institutional account") or (ii) the Purchaser is an
Accredited Investor other than a bank (as so defined) or a savings and loan
association or other institutions (as so described) that is purchasing for one
or more institutional accounts, each of which is an Accredited Investor. The
Purchaser has such knowledge and experience in financial and business matters
that the Purchaser is capable of evaluating the merits and risks of purchasing
the Shares. The Purchaser is aware that the Purchaser (or any institutional
account) may be required to bear the economic risk of an investment in each
Share for an indefinite period of time, and the Purchaser (or such
institutional account) is able to bear such risk for an indefinite period.
(c) The Purchaser is purchasing the Shares for the Purchaser's own account,
or for one or more institutional accounts for which the Purchaser is acting as a
fiduciary or agent, in a minimum amount of $100,000 for each such account, in
each case for investment, and not with a view to, or for offer or sale in
connection with, any distribution thereof, subject to the disposition of the
Purchaser's property or the property of such institutional account or accounts
being at all times within the Purchaser's or their control and subject to the
Purchaser's or their ability to resell such Shares pursuant to an exemption from
registration available under the Securities Act. The Purchaser agree on the
Purchaser's own behalf and on behalf of any institutional account for which the
Purchaser is purchasing Shares to offer, sell or otherwise transfer such Shares
only in minimum amounts of $100,000 and, prior to the date which is three years
after the later of the original issue date of such Shares and the last date on
which the Company or any affiliate of the Company was the beneficial owner of
such Shares (or any predecessor of such Shares), only (i) to the Company, (ii)
pursuant to a registration statement which has been declared effective under the
Securities Act or (iii) pursuant to an exemption from the registration
requirements of the Securities Act as confirmed in an opinion of counsel
satisfactory to the Company, provided however, that the Company agrees that it
will not require opinions of counsel for transactions made pursuant to Rule 144
or for transactions by and between non-U.S. Persons (as defined in U.S.
securities laws) except in unusual circumstances, subject in each of the
foregoing cases to any requirement of law that the disposition of the
Purchaser's property or of the property of such investor account or accounts be
at all times within the Purchaser's control. In order to effectuate the
foregoing restrictions on resales and other transfers of the Shares, if any
resale or other transfer is proposed to be made (other than to the Company or
pursuant to an effective registration statement) prior to three years after the
later of the original issue date and the last date on which the Company or any
affiliate of the Company was the beneficial owner of any such Shares (or any
predecessor of such Shares) (i)(A) the Purchaser shall deliver to the Company's
transfer agent a Transferor Representation Statement substantially in the form
of Annex "A" hereto, in the case of a transfer proposed to be made in compliance
with an exemption from the registration requirements of the Securities Act and
(B) the transferee shall deliver to the Company's transfer agent a Transferee
Representation Statement, substantially in the form of Annex "B" hereto, in the
case of a transfer proposed to be made in compliance with an exemption
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from the registration requirements of the Securities Act, or (ii) the Purchaser
shall provide the Company with an opinion of counsel satisfactory to the
Company to ensure compliance with the provisions of the Securities Act.
(d) The Purchaser acknowledges that the Purchaser will have the benefit of
certain registration rights with respect to the Shares, as described in Annex
"C" hereto, and in the Memorandum under the heading "Description of the
Company's Securities."
(e) The Purchaser acknowledges that the Company and others will rely upon
the truth and accuracy of the foregoing acknowledgments, representations and
agreements and agrees that if any of the acknowledgments, representations or
warranties made by the Purchaser are no longer accurate, the Purchaser shall
promptly notify the Company. If the Purchaser is acquiring any Shares as a
fiduciary or agent for one or more institutional accounts, the Purchaser
represents that the Purchaser has sole investment discretion with respect to
each such account and that the Purchaser has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each such account.
(f) The Purchaser shall deliver the Purchase Price in cash to the account
of the Company at Chemical Bank, London Branch, Account No. 187819-001. All
checks shall be made payable to "International Meta Systems, Inc." For purposes
of the delivery of the Purchase Price only, the terms of this Subscription
Agreement shall govern and shall supersede the terms set forth in the
Memorandum.
(g) The Purchaser has been furnished and has carefully read the Memorandum
relating to the securities offered thereby and the documents and other
materials which are exhibits thereto or enclosed therewith or otherwise
supplied to the Purchaser, and understands the risks and other considerations
relating to a purchase of the securities, including the risks set forth under
the Section captioned "Risk Factors" in the Memorandum, which is incorporated
herein by this reference.
(h) The principal amount of the securities subscribed for by the Purchaser
as set forth herein does not exceed ten percent (10%) of the Purchaser's net
worth. The Purchaser shall provide the Company such documentation as the Company
shall reasonably request to establish the foregoing representation.
(i) The Purchaser has either a pre-existing personal or business
relationship with the Company and its officers, directors and controlling
persons or by reason of the Purchaser's business or financial expertise has the
capacity to protect the Purchaser's own interest in connection with this
transaction.
(j) The Purchaser has reached the age of majority (if an individual)
according to the laws of the country in which the Purchaser resides and has
adequate means of providing for the Purchaser's current needs and possible
personal contingencies and has
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need for only limited liquidity of this investment. The Purchaser's commitment
to liquid investments is reasonable in relation to the Purchaser's net worth.
(k) The Purchaser is not relying on the Memorandum or the references to
any legal opinion in the Memorandum with respect to the tax and other economic
considerations relating to this investment. In regard to such considerations,
the Purchaser relied on the advice of, or has consulted with, the Purchaser's
own personal tax, investment or other advisors.
(l) No oral or written representations have been made or oral or written
information furnished to the Purchaser in connection with the Offering of the
securities that are in any way inconsistent with the information stated in the
Memorandum.
(m) If the Purchaser is a corporation, the Purchaser is duly and validly
organized, validly existing and in good tax and corporate standing as a
corporation under the laws of the jurisdiction of its incorporation with full
power and authority to purchase the securities to be purchased by it and to
execute and deliver this Subscription Agreement.
(n) If the Purchaser is a partnership, the representations, warranties,
agreements and understandings set forth above are true with respect to all
partners in the Purchaser (and if any such partner is itself a partnership, all
persons holding an interest in such partnership, directly or indirectly,
including through one or more partnerships), and the person executing this
Subscription Agreement has made due inquiry to determine the truthfulness of
the representations and warranties made hereby.
(o) If the Purchaser is purchasing in a representative or fiduciary
capacity, the above representations and warranties shall be deemed to have been
made on behalf of the person or persons for whom the Purchaser is so purchasing.
(p) Within five (5) days after receipt of a request from the Company, the
Purchaser will provide such information and deliver such documents as may
reasonably be necessary to comply with any and all laws and ordinances to which
the Company is subject.
(q) The Purchaser or the Purchaser's professional adviser, if any, has
been granted the opportunity to conduct a full and fair examination of the
records, documents and files of the Company, to ask questions of and receive
answers from representatives of the Company, its officers, directors, employees
and agents concerning the terms and conditions of this offering, the Company
and its business and prospects, and to obtain any additional information which
the Purchaser or the Purchaser's professional adviser deems necessary to verify
the accuracy of the information received.
(f) The securities were not offered to the Purchaser through an
advertisement in printed media of general and regular circulation, radio or
television.
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(s) The Purchaser has relied completely on the advice of, or has consulted
with, the Purchaser's own personal tax, investment, legal or other advisors and
has not relied on the Company or any of its affiliates, officers, directors,
attorneys, accountants or any affiliates of any thereof and each other person,
if any, who controls any thereof, within the meaning of Section 15 of the
Securities Act, except to the extent such advisors shall be deemed to be as
such.
2. THE PURCHASER IS AWARE THAT:
(a) An investment in the Company involves certain risks, including the
potential loss by the Purchaser of interest on the Purchaser's investment
herein, and the Purchaser has taken full cognizance of and understand all of
the risk factors related to the purchase of the securities, including, but not
limited to, those set forth in the Memorandum. The Purchaser recognizes that
the Memorandum does not purport to contain all the information which would be
contained in a registration statement under the Securities Act.
(b) No governmental agency has passed upon the securities or made any
finding or determination as to the fairness of this transaction.
(c) There is currently a limited market for the Company's securities and
that such market may not be sustained at the time the Purchaser intends to
resell the Shares or at any time in the future. Although it is contemplated
that the securities may be registered, there can be no assurance that any
registration statement will ever be filed with respect to such securities, or,
even if filed, that it will become effective. Therefore, the Purchaser may bear
the economic risk of the Purchaser's investment for an indefinite period of
time.
(d) The Company has full right in its sole direction to accept or reject
the Purchaser's subscription, provided that, if the Company decides to reject
such subscription, the Company must do so promptly and in writing. In the case
of rejection, any cash payments and copies of all executed Subscription
Documents will be promptly returned (without interest or deduction in the case
of cash payments). In the case of acceptance, ownership of the number of
securities being purchased hereby will pass to the Purchaser upon issuance of
the securities subscribed for, as further described in the Memorandum. The
securities subscribed for by the Purchaser may be apportioned as set forth in
the Memorandum under the caption "Terms of the Offering."
(e) Further, the Purchaser agrees to pay a separate fee (the "Fee") paid
to and solely for the account of Paragon Capital Management LLC (the "Placement
Agent") of $0.055 per Share, pursuant to the terms of a separate agreement
between the Purchaser and the Placement Agent in accordance with the terms and
conditions of this Subscription Agreement. In no event shall the Fee be
attributed to the purchase price for the Shares or entitle the Purchaser to
acquire any additional Shares other than the number of Shares set
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forth in Section 4(b) hereof, in accordance with the terms and conditions of
this Subscription Agreement.
3. THE PURCHASER HEREBY AGREES:
(a) To indemnify and hold harmless the Company as well as the officers,
directors, partners, attorneys, accountants and affiliates of any thereof and
each other person, if any, who controls any thereof, within the meaning of
Section 15 of the Securities Act, against any and all loss, liability, claim,
damage and expense whatsoever (including, but not limited to, any and all
expenses reasonably incurred in investigating, preparing or defending against
any litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any allegedly false representation or warranty or breach of or
failure by the Purchaser to comply with any covenant or agreement made by the
Purchaser herein or in any other document furnished by the Purchaser to any of
the foregoing in connection with this transaction; provided, however that in no
event shall the indemnity under this Subsection 3(a) exceed the Purchase Price
paid by the Purchaser.
(b) That, subject to the provisions of any applicable governmental
securities laws providing for the refund of subscription amounts submitted by
the Purchaser, if applicable, the subscription hereunder is irrevocable and that
the Purchaser is not entitled to cancel, terminate or revoke this Subscription
Agreement and that this Subscription Agreement shall survive the Purchaser's
death or disability of and shall be binding upon and inures to the Purchaser's
benefit, and the Purchaser's executors, administrators, successors, legal
representatives and assigns. If the Purchaser is more than one person, the
Purchaser's obligations hereunder shall be joint and several, and the
agreements, representations, warranties and acknowledgments herein contained
shall be deemed to be made by and be binding upon each such person and each such
person's heirs, executors, administrators, successors, legal representatives and
assigns.
(c) Neither this Subscription Agreement nor any provisions hereof shall be
waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge or
termination is sought.
(d) Any notice, demand or other communication which any party hereto may be
required or may elect go give anyone interested hereunder shall be sufficiently
given if: (a) deposited, postage prepaid, in a United States mail box, stamped
registered or certified mail, return receipt requested, and addressed, in the
case of the Company, to the address given in the preamble hereof, and, if to the
Purchaser, to the address set forth hereinafter; or (b) delivered personally at
such address.
(e) This Subscription Agreement contains the entire agreement of the
parties with respect to the subject matter hereof, and there are no
representations, warranties, covenants or other agreements except as stated or
referred to herein.
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(f) Each provision of this Subscription Agreement is intended to be
severable from every other provision and the invalidity or illegality of the
remainder hereof.
(g) This Subscription Agreement is not transferable or assignable by the
Purchaser.
(h) This Subscription Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, United States of America.
(i) This Subscription Agreement may not be assigned by the Purchaser
without the prior written consent of the Company, and may not be amended or any
provision hereof waived or modified except by an instrument in writing signed by
the Company and the Purchaser.
(j) This Subscription Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one agreement.
4. SUBSCRIPTION INFORMATION:
(a) The Purchaser hereby subscribes for Shares in the amounts, and tenders
payment in cash in consideration therefor, as further set forth below. Please
make checks delivered in respect of subscriptions hereunder payable to
"International Meta Systems, Inc." The Closing of the Subscription Agreement
shall take place only upon delivery of the Purchase Price against the Shares,
and the acceptance by the Company of this Subscription Agreement in accordance
with the terms and conditions set forth in the Memorandum.
(b) Number of Shares subscribed for: _______________________
__________ Shares against payment in cash in the amount of
$____________, representing $1.00 per Share.
(c) If the Shares hereby subscribed for are to be owned by more than one
person in any manner, the Purchaser understands and agrees that all of the
co-owners of such Shares must sign this Subscription Agreement.
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IN WITNESS WHEREOF, the undersigned Purchaser does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that the Purchaser has by the following signature(s) executed this Subscription
Agreement this_____ day of__________________, 1996, at_________________________
___________________________________
Name of Purchaser
___________________________________
Signature of Purchaser
___________________________________
Name of Co-Purchaser (if any)
___________________________________
Signature of Co-Purchaser (if any)
SUBSCRIPTION RECEIVED AND ACCEPTED at El Segundo, California.
INTERNATIONAL META SYSTEMS, INC.
By: __________________________ Date: _______________, 1996
Xxxxxx X. Xxxxx, President
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TYPE OF OWNERSHIP
(Check One)
___________ Individual (One signature required)
___________ Joint Tenants with Right of Survivorship (Both parties must
sign)
___________ Tenants in Common (Both parties must sign)
___________ Community Property (One signature required if interest held in
one name, i.e., managing spouse, two signatures required if
interest held in both names)
___________ Trust
___________ Corporation
___________ Partnership
_____________________________________________________________________
Please print here the exact name (registration) Purchaser desires
for securities
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SIGNATURE PAGE
FOR INDIVIDUAL PURCHASERS
PURCHASER #1 PURCHASER #2
_____________________________________ ______________________________________
Signature Signature
_____________________________________ ______________________________________
Social Security Number Social Security Number
_____________________________________ ______________________________________
Print or Type Name Print or Type Name
Residence Address and Residence Address and
Telephone Number: Telephone Number:
_____________________________________ ______________________________________
_____________________________________ ______________________________________
_____________________________________ ______________________________________
_____________________________________ ______________________________________
Executed at: Executed at:
_____________________________________ ______________________________________
City City
_____________________________________ ______________________________________
State State
this _______ day of __________, 19__. this _______ day of ___________, 19__.
Mailing Address and Telephone Number,
if different:
__________________________________________________
__________________________________________________
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SIGNATURE PAGE
FOR CORPORATE PURCHASERS
________________________________________________________________________________
Name of corporation (please print or type)
By______________________________________________________________________________
(Signature of authorized agent)
Name of Authorized Agent and Title______________________________________________
Taxpayer Identification No.:____________________________________________________
Address and Telephone Number of Principal Corporate Offices:
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
Mailing Address and Telephone Number, if different:
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
Executed at ___________, __________, ___________ this ___ of ____________, 19__.
City State Country
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SIGNATURE PAGE
FOR PARTNERSHIP PURCHASERS
______________________________________________________________________________
Name of partnership (please print or type)
By ___________________________________________________________________________
Signature of general partner
By ___________________________________________________________________________
Name of General Partner (please print or type)
By ___________________________________________________________________________
Signature of additional general partner
(if required by Partnership Agreement)
By ___________________________________________________________________________
Name of General Partner (please print or type)
Taxpayer Identification No.: _________________________________________________
Principal Business Address and Telephone Number: _____________________________
______________________________________________________________________________
______________________________________________________________________________
Mailing Address and Telephone Number, if different: __________________________
______________________________________________________________________________
Attention: ___________________________________________________________________
Executed at: ________, ________, ___________ this ___ of ______________, 19___,
City State Country
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SIGNATURE PAGE
FOR TRUST PURCHASES
________________________________________________________________________________
Name of Trust (please print or type)
________________________________________________________________________________
Name of Trustee (please print or type)
________________________________________________________________________________
Date Trust was formed
By:_____________________________________________________________________________
Trustee's Signature
Taxpayer Identification No.:____________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Executed at ___________, __________, ___________ this ____ of __________, 19___.
City State Country
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Annex A
TRANSFEROR REPRESENTATION STATEMENT
TRANSFEROR : _____________________________
TRANSFEREE : _____________________________
COMPANY : International Meta Systems, Inc.
STOCK : Common Stock
AMOUNT : _______ shares (the "Shares")
PRICE : _______
DATE : _______________________
In connection with the transfer of the above-listed Shares, the Transferor
represents and warrants to the Company as follows:
5. Transferor understands that the transfer of the Shares contemplated
hereby is being made pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as amended, of the United States of
America (the "Securities Act").
6. Transferor did not engage in any directed selling efforts (as defined
in the United States securities laws) in connection with this transfer of
Shares.
A directed selling effort is any activity undertaken for the purpose
of, or that could reasonably be expected to have the effect of, conditioning
the market in the United States (U.S.) for any of the Shares being offered.
Directed selling efforts include, but are not limited to the placement of an
advertisement, other than in strict compliance with U.S. law, or foreign law, in
a publication with a general circulation in the United States that refers to
the offering of securities being made.
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7. If Transferor is a dealer (as defined in Section 2(12) of the
Securities Act), or other person receiving a selling concession, fee, or other
remuneration in respect of the Shares, and the transfer of Shares contemplated
hereby is made to a known dealer, or other person receiving a selling
concession, fee, or other remuneration in respect of the Shares, then the
Transferor affirms that Transferor has sent Transferee a notice that these
Shares can only be offered and sold pursuant to a registration statement or
exemption available under the Securities Act.
TRANSFEROR:
________________________________________
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Annex B
TRANSFEREE REPRESENTATION STATEMENT
TRANSFEROR : _____________________________________
TRANSFEREE : _____________________________________
COMPANY : International Meta Systems, Inc.
STOCK : Common Stock
AMOUNT : ___________ shares (the "Shares")
PRICE : ___________
DATE : ________________________________
In connection with the transfer of the above-listed Shares, the Transferee
represents and warrants to the Company as follows:
8. Transferee understands that the Shares have not been registered
pursuant to Section 5 of the Securities Act of 1933, as amended, of the United
States of America (the "Securities Act"), in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act and/or Regulation D
of the Securities and Exchange Commission.
9. Transferee understands that securities acquired overseas may be resold
in the United States (U.S.) only if they are registered under the Securities
Act or an exemption from registration is available.
10. Transferee is purchasing the Shares for its own account, or for one or
more institutional accounts for which Transferee is acting as a fiduciary or
agent, in a minimum amount of US$100,000 for each such account, in each case for
investment, and not with a view to, or for offer or sale in connection with, any
distribution thereof, subject to the disposition of Transferee's property or the
property of such institutional account or accounts being at all times within
Transferee's or their control and subject to Transferee's or their ability to
resell such Shares pursuant to an exemption from registration available under
the Securities Act. Transferee agrees on its own behalf and on behalf of any
institutional account for which Transferee is purchasing Shares to offer, sell
or otherwise transfer such Shares only in minimum amounts of US$100,000 and,
prior to the date which is three years after the later of the original issue of
such Shares and the last date on which the Company or any affiliate of the
Company was the beneficial owner of the Shares.
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(or any predecessor of such Shares), only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act or (c) pursuant to an exemption from the registration requirements of the
Securities Act as confirmed in an opinion of counsel satisfactory to the
Company, provided however, that the Company agrees that it will not require
opinions of counsel for transactions made pursuant to Rule 144 or for
transactions by and between non-U.S. Persons (as defined in U.S. securities
laws) except in unusual circumstances, subject in each of the foregoing cases to
any requirement of law that the disposition of its property or of the property
of such investor account or accounts be at all times within Transferees control.
In order to effectuate the foregoing restrictions on resales and other transfers
of the Shares, if any resale or other transfer is proposed to be made (other
than to the Company or pursuant to an effective registration statement) prior to
three years after the later of the original issue date and the last date on
which the Company or any affiliate of the Company was the beneficial owner of
any such Shares (or any predecessor of such Shares) (a)(i) Transferee shall
deliver to the Company's transfer agent a Transferor Representation Statement
substantially in the form of Annex A attached to the subscription agreement
entered into in connection with the original purchase of the Shares in the case
of a transfer proposed to be made in compliance with an exemption from the
registration requirements of the Securities Act and (ii) the recipient of the
Shares shall deliver to the Company's transfer agent a Transferee Representation
Statement substantially in the form of Annex B attached to the subscription
agreement entered into in connection with the original purchase of the Shares
in the case of a transfer proposed to be made in compliance with an exemption
from the registration requirements of the Securities Act, or (b) Transferee
shall provide the Company with an opinion of counsel satisfactory to the
Company to ensure compliance with the provisions of the Securities Act.
11. Transferee acknowledges that the Company and others will rely upon the
truth and accuracy of the foregoing acknowledgments, representations and
agreements and agrees that if any of the acknowledgments, representations or
warranties made by Transferee are no longer accurate, Transferee shall promptly
notify the Company. If Transferee is acquiring any Shares as a fiduciary or
agent for one or more institutional accounts, Transferee represents that it has
sole investment discretion with respect to each such account and that it has
full power to make the foregoing acknowledgments, representations and agreements
on behalf of each such account.
12. Transferee acknowledges that Transferor, not the Company, is
transferring these Shares and that any information Transferee may have received
in connection with this transaction was provided to Transferee by Transferor,
for benefit of Transferor, and not by or for the Company. Transferee further
acknowledges that the sale of these Shares was negotiated, at arm's length,
between the Transferor and the Transferee, without any assistance from the
Company.
13. Transferee authorizes the Company and his agents to place, on each
certificate for shares which he may acquire, a legend stating that such Shares
has not been registered under the Act or any U.S. state securities law and
setting forth the aforementioned restrictions on transfer.
TRANSFEREE:
___________________________
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Annex C
REGISTRATION RIGHTS
The following registration rights are granted to the Purchasers of the
Shares in the Offering. Any terms not defined hereunder shall have the same
meaning as in the Memorandum.
1. DEMAND REGISTRATIONS, (a) GENERAL. (i) Since the Company has received
$2,000,000 is payment for the Shares issued pursuant to the Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated January 26, 1996, between the
Company and Paragon, if, on or before April 15, 1996, the Company has received
an additional $2,000,000 from the sale of up to an additional 8,000,000 Shares
pursuant to the offering of Shares under the terms and conditions provided in
the Memorandum, then, during the period commencing July 31, 1996 and
terminating April 30, 1998 (the "Demand Registration Period"), Paragon and the
holders purchasing in the Offering shall have the right, upon the written
request of the holders of no less than twenty-five percent (25%) of the
aggregate of the Shares and the shares of Common Stock purchased pursuant to
the Offering (the "PP Shares"), that the Company effect two registrations of the
Shares and the PP Shares (collectively, the "Registrable Shares"), under and
pursuant to the Securities Act, owned by such holders and specifying the
intended method of disposition thereof. The Company shall give prompt written
notice (in any event within ten (10) business days after its receipt of notice
of any exercise of a Demand Registration) to the other holders of Registrable
Shares of its intention to effect such a registration and shall use its best
efforts to include in such registration all of the Registrable Shares with
respect to which the Company receives from any of such holders a written
request for inclusion therein within fifteen (15) days after the stockholder's
receipt of the Company's notice, which request shall specify the number of the
Registrable Shares to be disposed of by the requesting holder and the intended
method of disposition thereof. All registrations requested pursuant to this
Section 1.1(a) are referred to herein as "Demand Registrations."
(b) NUMBER OF DEMAND REGISTRATIONS. Subject to the provisions of Section
1(a), the holders of the Registrable Shares shall be entitled, collectively, to
request two Demand Registration during the Demand Registration Period.
Transferees of the Registrable Shares, other than such persons who shall have
been issued the Registrable Shares pursuant to the terms of this Agreement,
shall have the right to participate in any such registration statement and
shall be entitled to exercise any of the rights provided for in this Section 1.
(c) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall effect a
Demand Registration pursuant to Section 1(a) in connection with an underwritten
offering by the holders of the Registrable Shares, no securities other than the
Registrable Shares shall be included among the securities covered by such
registration unless (i) the
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managing underwriter of such offering shall have advised the Company in writing
that the inclusion of such other securities would not adversely affect such
offering or (ii) such holders of Registrable Shares to be registered therein
shall have consented in writing to the inclusion of such other securities.
(d) REGISTRATION STATEMENT FORM. Demand Registration shall be effected as
soon as practicable following receipt of the holder's written request and shall
be on such appropriate registration form of the Commission (i) as shall be
selected by the Company and shall be acceptable to the requesting holder and
(ii) as shall permit the disposition of such Registrable Shares in accordance
with the intended method or methods of disposition specified in the request for
such registration. The Company agrees to include in any such registration
statement all information that, in the opinion of counsel to the holder so
requesting registration, or counsel to the Company, is required to be included.
(e) PRIORITY ON DEMAND REGISTRATIONS. In the event that the managing
underwriters of a requested Demand Registration advises the Company in writing
that in their opinion the number of Registrable Shares proposed to be included
in any such registration exceeds the number of securities which can be sold in
such offering, the Company shall include in such registration only the number of
Registrable Shares (PRO RATA in accordance with the number of Registrable
Shares requested by each holder to be included in such registration) which in
the opinion of such underwriters can be sold.
(f) PERMITTED INTERRUPTIONS. The Company may postpone (such postponement
is referred to herein as a "Permitted Interruption") for a reasonable period of
time (not to exceed ninety (90) days, which may not thereafter be extended) the
filing or the effectiveness of a registration statement for a Demand
Registration if, at the time it receives a request for such registration: (i)
the Company is engaged in any active program for repurchase of Common Stock
that is registered under the Securities Act and furnishes an Officer's
Certificate to that effect, (ii) the Company is conducting or about to conduct
an offering of Common Stock and the Company is advised by the investment banker
engaged by the Company to manage such offering that such offering would be
affected adversely by the registration so demanded and the Company furnishes an
Officer's Certificate to that effect, or (iii) the board of directors of the
Company shall determine in good faith that such offering will interfere with a
pending or contemplated financing, merger, acquisition, sale of assets,
recapitalization or other corporate action of the Company and the Company
furnishes an Officer's Certificate to that effect; PROVIDED, HOWEVER, that the
Company may not utilize the right xxx xxxx once in any twelve (12) month period.
After such Permitted Interruption the Company shall effect registration as
promptly as practicable without further request unless such request has been
withdrawn.
(g) SELECTION OF UNDERWRITERS. The holder of Registrable Shares requesting
registration shall have the right to select such investment banker(s) as shall
be reasonably acceptable to the Company to administer the offering for which a
Demand Registration is requested. Such holder(s) shall, in their sole
discretion, negotiate the terms
20
of the underwriters' fees and expenses, the underwriting discounts and
commissions and the transfer taxes to be paid by such holder.
2. PIGGYBACK REGISTRATIONS. (a) GENERAL. Whenever the Company proposes
to register any shares of Common Stock under the Securities Act (other than a
registration on Exchange Act Form 10 or solely for shares to issued in
connection with any employee benefit plan or a merger, consolidation or other
business combination registered on Form S-4, or any successor form thereto) and
the registration form to be used may be used for the registration of
Registrable Shares (a "Piggyback Registration"), the Company shall give prompt
written notice (in any event within ten (10) business days after its receipt of
notice of any exercise of other registration rights) to the holder of
Registrable Shares of its intention to effect such a registration and shall use
its best efforts to include in such registration all of the Registrable Shares
with respect to which the Company receives from any of such holders a written
request for inclusion therein within fifteen (15) days after the stockholder's
receipt of the Company's notice, which request shall specify the number of the
Registrable Shares to be disposed of by the requesting holder and the intended
method of disposition thereof. If the Company elects, prior to effectiveness,
not to proceed with a primary registration of its Common Stock, it shall not be
obligated to register any Registrable Shares.
(b) PRIORITY ON PRIMARY REGISTRATION. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company and the managing
underwriter(s) of such offering advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can reasonably be sold in such offering, then the
Company shall include in such registration (i) first, the securities that the
Company proposes to sell, (ii) second, the Registrable Shares, along with the
shares of the Company shareholders who have rights to participate in such
registration, which rights were in existence prior to the date of this
Agreement, which request to be included therein (PRO RATA in accordance with
the number of Registrable Shares, and other shares having the right to
participate in the registration, as are requested by each holder to be included
in such registration), and (iii) third, other securities requested to be
included in such registration. If the managing underwriter of such offering
subsequently advises the Company in writing that the number of securities which
can be sold exceeds the number of securities included in the offering, the
Company shall include in the registration, first, the securities that the
Company proposes to sell and second, such Registrable Shares that the holder(s)
had originally requested to be included in the registration and third, such
other securities originally proposed for inclusion in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is
an underwritten secondary registration on behalf of holders of the Company's
securities other than the holder(s) of Registrable Shares and the managing
underwriter(s) of such offering advise the Company in writing that in their
opinion the number of securities to be included in such registration exceeds
the number which can reasonably be sold in such offering then the Company shall
include in such registration (i) first, if such registration is
21
being made on behalf of other stockholders of the Company exercising demand
registration rights, then the securities so requested to be included therein in
accordance with such demand registration rights, (ii) second, the Registrable
Shares requested to be included in such registration (PRO RATA in accordance
with the number of Registrable Shares requested by each holder to be included
in such registration) and (iii) third, other securities requested to be
included in such registration. If the managing underwriter of such offering
subsequently advises the Company in writing that the number of securities which
can be sold exceeds the number of securities included in the offering, the
Company shall include in the registration such additional securities that (i)
first, the holder(s) of Registrable Shares had originally requested be included
in the registration and (ii) second, others had originally proposed to include
in the registration.
(d) OTHER REGISTRATION. If: (i) the Company has previously filed a
registration statement with respect to any Registrable Shares pursuant to
Section 1(a) or 2(b) and (ii) such previous registration has not been
withdrawn or abandoned, the Company shall not file or cause to be effective
any other registration of any its equity securities of securities convertible
or exchangeable into or exercisable for its equity securities under the
Securities Act (except on Form S-8 or S-4 or any successor form), whether on
its own behalf or as the request of any holder of such securities, until a
period of at least three (3) months has elapsed from the effective date of such
previous registration.
(e) PIGGYBACK NOT A DEMAND REGISTRATION. Should a holder's participation
in a registration be pursuant to a Piggyback Registration in connection with:
(i) an underwritten primary registration on behalf of the Company as described
in Section 2(b) or (ii) an underwritten secondary registration on behalf of
holders of the Company securities other than holder(s) of Registrable Shares as
described in Section 2(c), then such participation shall not constitute a
Demand Registration for purposes of determining the number of Demand
Registrations to which holders of Registrable Shares are entitled pursuant to
Section 1(b).
3. EXPENSES OF DEMAND REGISTRATION. (a) All expenses allocable to the
registration of securities of the holder(s) to be registered pursuant to a
Demand Registration, other than underwriting discounts and commissions incurred
in connection with registrations, filings or qualifications pursuant to a
Demand Registration, including (without limitation) all registration, filing
and qualification fees, printer's and accounting fees, fees and disbursements
of counsel for the Company shall be borne equally and on a current basis by the
Company and the holders of the Registrable Shares; PROVIDED, HOWEVER, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to a Demand Registration if the registration request
is subsequently withdrawn at the request of the holders of a majority of the
Registrable Shares to be registered (in which case all participating holders
shall bear such expenses), unless the holders of a majority of the Registrable
Shares agree to forfeit their right to one demand registration pursuant to a
Demand Registration PROVIDED, FURTHER, HOWEVER, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the holders
at the time of their request and
22
have withdrawn the request with reasonable promptness following disclosure by
the Company of such material adverse change, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to
a Demand Registration.
(b) PAYMENT OF EXPENSES BY THE HOLDER(S). In addition to the expenses
referenced in subsection 3(a), the Holder(s) shall pay the underwriters' fees
and expenses, the underwriters' discount and commission and the commissions and
fees, if any, payable in respect of selling brokers, dealer managers or similar
securities industry professionals, fees and expenses of holder's counsel, and
transfer taxes allocable to the registration of the Holder(s) securities so
included in any Demand or Piggyback Registration pursuant to this Agreement.
4. EXPENSES OF PIGGYBACK REGISTRATION. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Shares with respect to the registrations pursuant to a Piggyback
Registration for each Holder (which right may be assigned), including (without
limitation) all registration, filing, and qualification fees, printers and
accounting fees relating or apportionable thereto, but excluding underwriter
discounts and commissions relating to the Registrable Shares.
5. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Shares pursuant to this Section 4.8 may be assigned (but
only with all related obligations) by a Holder to a transferee or assignee of
such securities who, after such assignment or transfer, holds at least 500,000
shares of the Shares or the PP Shares (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalization),
provided: (a) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to be bound by
and subject to the terms and conditions of this Agreement; and (c) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purposes of determining the number
of Registrable Shares held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Shares by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
6. LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. From and after the date of
this Agreement, the Company shall not, without the prior written consent of the
holders of a majority of the outstanding Registrable Shares, enter into any
agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 4.8 of the Stock Purchase
Agreement unless under the terms of such agreement
23
such holder or prospective holder may include such securities in any such
registration only to the extent that the including of such securities will not
reduce the amount of the Registrable Shares of the holders which is included,
or (b) to make a demand registration which could result in such registration
statement being declared effective within one hundred twenty (120) days of the
effective date of any registration effected pursuant to a Demand Registration
by the holders.
