-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FLkSa88iXvdDPpnZHzWcelspoCiFj+simBXlxiuvHenmoe8GWtIiiriBoUNarjF+ 8eFAFH3onB0Le/KLcY5NMQ== 0000950136-04-001352.txt : 20040430 0000950136-04-001352.hdr.sgml : 20040430 20040429184840 ACCESSION NUMBER: 0000950136-04-001352 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20040430 GROUP MEMBERS: KANDERS &COMPANY, INC. GROUP MEMBERS: OLDEN ACQUISITION LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NET PERCEPTIONS INC CENTRAL INDEX KEY: 0001078203 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 411844584 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-58009 FILM NUMBER: 04766855 BUSINESS ADDRESS: STREET 1: 7700 FRANCE AVE SOUTH CITY: EDINA STATE: MN ZIP: 55435 BUSINESS PHONE: 6129031270 MAIL ADDRESS: STREET 1: 7700 FRANCE AVE SOUTH CITY: EDINA STATE: MN ZIP: 55435 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KANDERS WARREN B CENTRAL INDEX KEY: 0000935577 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O KANDERS & COMPANY, INC. STREET 2: TWO SOUNDVIEW DRIVE CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2035529600 MAIL ADDRESS: STREET 1: C/O KANDERS & COMPANY, INC. STREET 2: TWO SOUNDVIEW DRIVE CITY: GREENWICH STATE: CT ZIP: 06830 SC 13D 1 file001.txt SCHEDULE 13D Page 1 of 8 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 NET PERCEPTIONS, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.0001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 64107U101 - -------------------------------------------------------------------------------- (CUSIP Number) Robert L. Lawrence, Esq. Kane Kessler, P.C. 1350 Avenue of the Americas, 26th Floor New York, NY 10019 (212) 541-6222 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 21, 2004 - -------------------------------------------------------------------------------- (Date of Event which requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box / /. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 2 of 8 SCHEDULE 13D - --------------------------------- --------------------------- CUSIP No. 182707109 Page 2 of 9 Pages - --------------------------------- --------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Warren B. Kanders ###-##-#### - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X| (b)| | - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY -------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON 5,628,300 WITH -------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,628,300 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! Page 3 of 8 SCHEDULE 13D - --------------------------------- --------------------------- CUSIP No. 182707109 Page 3 of 9 Pages - --------------------------------- --------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Kanders & Company, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) | | - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) | | - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY -------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON 5,628,300* WITH -------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,628,300 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- * Warren B. Kanders is the sole shareholder of Kanders & Company, Inc. *SEE INSTRUCTIONS BEFORE FILLING OUT! Page 4 of 8 SCHEDULE 13D - --------------------------------- --------------------------- CUSIP No. 182707109 Page 4 of 9 Pages - --------------------------------- --------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Olden Acquisition LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X| (b) | | - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) | | - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY -------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON 5,628,300* WITH -------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,628,300 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 19.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- * Kanders & Company, Inc. is the sole member and Warren B. Kanders is the sole manager of Olden Acquisition LLC. *SEE INSTRUCTIONS BEFORE FILLING OUT! Page 5 of 8 Item 1. Security and Issuer. (i) Name of Issuer: Net Perceptions, Inc. (the "Company"). (ii) Address of the Principal Executive Offices of Issuer: 7700 France Avenue, Edina, Minnesota 5373. (iii) Title of Class of Equity Securities to which this Statement relates: Common Stock, $0.0001 par value per share, of the Company (the "Common Stock"). Item 2. Identity and Background. (a) This statement is being filed by Warren B. Kanders ("Kanders"), Kanders & Company, Inc. ("Kanders & Company") and Olden Acquisition LLC ("Olden", and together with Kanders and Kanders & Company, collectively referred to as the "Reporting Persons"). (b) (i) The business address of Kanders is: c/o Kanders & Company, Inc. One Pickwick Plaza Greenwich, CT 06830 (ii) The business address of Kanders & Company is: One Pickwick Plaza Greenwich, CT 06830 (iii) The business address of Olden is: c/o Kanders & Company, Inc. One Pickwick Plaza Greenwich, CT 06830 (c) (i) Kander's principal occupation is Executive Chairman of the Board of Armor Holdings, Inc. (NYSE), 1400 Marsh Landing Parkway, Suite 112 Jacksonville, FL 32250, and is an executive of other public companies in which he has an investment, including the Issuer, and is the sole shareholder and sole director of Kanders & Company, and the sole manager of Olden. (ii) Kanders & Company is a Delaware corporation established as an investment vehicle and as a financial consultant. It is the sole member of Olden. (iii) Olden is a private investment limited liability company organized under the laws of the State of Delaware. Page 6 of 8 (d) None of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons was, during the last five years, a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Kanders is a citizen of the United States. Item 3. Source and Amount of Funds or Other Consideration. The shares of Common Stock reported herein are deemed to be beneficially owned by the Reporting Persons as a result of Olden purchasing a $2,532,735 2% Convertible Subordinated Note ("Note") from the Issuer on April 21, 2004 pursuant to a Convertible Note Purchase Agreement with the Issuer (the "Note Purchase Agreement"), which is more fully described in Item 4 below. The Note is not convertible until the first anniversary unless called by the Issuer or upon the occurrence of certain events, as set forth in the Note. The aggregate purchase price of the interests reported herein by the Reporting Persons was $2,532,735. Such funds were furnished from Olden's working capital. Item 4. Purpose of Transaction. On April 21, 2004, the Issuer entered into the Note Purchase Agreement with Olden pursuant to which the Issuer issued the Note to Olden, in the aggregate principal amount of $2,532,735, which is convertible after one year (or earlier upon a call by the Issuer of the Note and in certain other circumstances) into up to 5,628,300 shares of Common Stock, constituting approximately 19.9% of Issuer's Common Stock outstanding on April 21, 2004, subject to adjustment. The purchase and sale of the Note and the transaction contemplated by the Note Purchase Agreement are part of an asset redeployment strategy on the part of the Issuer. On April 21, 2004, the Issuer's Board of Directors voted to increase its size from three to four members. One of the Issuer's directors resigned and Kanders was appointed to fill the vacancy. As a result, the Board is now comprised of Mr. Kanders and another new director appointed by the Board and two remaining directors. In addition, Kanders was appointed as the Executive Chairman of the Board. It is the understanding of the Reporting Persons that the two continuing directors do not intend to stand for re-election at the Issuer's 2004 annual meeting of stockholders. The Note was acquired by the Reporting Persons for investment purposes. The Reporting Persons' primary interest is to maximize the value of their investment in the Issuer through an asset redeployment strategy. The Reporting Persons will in the future take such actions with respect to their investment in the Issuer as they deem appropriate in light of the circumstances existing from time to time. Such actions may involve the purchase of shares of Common Stock, or alternatively, may involve the sale of all or a portion of the Note or the shares of Common Stock issuable upon conversion of the Note, in the open market or in privately negotiated transactions to one or more purchasers. In connection with the transaction, the Issuer and Olden also entered into a Registration Rights Agreement, dated April 21, 2004 (the "Registration Rights Agreement"), which requires the Issuer, upon Olden's request, to file a "shelf" Page 7 of 8 Registration Statement under Rule 415 to register the shares of Common Stock into which the Note is convertible. Item 5. Interest in Securities of the Issuer. As a result of entering in the Note Purchase Agreement and the Registration Rights Agreement, and acquiring the Note, the Reporting Persons may be deemed to beneficially own the 5,628,300 shares of Common Stock into which the Note is convertible, which 5,628,300 shares constitute approximately 19.9% of the outstanding Shares. The percentage reported is based upon 28,283,347 shares of Common Stock outstanding as of April 21, 2004. The Reporting Persons may be deemed to share the power to vote the shares of Common Stock reported hereby issuable upon conversion of the Note. The Reporting Persons do not currently have the sole or shared power to dispose or direct the disposition of such shares of Common Stock. The filing of this Schedule 13D and any future amendment by the Reporting Persons, and the inclusion of information herein and therein, shall not be considered or construed as an admission that such persons, for the purpose of Section 13(d) of the Exchange Act or otherwise, is the beneficial owner of any shares of Common Stock in which such person does not have a pecuniary interest. Other than the Note Purchase Agreement, the Reporting Persons did not effect any transactions in the class of securities reported hereby during the past 60 days. Item 6. Contracts, Arrangements, Understandings or Relationships with respect to Securities of the Issuer. None other than described herein. See Items 3 and 4 of this Schedule 13D. Item 7. Material to be Filed as Exhibits. Exhibit 1 - Joint Filing Agreement. Exhibit 2 - Convertible Note Purchase Agreement, dated April 21, 2004, by and between Net Perceptions, Inc. and Olden Acquisition LLC. Exhibit 3 - Convertible Subordinated Note, dated April 21, 2004. Exhibit 4 -- Registration Rights Agreement, dated April 21, 2004, by and between Net Perceptions, Inc. and Olden Acquisition LLC. Page 8 of 8 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: April 28, 2004 /s/ Warren B. Kanders ----------------------------------- Warren B. Kanders KANDERS & COMPANY, INC. By: /s/ Warren B. Kanders ------------------------------- Name: Warren B. Kanders Title: President OLDEN ACQUISITION LLC By: /s/ Warren B. Kanders ------------------------------- Name: Warren B. Kanders Title: Manager EX-99.1 2 file002.txt JOINT FILING AGREEMENT SCHEDULE 13D JOINT FILING AGREEMENT The undersigned and each other person executing this joint filing agreement (this "Agreement") agree that each of the undersigned is responsible for the timely filing of this statement and any amendments thereto, and for the completeness and accuracy of the information concerning such person contained herein or therein; but none of the undersigned is responsible for the completeness or accuracy of the information statement concerning any other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate. In Witness Whereof, the undersigned have either signed this Agreement or caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date set forth below. Date: April 28, 2004 /s/ Warren B. Kanders ----------------------------------- Warren B. Kanders KANDERS & COMPANY, INC. By: /s/ Warren B. Kanders ------------------------------- Name: Warren B. Kanders Title: President OLDEN ACQUISITION LLC By: /s/ Warren B. Kanders ------------------------------- Name: Warren B. Kanders Title: Manager EX-99.2 3 file003.txt CONVERTIBLE NOTE PURCHASE AGREEMENT ================================================================================ CONVERTIBLE NOTE PURCHASE AGREEMENT DATED AS OF APRIL 21, 2004 BY AND AMONG NET PERCEPTIONS, INC., A DELAWARE CORPORATION, AS ISSUER AND SELLER AND OLDEN ACQUISITION LLC, AS PURCHASER ================================================================================ CONVERTIBLE NOTE PURCHASE AGREEMENT (this "Agreement") dated as of April 21, 2004, by and among Net Perceptions, Inc., a Delaware corporation (the "Seller"), and Olden Acquisition, LLC, a Delaware limited liability company (the "Purchaser"). WITNESSETH: WHEREAS, the Purchaser is willing to purchase from the Seller, and the Seller desires to sell to the Purchaser, for the Purchase Price (as defined below), a convertible subordinated promissory note which is convertible into up to 5,628,300 shares of the Seller's common stock, $0.0001 par value per share (the "Common Stock"), such number of shares constituting 19.9% of the number of shares of Common Stock outstanding as of the Closing Date (as defined below). NOW, THEREFORE, in consideration of the mutual promises and representations, warranties, covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I PURCHASE AND SALE 1.1 PURCHASE AND SALE; PURCHASE PRICE. (a) On the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined below) the Seller will sell, and the Purchaser will purchase, for $2,532,735 (the "Purchase Price"), which is the price determined by multiplying (x) the 5,628,300 shares of Common Stock constituting 19.9% of the number of shares of Common Stock outstanding as of the Closing Date by (y) the product of (i) the average closing selling price per share of Common Stock for the twenty (20) consecutive trading days ending on the fifth trading day prior to the Closing Date, and (ii) 1.1, a convertible subordinated promissory note in the original principal amount of $2,532,735, bearing interest at the rate of 2% per annum, due April 21, 2014, which is convertible into shares of Common Stock, in substantially the form attached hereto as Exhibit 1.1(a) hereto (the "Note" or "Notes"). (b) Upon a reduction in the Principal Sum (as defined in the Note) as provided in the Note in connection with either (x) any payment(s) made by the Seller to any of Purchaser's Indemnified Persons (as defined in Section 7.2(a) hereof) in respect of indemnification Claims (as defined in Section 7.2(a) hereof) of the Purchaser pursuant to Section 7.2(a) or (y) the satisfaction of any indemnification Claims of the Seller by means of a reduction in the Principal Sum of the Note pursuant to Section 7.2(b), the parties shall execute a new Note or Notes in substitution of the then outstanding Note(s) (which outstanding Note(s) shall be cancelled) having an aggregate principal amount equal to the Principal Sum as so reduced. In all other respects the substituted Note(s) shall be identical to the previously outstanding Note(s). 1.2 TRANSFERS; LEGEND. (a) Without limitation of transfer restrictions imposed by applicable securities laws, the Note may not be transferred or assigned, in whole or in part, except to an Affiliate (as defined below) of the Purchaser. Purchaser may effect any permitted transfer or assignment of the Note by delivering written transfer instructions to the Seller, and the Seller shall reflect such transfer or assignment on its books and records, provided that if Seller determines in good faith that under applicable securities laws an opinion of counsel should be obtained in connection with such transfer or assignment, then it may condition its reflecting such transfer or assignment on its books and records on 1 receipt of such opinion. Any permitted transferee which acquires at least 20% of the aggregate principal amount of the Note issued at the Closing shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement (as defined below). The Seller shall reissue notes evidencing the Note upon surrender of notes evidencing the Note being transferred in accordance with this Section 1.2(a). Any such transfer shall be made by a Purchaser in accordance with applicable law. An "Affiliate" means any Person (as such term is defined below) that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). A "Person" means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision of any thereof) or other entity of any kind. (b) At the Closing, and so long as the Notes have not been registered under the Securities Act or until such time as the sale of the Notes to the public does not require such registration, the Notes shall bear the following legend: THIS CONVERTIBLE SUBORDINATED NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS CONVERTIBLE SUBORDINATED NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THIS CONVERTIBLE NOTE IS NOT TRANSFERABLE OR ASSIGNABLE EXCEPT AS SPECIFIED IN THE CONVERTIBLE NOTE PURCHASE AGREEMENT REFERRED TO HEREIN. ARTICLE II CLOSING 2.1 THE CLOSING. The closing of the transactions contemplated under this Agreement (the "Closing") shall take place at the offices of Kane Kessler, P.C., 1350 Avenue of the Americas, 26th Floor, New York, New York 10036 on the date hereof (the actual date of Closing, the "Closing Date"). 2.2 DELIVERIES. (A) DELIVERIES BY THE SELLER. At the Closing, the Seller shall deliver or cause to be delivered to the Purchaser the following: 1. The Note; 2. The Registration Rights Agreement, in the form attached hereto as Exhibit 2.2(a)(2) (the "Registration Rights Agreement"), duly executed by the Seller. 3. The legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP ("Seller's Counsel"), counsel to the Seller, in the form previously agreed upon by the parties. 2 4. A certificate of the Secretary of the Seller (the "Secretary's Certificate"), in form and substance reasonably satisfactory to the Purchaser, certifying, on behalf of the Seller as follows: (i) that attached to the Secretary's Certificate is a true and complete copy of the certificate of incorporation of the Seller and a true and complete copy of the Bylaws of the Seller, each as in effect on the Closing Date; (ii) that attached to the Secretary's Certificate are true and complete copies of the resolutions of the Seller's Board of Directors authorizing the execution, delivery and performance by the Seller of this Agreement and the Related Documents (as defined below), and approving the consummation by the Seller of the transactions contemplated hereby, including the authorization and issuance of the Note, and that said resolutions are in full force and effect as of the Closing Date without amendment or modification; and (iii) the names and true signatures of the officers of the Seller signing this Agreement on behalf of the Seller and all other documents to be delivered at the Closing pursuant to this Agreement. 5. A certificate of the President of the Seller (the "President's Certificate"), in form and substance reasonably satisfactory to the Purchaser, certifying, on behalf of the Seller as follows: (i) based on the number of shares of Common Stock outstanding immediately prior to the Closing as advised by the Seller's transfer agent, which equals the number of shares of Common Stock outstanding as of December 31, 2003 plus the number of shares of Common Stock issued upon exercise of outstanding options since December 31, 2003, the maximum number of shares of Common Stock into which the Note is convertible as of the Closing Date constitutes 19.9% of the number of shares of Common Stock outstanding as of the Closing Date; (ii) such other matters as required by this Agreement; and (iii) such other matters as the Purchaser may reasonably request. 6. The resignation of the director of the Seller identified pursuant to Section 6.1(c) hereof. 7. Such other documents as the Purchaser shall reasonably request. 3 (B) DELIVERIES BY THE PURCHASER. At the Closing, the Purchaser shall deliver or cause to be delivered to the Seller the following: 1. Payment of the full amount of the Purchase Price, in cash by wire transfer of immediately available funds to an account designated in writing by the Seller, subject to such deductions as are required or authorized in accordance with the terms hereof or the written directions of the Seller. 2. The Registration Rights Agreement duly executed by the Purchaser. 3. Such other documents as the Seller shall reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER The Seller hereby represents and warrants to the Purchaser, as of the date hereof, as follows: 3.1 CORPORATE EXISTENCE AND POWER; SUBSIDIARIES. Except as set forth in Section 3.1 of the Seller Disclosure Schedule previously delivered by the Seller to Purchaser (the "Seller Disclosure Schedule"), the Seller and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all corporate powers required to carry on its business as now conducted. The Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect on the Seller. For purposes of this Agreement, the term "Material Adverse Effect" means, when used in connection with any party, any change, effect, event, occurrence, condition or development or state of facts that is or would reasonably be expected to be materially adverse to the assets or financial condition of such party and its Subsidiaries, taken as a whole. True and complete copies of the Seller's Certificate of Incorporation, as amended, and Bylaws, as amended (collectively, the "Charter and Bylaws") have been provided to the Purchaser. For purposes of this Agreement, the term "Subsidiary" or "Subsidiaries" means, with respect to any entity, any corporation or other organization of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by such entity or of which such entity is a partner or is, directly or indirectly, the beneficial owner of 50% or more of any class of equity securities or equivalent profit participation interests. The Seller has no Subsidiaries other than as set forth in Exhibit 21 to the Seller's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (the "2003 10-K"). 3.2 CORPORATE AUTHORIZATION; RIGHTS PLAN. (a) The execution, delivery and performance by the Seller of this Agreement, the Registration Rights Agreement, and each of the other documents executed pursuant to and in connection with this Agreement (the "Related Documents"), and the consummation by the Seller of the transactions contemplated hereby and thereby (including, but not limited to, the sale and delivery of the Notes) have been duly authorized by the Seller, and no additional corporate action is required for the approval by the Seller of this Agreement or the Related Documents. The Seller has reserved 6,000,000 shares of Common Stock for issuance as Common Stock upon conversion of the Notes. This Agreement and the Related Documents have been or, to the extent contemplated hereby or by the Related Documents, will be duly executed and delivered and constitute the legal, valid and binding agreement of the Seller, enforceable against the Seller in accordance with 4 their terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of its obligations hereunder are subject to general principles of equity. (b) The Note that will be issued to the Purchaser at Closing, when issued and delivered in accordance with the terms hereof, will be duly authorized and validly issued and free of restrictions on transfer other than as provided in Section 1.2 and under applicable state and federal securities laws. (c) The issuance of the Note will not result in or obligate the Seller to (i) issue or offer to issue, with or without consideration, any securities or rights to acquire any securities to any person, whether as a pre-emptive right, or pursuant to any rights plan, or pursuant to any agreement, undertaking or other obligation of any nature, or (ii) adjust the number or kind of securities held by or issuable (with or without the payment of any consideration) to any person. 3.3 CHARTER, BYLAWS AND CORPORATE RECORDS. Except as set forth in Section 3.3 of the Seller Disclosure Schedule, the minute books of the Seller contain complete and accurate records of all meetings and other corporate actions of the board of directors, committees of the board of directors, incorporators and shareholders of the Seller and its Subsidiaries from the date of their incorporation to the date hereof. All material corporate decisions and actions have been validly made or taken. 3.4 NON-CONTRAVENTION. Except as otherwise specifically contemplated in this Agreement and the Related Documents, the execution, delivery and performance by the Seller of this Agreement and the Related Documents, and the consummation by the Seller of the transactions contemplated hereby and thereby (including, but not limited to, the issuance, sale and delivery of the Note by the Seller) do not and will not (a) contravene or conflict with the Charter and Bylaws of the Seller or any of its Subsidiaries or any material agreement to which the Seller or any of its Subsidiaries is a party or bound; (b) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to the Seller or any of its Subsidiaries; (c) constitute a default under or give rise to a right of termination, cancellation or acceleration or loss of any benefit under any Material Contract (as defined herein) or under any material license, franchise, permit or other similar authorization held by the Seller or any of its Subsidiaries; (d) require any action by or in respect of, or filing with, any governmental body, agency, official or authority, other than filings under the Exchange Act (as defined below); or (e) result in the creation or imposition of any Lien (as defined below) on any asset of the Seller or any of its Subsidiaries, except, in the case of (b) through (e), as would not have a Material Adverse Effect on the Seller. For purposes of this Agreement, the term "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, claim or encumbrance of any kind in respect of such asset. 3.5 SEC DOCUMENTS. The Seller is obligated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to file with the Securities and Exchange Commission (the "Commission" or the "SEC") reports and other documents pursuant to Sections 13 and 15(d) thereof (all reports filed or required to be filed by the Seller with the SEC, including all exhibits thereto or incorporated therein by reference, and all documents filed by the Seller under the Securities Act, or any other provisions of the Exchange Act (other than the Seller's Proxy Statement filed with the SEC on February 12, 2004, as supplemented (the "Proxy Statement") and Seller's Schedule 14D-9 filed with the SEC on December 31, 2003, as amended) are hereinafter called the "SEC Documents," and all SEC Documents with respect to any period ending on or after December 31, 2002, are hereinafter called the "Recent Reports"). The Seller has filed all reports or other documents required to be filed under the Exchange Act. All Recent Reports filed by the Seller with the SEC (i) were prepared in all material 5 respects in accordance with the requirements of the Exchange Act and the Securities Act and (ii) did not at the time they were filed (or, if amended or superseded by a filing prior to the date hereof, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.6 FINANCIAL STATEMENTS. Each of the Seller's consolidated balance sheet and related consolidated statements of income, cash flows and changes in stockholders' equity (including the related notes), as contained in the Recent Reports (collectively, the "Seller's Financial Statements" or the "Financial Statements") (x) present fairly in all material respects the financial position of the Seller and its consolidated Subsidiaries as of the dates thereof and the results of operations, cash flows and stockholders' equity as of and for each of the periods then ended, except that any unaudited financial statements are subject to normal year-end adjustments, and (y) were prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q or 8-K), applied on a consistent basis throughout the periods involved, in each case, except as otherwise indicated in the notes thereto. 3.7 COMPLIANCE WITH LAW. (a) The Seller and its Subsidiaries are in compliance and have conducted their business and offerings and issuance's of securities so as to comply with all laws, rules and regulations, judgments, decrees or orders of any court, administrative agency, commission, self regulatory organization, regulatory authority or other governmental authority or instrumentality, domestic or foreign, applicable to its operations except as in each case would not in the aggregate have a Material Adverse Effect on the Seller. There are no judgments or orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency or by arbitration), including any such actions relating to affirmative action claims or claims of discrimination, against the Seller or its Subsidiaries or against any of their properties or businesses. Except as set forth in Section 3.7 of the Seller Disclosure Schedule, without limiting the generality of the foregoing, the Seller has no liability arising out of the termination of any employee or any employee benefit plan, other than such liabilities as are fully disclosed in the Financial Statements and for which the Seller has made adequate reserves. (b) The Seller and its Subsidiaries hold all authorizations, consents, approvals, franchises, licenses and permits required under applicable law or regulation for the operation of the business of the Seller and its Subsidiaries as presently operated (the "Governmental Authorizations"), other than such Governmental Authorizations the loss or absence of which would not have a Material Adverse Effect on the Seller ("Material Governmental Authorizations"). The Seller and its Subsidiaries are in material compliance with the terms of all the Material Governmental Authorizations. The Seller and its Subsidiaries have not engaged in any activity that would be reasonably expected to cause revocation or suspension of any Material Governmental Authorizations. The Seller and its Subsidiaries have no knowledge of any facts which would reasonably be expected to cause them to believe that the Material Governmental Authorizations will not be renewed by the appropriate governmental authorities in the ordinary course. Neither the execution, delivery nor performance of this Agreement by the Seller will adversely affect in a material respect the status of any of the Material Governmental Authorizations. 3.8 NO DEFAULTS. The Seller and its Subsidiaries are not, nor will they be solely as a result of the passage of time, giving of notice, or both, (i) in violation of any provision of their Charter and Bylaws (ii) in default or violation of any term, condition or provision of (A) any judgment, decree, order, injunction or stipulation applicable to the Seller or its Subsidiaries or (B) any agreement, note, mortgage, indenture, contract, lease or instrument, permit, concession, franchise or license to which the Seller or its Subsidiaries are a party or by which the Seller or its Subsidiaries or their properties or assets 6 may be bound, except, in the case of (A) or (B) as would not have a Material Adverse Effect on the Seller. 3.9 LITIGATION. Except as disclosed in the 2003 10-K, there is no action, suit, proceeding, judgment, claim or investigation pending or, to the knowledge of the Seller, threatened against the Seller and any of its Subsidiaries which, would, individually or in the aggregate, have a Material Adverse Effect on the Seller. There is no action, suit, proceeding, judgment, claim or investigation of which the Seller has received notice pending or, to the knowledge of the Seller, threatened, which in any manner challenges or seeks to prevent, enjoin, alter or materially delay any of the transactions contemplated hereby. There are no claims or complaints existing or, to the knowledge of the Seller or its Subsidiaries, threatened for product liability in respect of any product of the Seller or its Subsidiaries, and the Seller and its Subsidiaries are not aware of any basis for the assertion of any such claim. 3.10 ABSENCE OF CERTAIN CHANGES. Except as set forth in the Recent Reports (including matters covered by the agreements disclosed in the Recent Reports) or Section 3.10 of the Seller Disclosure Schedule, since December 31, 2003 there has not occurred: (a) Any event that would, individually or in the aggregate, have a Material Adverse Effect on the Seller; (b) Any amendments or changes in the Charter or Bylaws of the Seller; (c) Any damage, destruction or loss, whether or not covered by insurance, that would, individually or in the aggregate, have a Material Adverse Effect on the Seller and its Subsidiaries; (d) Any (i) incurrence, assumption or guarantee by the Seller or its Subsidiaries of any debt for borrowed money (other than for equipment leases or working capital lines of credit); (ii) issuance or sale of any securities convertible into or exchangeable for securities of the Seller (other than to directors, employees and consultants pursuant to existing equity compensation or stock purchase plans of the Seller in accordance with past business practices); (iii) issuance or sale of options or other rights to acquire from the Seller or its Subsidiaries, directly or indirectly, securities of the Seller or any securities convertible into or exchangeable for any such securities, other than options issued to directors, employees and consultants in the ordinary course of business pursuant to existing equity compensation or stock purchase plans of the Seller in accordance with past practices; (iv) issuance or sale of any stock, bond or other corporate security (other than to directors, or employees pursuant to existing equity compensation or stock purchase plans of the Seller in accordance with past business practices); (v) declaration or making any dividend, payment or other distribution to shareholders or purchase or redemption of any share of its capital stock or other security; 7 (vi) cancellation of any debt or claim except in the ordinary course of business in accordance with past practices; (vii) waiver of any right of substantial value whether or not in the ordinary course of business; (viii) material change in officer compensation; or (ix) other commitment (contingent or otherwise) to do any of the foregoing. (e) Any creation, sufferance or assumption by the Seller or any of its Subsidiaries of any Lien on any asset or any making of any loan, advance or capital contribution to or investment in any Person in an aggregate amount which exceeds $10,000 outstanding at any time; (f) Any entry into, amendment of, relinquishment, termination or non-renewal by the Seller or its Subsidiaries of any Material Contract or any material license, transaction, commitment or other right or obligation, other than in the ordinary course of business; (g) The adoption or implementation of any plan of liquidation of the Seller or any Subsidiary; or (h) Any transfer or grant of a right with respect to the patents, patent applications, patent licenses, trademarks, trade names, service marks, trade secrets, copyrights or other intellectual property rights owned or licensed by the Seller or its Subsidiaries, except as among the Seller and its Subsidiaries. 3.11 NO UNDISCLOSED LIABILITIES. The Seller and its Subsidiaries do not have any direct or indirect indebtedness, liabilities, claim, loss, damage, deficiency, obligation or responsibility, known or unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise, required by GAAP to be set forth in financial statements, including but not limited to off-balance sheet financings, guarantees and similar transactions ("Liabilities") which are not reflected to the extent required by GAAP in the December 31, 2003 balance sheet of the Seller (or the notes thereto) contained in the 2003 10-K, except for (i) Liabilities incurred since December 31, 2003 in connection with the Seller's ongoing activities and the wind down of its business which either have been satisfied as of the Closing Date or individually are less than $5,000, (ii) Liabilities of $5,000 or more (excluding any Liabilities owed to the Purchaser as a result of this Agreement) as set forth in Section 3.11 of the Seller Disclosure Schedule, and (iii) Liabilities incurred in connection with the matters described in the Recent Reports or the Proxy Statement. The Seller has not guaranteed the debt or other obligations of any unaffiliated person or entity and has not engaged in any off-balance sheet financing transactions. 3.12 TAXES. Except as set forth in Section 3.12 of the Seller Disclosure Schedule: (i) all tax returns and tax reports required to be filed with respect to the income, operations, business or assets of the Seller and its Subsidiaries have been filed (or appropriate extensions have been obtained) with the appropriate governmental agencies in all jurisdictions in which such returns and reports are required to be filed, and all of the foregoing as filed are correct and complete in all material respects and, in all material respects, reflect accurately all liability for taxes of the Seller and its Subsidiaries for the periods to which such returns relate, and all amounts shown as owing thereon have been paid; (ii) all income, profits, franchise, sales, use, value added, occupancy, property, excise, payroll, withholding, FICA, 8 FUTA and other taxes (including interest and penalties), if any, collectible or payable by the Seller and its Subsidiaries or relating to or chargeable against any of its material assets, revenues or income or relating to any employee, independent contractor, creditor, stockholder or, other third party through the Closing Date, were fully collected and paid by such date if due by such date or provided for by reserves in the Financial Statements to the extent required by GAAP as of and for the periods ended December 31, 2003 and all similar items due through the Closing Date will have been fully paid by that date or provided for by reserves to the extent required for GAAP, whether or not any such taxes were reported or reflected in any tax returns or filings; (iii) no taxation authority has sought to audit the records of the Seller or any of its Subsidiaries for the purpose of verifying or disputing any tax returns, reports or related information and disclosures provided to such taxation authority, or for the Seller's or any of its Subsidiaries' alleged failure to provide any such tax returns, reports or related information and disclosure; (iv) to the knowledge of the Seller and its Subsidiaries, no material claims or deficiencies have been asserted against or inquiries raised with the Seller or any of its Subsidiaries with respect to any taxes or other governmental charges or levies which have not been paid or otherwise satisfied, including claims that, or inquiries whether, the Seller or any of its Subsidiaries has not filed a tax return that it was required to file, and to the knowledge of the Seller there exists no reasonable basis for the making of any such claims or inquiries; and (v) neither the Seller nor any of its Subsidiaries has waived any restrictions on assessment or collection of taxes or consented to the extension of any statute of limitations relating to taxation. Neither the Seller nor any of its Subsidiaries is a party to any tax sharing or indemnification agreement, and none of them is liable for the taxes of any other Person (other than Subsidiaries) whether as a transferee, successor, by contract or otherwise. 3.13 EXCHANGE ACT REGISTRATION; NO ADVERSE ORDER. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act. No order prohibiting the issuance and/or sale of the Note is in effect and no proceedings for such purpose are pending or threatened. 3.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as set forth in Section 3.14 of the Seller Disclosure Schedule and the agreements relating to transactions set forth in the Recent Reports or as would not have a Material Adverse Effect on Seller, there is no agreement, judgment, injunction, order or decree binding upon the Seller or its Subsidiaries which has or would reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Seller or its Subsidiaries, any acquisition of property by the Seller or its Subsidiaries or the conduct of business by the Seller or its Subsidiaries as currently conducted. 3.15 NO PREEMPTIVE RIGHTS. Other than pursuant to the Registration Rights Agreement and as provided in the Note, no Person possesses any preemptive rights, registration rights or anti-dilution rights (other than customary adjustments for stock splits, stock dividends and the like provided for in the Seller's stock option plans or agreements), in respect of the Note or in respect of the issuance of any Common Stock. 3.16 APPLICATION OF TAKEOVER PROTECTION. The Seller's board of directors has taken all necessary action in order to render inapplicable, and has rendered inapplicable, any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti- takeover provisions under the Charter and By-laws, the laws of the state of its incorporation or any rights plan or similar arrangement which would otherwise become applicable as a result of the transactions contemplated by this Agreement, including, without limitation, the Seller's issuance of the Note and the Purchaser's ownership thereof. 3.17 SUBSIDIARIES AND INVESTMENTS. Except as set forth in the Recent Reports or in Section 3.17 of the Seller Disclosure Schedule, the Seller has no Subsidiaries or Investments. For purposes of 9 this Agreement, the term "Investments" shall mean, with respect to any Person, all advances, loans or extensions of credit to any other Person, all purchases or commitments to purchase any stock, bonds, notes, debentures or other securities of any other Person, and any other investment in any other Person, including partnerships or joint ventures (whether by capital contribution or otherwise) or other similar arrangement (whether written or oral) with any Person, including but not limited to arrangements in which (i) the Person shares profits and losses, (ii) any such other Person has the right to obligate or bind the Person to any third party, or (iii) the Person may be wholly or partially liable for the debts or obligations of such partnership, joint venture or other arrangement. 3.18 CAPITALIZATION. The authorized capital stock of the Seller consists of 100,000,000 shares of common stock, $0.0001 par value per share ("Common Stock"), of which 28,283,347 shares are issued and outstanding as of the date hereof, and 5,000,000 shares of preferred stock, issuable in one or more classes or series, with such relative rights and preferences as the Board of Directors may determine, of which 1,500,000 shares have been designated as Series A Junior Participating Preferred Stock. No shares of preferred stock have been issued. All shares of the Seller's issued and outstanding capital stock have been duly authorized, are validly issued and outstanding, and are fully paid and nonassessable. There are no dividends which have accrued or been declared but are unpaid on the capital stock of the Seller. All taxes required to be paid by the Seller in connection with the issuance and any transfers of the Seller's capital stock have been paid. All securities of the Seller have been issued in compliance in all material respects with the provisions of all applicable securities or other laws. 3.19 OPTIONS, WARRANTS, RIGHTS. Except as set forth in Section 3.18, the Recent Reports or Section 3.19 of the Seller Disclosure Schedule, and except for the Note, there are no outstanding (a) securities, notes or instruments convertible into or exercisable for any of the capital stock or other equity interests of the Seller or its Subsidiaries; (b) options, warrants, subscriptions or other rights to acquire capital stock or other equity interests of the Seller or its Subsidiaries; or (c) commitments, agreements or understandings of any kind, including employee benefit arrangements, relating to the issuance or repurchase by the Seller or its Subsidiaries of any capital stock or other equity interests of the Seller or its Subsidiaries, any such securities or instruments convertible into or exercisable for securities or any such options, warrants or rights. Neither the Seller nor any Subsidiary has granted anti-dilution rights to any person or entity in connection with any option, warrant, subscription or any other instrument convertible into or exercisable for the securities of the Seller or any of its Subsidiaries. Other than the rights granted to the Purchaser under the Registration Rights Agreement, there are no outstanding rights which permit the holder thereof to cause the Seller or the Subsidiaries to file a registration statement under the Securities Act or which permit the holder thereof to include securities of the Seller or any of its Subsidiaries in a registration statement filed by the Seller or any of its Subsidiaries under the Securities Act, and there are no outstanding agreements or other commitments which otherwise relate to the registration of any securities of the Seller or any of its Subsidiaries for sale or distribution in any jurisdiction. 3.20 EMPLOYEES, EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS. (a) Except as disclosed in the Recent Reports or in Section 3.20(a) of the Seller Disclosure Schedule, there are no employment, consulting, severance or indemnification arrangements, agreements, or understandings in effect as of the date hereof between the Seller or its Subsidiaries and any officer, director, consultant or employee of the Seller or its Subsidiaries (the "Employment Agreements"). Except as disclosed in the Recent Reports, no Employment Agreement provides for the acceleration or change in the award, grant or vesting of options, warrants, rights, severance payments, or other contingent obligations of any nature whatsoever of the Seller or its Subsidiaries in favor of any such parties in connection with the 10 transactions contemplated by this Agreement. Except as disclosed in the Recent Reports or in Section 3.20(a) of the Seller Disclosure Schedule, the terms of employment or engagement of all directors, officers, employees, agents, consultants and professional advisors of the Seller and its Subsidiaries are such that their employment or engagement may be terminated upon not more than two weeks' notice given at any time without liability for payment of compensation or damages and the Seller and its Subsidiaries have not entered into any agreement or arrangement for the management of their business or any part thereof other than with their directors or employees. (b) Except as set forth in Section 3.20(b) of the Seller Disclosure Schedule or Recent Reports, the Seller and its Subsidiaries have no pension, retirement, stock purchase, stock bonus, stock ownership, stock option, profit sharing, savings, medical, disability, hospitalization, insurance, deferred compensation, bonus, incentive, welfare or any other employee benefit plan, agreement, commitment or arrangement currently maintained or contributed to by the Seller or its Subsidiaries for any of its directors, officers, consultants, employees or former employees (the "Seller Plans"). The Seller has previously made available to Purchaser, to the extent applicable, (i) a true and complete copy of all of the Seller Plans (or, if oral, a true and complete written summary thereof); (ii) a current summary plan description (plus summaries of any subsequent modifications thereto) for each Seller Plan; (iii) the latest IRS determination letter obtained with respect to any Seller Plan qualified under Section 401 or 501 of the Code; and (iv) Forms 5500 for the last three (3) plan years for each Seller Plan required to file such form. Except as set forth in Section 3.20(b) of the Seller Disclosure Schedule, none of the Seller Plans is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and, except as set forth in Section 3.20(b) of the Seller Disclosure Schedule, neither the Seller nor any of its Subsidiaries has established, maintained, made or been required to make any contributions to, or terminated, and has no liability with respect to, any "employee benefit plan" within the meaning of ERISA. The Seller and its Subsidiaries do not have any liability to the Pension Benefit Guaranty Corporation (the "PBGC"), and no facts or circumstances exist which might give rise to any liability of the Seller or its Subsidiaries to the PBGC or which could reasonably be anticipated to result in any claims being made against the Purchaser, the Seller or their Subsidiaries by the PBGC. The Seller and its Subsidiaries have paid all amounts required under applicable law and any Seller Plan to be paid as a contribution to any Seller Plan through the date hereof. The Seller has set aside adequate reserves to meet contributions which are not yet due under any Seller Plan. Neither the Seller, its Subsidiaries nor, to the Seller's knowledge, any other Person has engaged in any transaction with respect to any Seller Plan which would subject the Seller to any tax, penalty or liability for prohibited transactions with respect to a Seller Plan. To the Seller's knowledge, no director, officer or employee of the Seller or its Subsidiaries, to the extent he or she is a fiduciary with respect to any Seller Plan, has breached any of his/her responsibilities or obligations imposed upon fiduciaries or which could result in any claim being made under, by or on behalf of any Seller Plan. No Seller Plan provides post-employment medical, health, or life insurance benefits for present or future retirees or present or future terminated employees, except for continuation coverage provided pursuant to the requirements of Section 4980B of the Code or Sections 601-608 of ERISA or a similar state law. (c) No material labor dispute with employees of the Seller exists or, to the best knowledge of the Seller is imminent. 3.21 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Seller, nor to the Seller's knowledge (i) any Affiliate of the Seller (including, but not limited to, its Subsidiaries), (ii) any agent or employee of the Seller, (iii) any other Person acting on behalf of or associated with the Seller, or (iv) any individual related to any of the foregoing Persons, acting alone or together, has: (a) received, directly or indirectly, any rebates, payments, commissions, promotional allowances or any other 11 economic benefits, regardless of their nature or type, from any customer, supplier, trading company, shipping company, governmental employee or other Person with whom the Seller or its Subsidiaries has done business directly or indirectly; or (b) directly or indirectly, given or agreed to give any gift or similar benefit to any customer, supplier, trading company, shipping company, governmental employee or other Person who is or may be in a position to help or hinder the business of the Seller or its Subsidiaries (or assist the Seller or its Subsidiaries in connection with any actual or proposed transaction) which (in the case of (a) or (b)) would have a Material Adverse Effect on the Seller. 3.22 CHANGE IN BOARD COMPOSITION. The change in the membership of the Seller's board of directors contemplated by Section 6.1(c) will not give rise to a right of termination, cancellation, severance or similar payments, or acceleration or loss of any benefit under any Material Contract or under any material license, franchise, permit or other similar authorization held by the Seller or any of its Subsidiaries or under any agreement or arrangement between the Seller or any of its Subsidiaries and their directors, officers, employees or consultants. 3.23 ENVIRONMENTAL MATTERS. None of the premises or any other property owned, occupied or leased by the Seller or its Subsidiaries (the "Premises") has been used by the Seller or its Subsidiaries, or to the Seller's knowledge, by any other Person, to manufacture, treat, store, or dispose of any waste, pollutant or toxic or hazardous substance (including, without limitation, asbestos, radioactive material and pesticides) or any other substance that has been designated to be a "hazardous substance" under Environmental Laws ("Hazardous Substances") other than substances customarily used in the Seller's or its Subsidiaries' businesses and in accordance with applications laws and regulations. The Seller and its Subsidiaries have not disposed of, discharged, emitted or released any Hazardous Substances which would require, under applicable Environmental Laws, remediation, investigation or similar response activity. No Hazardous Substances are present as a result of the actions of the Seller or its Subsidiaries or, to the Seller's or its Subsidiaries' knowledge, any other Person, in, on or under the Premises which would give rise to any liability or clean-up obligations of the Seller or its Subsidiaries under applicable Environmental Laws. The Seller and its Subsidiaries and, to the Seller's and its Subsidiaries' knowledge, any other Person for whose conduct it may be responsible, are in material compliance with all laws, regulations and other federal, state or local governmental requirements, and all applicable judgments, orders, writs, notices, decrees, permits, licenses, approvals, consents or injunctions in effect on the Closing Date relating to the generation, management, handling, transportation, treatment, disposal, storage, delivery, discharge, release or emission of any waste, pollutant or toxic or hazardous substance (including, without limitation, asbestos, radioactive material and pesticides) or to any other actions, omissions or conditions affecting the environment (the "Environmental Laws"). Neither the Seller nor its Subsidiaries nor, to the Seller's or its Subsidiaries' knowledge, any other Person for whose conduct it may be responsible has received any complaint, notice, order, or citation of any actual, threatened or alleged noncompliance with any of the Environmental Laws, and there is no proceeding, suit or investigation pending or, to the Seller's or its Subsidiaries knowledge, threatened against the Seller or its Subsidiaries or any such Person with respect to any violation or alleged violation of the Environmental Laws, and, to the Seller's knowledge, there is no basis for the institution of any such proceeding, suit or investigation. 3.24 BROKERS. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement, based upon any arrangement, contract or agreement of the Seller or any of its Affiliates, except as provided in Section 8.2. 3.25 MATERIAL CONTRACTS. Each of the Seller's and its Subsidiaries' material contracts, agreements, notes, mortgages, indentures, leases and other binding instruments and commitments which 12 (x) are filed as exhibits to the 2003 10-K or (y) which have been executed after December 31, 2003 and would have been required to be filed as exhibits to the 2003 10-K if they had been in effect on December 31, 2003 (collectively, the "Material Contracts") are in full force and effect on the date hereof, and none of the Seller, its Subsidiaries nor, to the Seller's or any Subsidiary's knowledge, any other party to such Material Contracts is in breach of or default under any of such Material Contracts. Section 3.25 of Seller's Disclosure Schedule lists any Material Contract not listed as an exhibit to the 2003 10-K. 3.26 INVESTMENT COMPANY STATUS. Neither the Seller nor any of its Subsidiaries is, nor immediately upon the Closing will be, an "investment company", as such term is defined in the Investment Company Act of 1940, as amended. 3.27 NO OWNERSHIP CHANGE. The Seller has not issued or redeemed any stock within the past 36 months which issuance or redemption was not publicly disclosed and which, to its knowledge, caused the Seller to experience an "ownership change" within the meaning of Section 382 of the Internal Revenue Code, as amended, immediately following and as a result of such issuance. Notwithstanding any other term or provision of this Agreement, Seller makes no other representation or warranty as to whether it has experienced such an ownership change, and makes no representation or warranty as to the existence or amount of any federal or state net operating loss or net operating loss carryforwards. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser represents and warrants to the Seller as follows: 4.1 EXISTENCE AND POWER. The Purchaser is duly organized, validly existing and in good standing under the laws of the State of Delaware. The Purchaser has all powers required to carry on the Purchaser's business as now conducted. 4.2 AUTHORIZATION. The execution, delivery and performance by the Purchaser of this Agreement, the Related Documents to which the Purchaser is a party, and the consummation by the Purchaser of the transactions contemplated hereby and thereby have been duly authorized by the Purchaser, and no additional action is required for the approval by the Purchaser of this Agreement or the Related Documents to which the Purchaser is a party. This Agreement and the Related Documents to which the Purchaser is a party have been or, to the extent contemplated hereby, will be duly executed and delivered and constitute valid and binding agreements of the Purchaser, enforceable against the Purchaser in accordance with their terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors and except that enforceability of their obligations thereunder are subject to general principles of equity. 4.3 INVESTMENT. The Purchaser is acquiring the Note for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with the intention of distributing or reselling the same, provided, however, that by making the representation herein, the Purchaser does not agree to hold any of the securities for any minimum or other specific term and, subject to Section 1.2(a), reserves the right to dispose of the Note at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The Purchaser is aware that neither the Note nor the shares of Common Stock into which the Note is convertible (the "Conversion Shares") have been registered under the Securities Act or under applicable state securities 13 or blue sky laws. The Purchaser is an "Accredited Investor" as such term is defined in Rule 501 of Regulation D, as promulgated under the Securities Act. 4.4 NONCONTRAVENTION. Neither the execution, the delivery and performance by the Purchaser of this Agreement, nor the consummation by the Purchaser of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Purchaser is subject or any provision of its charter or bylaws. 4.5 NO REGISTRATION. The Purchaser understands that the Note is being offered and sold to the Purchaser, and upon conversion of the Note the Conversion Shares will be issued, in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Seller is relying upon the truth and accuracy of, and the Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Note. 4.6 BUSINESS OR FINANCIAL EXPERTISE. Purchaser has, by reason of Purchaser's business or financial expertise or the business or financial experience of its professional advisors who are unaffiliated with and who are not, to the Purchaser's knowledge, compensated by the Seller or any affiliate or selling agent of the Seller, directly or indirectly, the capacity to protect its own interests in connection with its acquisition of the Note and any Conversion Shares. 4.7 BROKERS' FEES. Purchaser has no liability or obligation to pay any fees or commissions to any broker, finder, or other agent with respect to the transactions contemplated by this Agreement for which the Seller could become liable or obligated, except as provided in Section 8.2. ARTICLE V COVENANTS OF THE SELLER AND PURCHASER 5.1 REPORTING OBLIGATIONS. At any time when the Seller is not obligated to file reports with the Commission under Section 13 or 15(d) under the Exchange Act, the Seller shall furnish to the Purchaser promptly upon their becoming available (but not later than 45 days after the end of the relevant period), quarterly financial statements reviewed by an independent auditor, and annual financial statements audited by an independent auditor, not later than 90 days after the end of the relevant year, together with such certifications of the chief executive officer and chief financial officer as the Purchaser may reasonably require. 5.2 RESERVATION OF SHARES. So long as any principal amount of the Note is outstanding, the Seller shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be sufficient to enable the Seller to issue the Conversion Shares. 5.3 LISTING OF SECURITIES. Promptly after the Seller has completed its transfer from the Nasdaq National Market to the Nasdaq SmallCap Market, the Seller shall prepare and file a Notification Form for Listing of Additional Shares to effect the listing on the Nasdaq SmallCap Market of the Conversion Shares. Following the Seller's transfer from the Nasdaq National Market to the Nasdaq SmallCap Market, the Seller shall use its reasonable best efforts to cause the Seller to maintain the listing of the Common Stock, including the Conversion Shares, on the Nasdaq SmallCap Market. 14 5.4 REGISTRATION RIGHTS AGREEMENT. The Seller shall carry out and observe all the terms of the Registration Rights Agreement executed simultaneously with the execution of this Agreement covering the Conversion Shares. 5.5 INVESTIGATION. The representations, warranties, covenants and agreements set forth in this Agreement shall not be affected or diminished in any way by any investigation (or failure to investigate) at any time by or on behalf of the party for whose benefit such representations, warranties, covenants and agreements were made. Without limiting the generality of the foregoing, the inability or failure of the Purchaser to discover any breach, default or misrepresentation by the Seller under this Agreement or the Related Documents (including under any certificate furnished pursuant to this Agreement) shall not in any way diminish any liability hereunder. 5.6 CERTAIN BUSINESS COMBINATIONS. Neither the Purchaser nor any of its Affiliates shall, at any time prior to the fifth anniversary of the Closing Date, directly or indirectly, propose, publicly disclose any intention to propose, vote for or otherwise act to consummate any Rule 13e-3 transaction (as defined in Rule 13e-3 under the Exchange Act) unless such transaction has been approved by a majority of the Seller's Independent Directors. For purposes of this Agreement, an "Independent Director" shall have the meaning given such term in the rules and regulations of the national securities exchange on which the Common Stock is listed at the time of such approval, or, if the Common Stock is not so listed on a national securities exchange at such time, the meaning given the term in the rules and regulations of the NASDAQ National Market. ARTICLE VI CONDITIONS TO THE CLOSING 6.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligation of the Purchaser to purchase the Note at the Closing is subject to the fulfillment or satisfaction, on and as of the Closing Date, except as otherwise expressly indicated below or in Section 2.2 hereof, of each of the following conditions (any one or more of which may be waived by the Purchaser, in its sole discretion, but only in a writing signed by the Purchaser): (a) OPINION. The Purchaser shall have received the opinion of Seller's Counsel, described in Section 2.2(a)(3). (b) BOARD APPROVAL. The Board of Directors of the Seller shall have approved the sale of the Note to the Purchaser in accordance with this Agreement and shall have adopted such resolutions as will satisfy the requirements of Section 203 of the Delaware General Corporation Law. (c) APPOINTMENT OF BOARD OF DIRECTORS. Effective as of the Closing, (i) the Board of Directors of the Seller shall have increased the size of the Board from three to four members, (ii) one current Board member, to be identified by the Seller, and subject to approval by Buyer, shall have resigned, and (iii) the remaining Board members shall have nominated and appointed as new directors to the Board effective as of the Closing two persons designated by Buyer. (d) OFFICERS' CERTIFICATE. The Purchaser shall have received the Certificate(s) described in paragraph 4 and 5 of Section 2.2(a). (e) CONVERTIBLE PROMISSORY NOTE. The Seller shall have executed and delivered the Note. 15 (f) REGISTRATION RIGHTS AGREEMENT. The Seller shall have executed and delivered the Registration Rights Agreement. (g) NO INJUNCTION. No order or decree of any court, arbitration panel or governmental authority or official, and no statute, rule or regulation of any foreign or domestic, national or local government or agency thereof shall have been enacted, and no judicial or administrative decision shall have been rendered which enjoins or prohibits, or seeks to enjoin or prohibit, the consummation of all or any of the transactions contemplated by this Agreement. 6.2 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the Seller hereunder to issue and sell the Note at the Closing are subject to the fulfillment or satisfaction, on and as of the Closing Date, of the following condition (which may be waived by the Seller, in its sole discretion, but only in a writing signed by the Seller): The Purchaser shall have performed and complied in all respects with all agreements and conditions contained in this Agreement which are required to be performed or complied with by the Purchaser prior to or at the Closing. ARTICLE VII INDEMNIFICATION 7.1 SURVIVAL OF REPRESENTATIONS. Except as otherwise provided herein, the representations and warranties of the Seller and the Purchaser contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing Date and shall continue in full force and effect for a period of 12 months after the Closing Date and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Seller or the Purchaser. 7.2 INDEMNIFICATION. (a) The Seller agrees to indemnify and hold harmless the Purchaser, its Affiliates, and each of their officers, directors, employees and agents and their respective successors and assigns, from and against any losses, damages, or expenses (net of any related insurance proceeds) due to any and all actions, suits, proceedings, claims, demands, judgments, costs and expenses (including reasonable legal fees and expenses) (all of the foregoing, "Claims") which are caused by or arise out of (i) any breach or default in the performance by the Seller of any covenant or agreement made by the Seller in this Agreement or in any of the Related Documents; and (ii) any breach of warranty or representation made by the Seller in this Agreement or in any of the Related Documents; provided however, that (x) the Seller shall have no liability for any Claims until the aggregate amount of such claims exceeds $175,000, whereupon all Claims shall be indemnified from the first dollar, and (y) the Seller's maximum liability under this Section 7.2(a) shall not exceed twenty-five percent (25%) of the Purchase Price, excluding breaches of Sections 3.2, 3.12, 3.16, 3.20(b), 3.23 and 3.27 for which the limitation on the Seller's liability under this Section 7.2(a) shall be the Purchase Price. (b) The Purchaser agrees to indemnify and hold harmless the Seller, its Affiliates, each of their officers, directors, employees and agents and their respective successors and assigns, from and against any Claims (net of any related insurance proceeds) which are caused by or arise out of (i) any breach or default in the performance by it of any covenant or agreement made by it in this Agreement or in any of the Related Documents; (ii) any breach of warranty or representation made by it in this Agreement or in any of the Related Documents; provided, however, that (x) the Purchaser shall have no liability for any Claims until the aggregate amount of such claims exceeds $175,000, whereupon all Claims shall be indemnified from the first dollar, and (y) the Purchaser's maximum liability under this Section 7.2(b) shall not exceed the Purchase Price. Any indemnification Claims of 16 the Seller against the Purchaser pursuant to this Section 7.2(b) while the Note is outstanding shall be satisfied by reducing the Principal Sum (as defined in the Note) by the aggregate amount for which the Purchaser is determined to be liable under this Section 7.2(b) and Section 7.3, provided that Purchaser shall be fully liable (subject to the limitations set forth in this Section 7.2(b)) for such indemnification Claim(s) to the extent such a reduction in the Principal Sum is not available. (c) The indemnification provided in this Section shall be the parties' sole and exclusive remedy for any breach or default in the performance by either party of any covenant or agreement made in this Agreement or in any of the Related Documents and for any breach of warranty or representation made by the parties in this Agreement or in any of the Related Documents, but shall not be the parties' sole and exclusive remedy for fraud. 7.3 INDEMNITY PROCEDURE. The party or parties responsible to indemnify pursuant to Section 7.2 of this Agreement is referred to herein as the "Indemnifying Party" and the other party or parties claiming indemnity is referred to as the "Indemnified Party". An Indemnified Party under this Agreement shall, with respect to claims asserted against such party by any third party, give written notice to the Indemnifying Party of any liability which might give rise to a claim for indemnity under this Agreement within sixty (60) business days of the receipt of any written claim from any such third party, but not later than twenty (20) days prior to the date any answer or responsive pleading is due, and with respect to other matters for which the Indemnified Party may seek indemnification, give prompt written notice to the Indemnifying Party of any liability which might give rise to a claim for indemnity; provided, however, that any failure to give such notice will not waive any rights of the Indemnified Party except to the extent the rights of the Indemnifying Party are materially prejudiced. The Indemnified Party shall have the right to conduct and control, through counsel of its choosing, the defense, compromise or settlement of any third Person claim, action or suit against such Indemnified Party as to which indemnification will be sought by any Indemnified Party from any Indemnifying Party hereunder, and in any such case the Indemnifying Party shall cooperate in connection therewith and shall furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnified Party in connection therewith; provided, that the Indemnifying Party may participate, through counsel chosen by it and at its own expense, in the defense of any such claim, action or suit as to which the Indemnified Party has so elected to conduct and control the defense thereof; and provided, further, that the Indemnified Party shall not, without the written consent of the Indemnifying Party (which written consent shall not be unreasonably withheld), pay, compromise or settle any such claim, action or suit, except that no such consent shall be required if, following a written request from the Indemnified Party, the Indemnifying Party shall fail, within 14 days after the making of such request, to acknowledge and agree in writing that, if such claim, action or suit shall be adversely determined, such Indemnifying Party has an obligation to provide indemnification hereunder to such Indemnified Party. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay, settle or compromise any such claim, action or suit without such consent, provided, that in such event the Indemnified Party shall waive any right to indemnity therefor hereunder unless such consent is unreasonably withheld. The parties agree to cooperate in defending such third party claims and the Indemnified Party shall provide such cooperation and such access to its books, records and properties as the Indemnifying Party shall reasonably request with respect to any matter for which indemnification is sought hereunder; and the parties hereto agree to cooperate with each other in order to ensure the proper and adequate defense thereof. 17 With regard to claims of third parties for which indemnification is payable hereunder, such indemnification shall be paid by the Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment against the Indemnified Party and the expiration of any applicable appeal period, or if earlier, five (5) days prior to the date that the judgment creditor has the right to execute the judgment; (ii) the entry of an unappealable judgment or final appellate decision against the Indemnified Party; or (iii) a settlement of the claim. Notwithstanding the foregoing, the reasonable expenses of counsel to the Indemnified Party shall be reimbursed on a current basis by the Indemnifying Party if such expenses are required to be paid pursuant to this Agreement. With regard to other claims for which indemnification is payable hereunder, such indemnification shall be paid promptly by the Indemnifying Party upon demand by the Indemnified Party. 7.4 INDEPENDENT DIRECTOR(S) REQUIREMENT. In connection with any claim by the Purchaser for indemnification, no material decision of the Seller, and no payment of any indemnification amount to Purchaser, shall be made without the prior written consent or approval of a majority of the Seller's Independent Directors. ARTICLE VIII MISCELLANEOUS 8.1 FURTHER ASSURANCES. After the Closing, each party agrees to cooperate fully with the other party and to execute such further instruments, documents and agreements and to give such further written assurances as may be reasonably requested by the other party to better evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement, including taking all actions, and promptly doing, or causing to be done, all things necessary, proper or advisable under applicable law to make effective the transactions contemplated hereby, for the purpose of securing to the parties hereto the benefits contemplated by this Agreement. 8.2 FEES AND EXPENSES. The Seller shall pay or reimburse fifty percent of all reasonable and documented out of pocket expenses incurred by the Purchaser and Kanders & Company, Inc. since April 9, 2004 through the Closing Date in connection with the consummation of the transaction contemplated by this Agreement, including, but not limited to, the review, analysis and due diligence examination of the Seller, travel expenses, banking fees and expenses, and the fees and expenses of accountants, financial advisors, attorneys and other advisors (inclusive of the finder's fee in the amount of $100,000 payable to an unaffiliated third party), up to a maximum amount for such reimbursement payment of $125,000. Such expenses reimbursement may, upon the written direction of the Seller, be paid out of the funds due from the Purchaser at the Closing. 8.3 NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a business day or later than 5:00 p.m. (New York City time) on any business day, or (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service such as Federal Express. The address for such notices and communications shall be as follows: 18
If to the Purchaser, to: If to the Seller, to: Olden Acquisition LLC Net Perceptions, Inc. 1 Pickwick Plaza 7700 France Avenue South Greenwich, Connecticut 06830 Edina, Minnesota 55435 Att'n: Mr. Warren B. Kanders Att'n: President Fax: 203-552-9607 Fax: 952-842-5005 With a copy in each case to: With a copy in each case to: Kane Kessler, P.C. Skadden, Arps, Slate, Meagher & Flom LLP 1350 Avenue of the Americas - 26th Floor One Beacon Street New York, New York 10019 31st Floor Att'n: Robert L. Lawrence, Esq. Boston, MA 02108 Fax No.: (212) 245-3009 Att'n: Kent A. Coit Fax: 617-573-4822
Unless otherwise stated above, such communications shall be effective when they are received by the addressee thereof in conformity with this Section. Any party may change its address for such communications by giving notice thereof to the other parties in conformity with this Section. 8.4 GOVERNING LAW. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and enforced in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law thereof that would require the application of any other law. 8.5 JURISDICTION AND VENUE. This Agreement shall be subject to the exclusive jurisdiction of the Federal and State Courts located in New York County, New York. The parties to this Agreement agree that any breach of any term or condition of this Agreement shall be deemed to be a breach occurring in the State of New York by virtue of a failure to perform an act required to be performed in the State of New York and irrevocably and expressly agree to submit to the jurisdiction of the Federal District Court, Southern District of New York and if such court does not have proper jurisdiction, the State Courts of New York County, New York for the purpose of resolving any disputes among the parties relating to this Agreement or the transactions contemplated hereby. The parties irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement, or any judgment entered by any court in respect hereof brought in New York County, New York, and further irrevocably waive any claim that any suit, action or proceeding brought in Federal or State Courts located in New York County, New York has been brought in an inconvenient forum. 8.6 SUCCESSORS AND ASSIGNS. This Agreement is personal to each of the parties and may not be assigned without the written consent of the other parties; provided, however, that the Purchaser shall be permitted to assign its rights under this Agreement to any permitted transferee of the Purchaser to whom it assigns or transfers the Note, to the extent provided in Section 1.2 hereof. 8.7 SEVERABILITY. If any provision of this Agreement, or the application thereof, shall for any reason or to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances shall continue in full force and effect and in no way be affected, impaired or invalidated. 19 8.8 ENTIRE AGREEMENT. This Agreement and the other agreements and instruments referenced herein constitute the entire understanding and agreement of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings. 8.9 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the Seller and Purchaser; provided that any such writing by Seller may be signed by Seller only if such writing has been approved by a majority of Seller's Independent Directors. The waiver by a party of any breach hereof or default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. 8.10 NO WAIVER. The failure of any party to enforce any of the provisions hereof shall not be construed to be a waiver of the right of such party thereafter to enforce such provisions. 8.11 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. For purposes of this Agreement, the term "knowledge," when used in reference to a corporation means the knowledge of the executive officers of such corporation assuming such officers shall have made inquiry that is customary and appropriate under the circumstances to which reference is made, and when used in reference to an individual means the knowledge of such individual assuming the individual shall have made inquiry that is customary and appropriate under the circumstances to which reference is made. 8.12 COUNTERPARTS; FACSIMILE. This Agreement may be executed in counterparts, each of which shall be an original and which together shall constitute one and the same instrument. This Agreement shall become binding when counterparts hereof, individually or taken together, shall bear the signatures of the parties reflected hereon as signatories. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 8.13 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this Agreement is intended, or shall be construed, to confer upon or give any person other than the parties hereto and their respective heirs, personal representatives, legal representatives, successors and permitted assigns, any rights or remedies under or by reason of this Agreement, other than Section 7.2 (which is intended to be for the benefit of the persons covered thereby). [SIGNATURE PAGES FOLLOW:] 20 IN WITNESS WHEREOF, the parties hereto have executed this Convertible Note Purchase Agreement as of the date first above written.
OLDEN ACQUISITION LLC, a Delaware limited NET PERCEPTIONS, INC., a Delaware corporation liability company By: /s/ Warren B. Kanders By: /s/ Thomas Donnelly ----------------------------- ----------------------------- Name: Warren B. Kanders Name: Thomas Donnelly Title: Manager Title: President and CFO
EX-99.3 4 file004.txt CONVERTIBLE SUBORDINATED NOTE THIS CONVERTIBLE SUBORDINATED NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS CONVERTIBLE SUBORDINATED NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THIS CONVERTIBLE NOTE IS NOT TRANSFERABLE OR ASSIGNABLE EXCEPT AS SPECIFIED IN THE CONVERTIBLE NOTE PURCHASE AGREEMENT REFERRED TO HEREIN. NET PERCEPTIONS, INC. 2% CONVERTIBLE SUBORDINATED NOTE DUE APRIL 21, 2014 Edina, Minnesota Issue Date: April 21, 2004 FOR VALUE RECEIVED, the undersigned, NET PERCEPTIONS, INC. (the "Company"), a Delaware corporation, hereby promises to pay to OLDEN ACQUISITION LLC, a Delaware limited liability company, or registered permitted assigns (the "Holder"), the principal sum of Two Million Five-Hundred And Thirty-Two Thousand Seven Hundred And Thirty-Five Dollars ($2,532,735) (the "Principal Sum") on April 21, 2014 (the "Maturity Date," which term includes any accelerated due date as hereinafter provided), with interest (computed on the basis of a 360-day year of twelve 30-day months and compounded semi-annually) on the unpaid balance of the Principal Sum from Issue Date at the interest rate of 2% per annum, accruing semi-annually on the last day of June and December in each year, commencing on June 30, 2004, which interest shall be payable, together with the Principal Sum, in full on the Maturity Date, whether at the stated maturity as aforesaid or by acceleration or otherwise. Notwithstanding the foregoing, accrued but unpaid interest with respect to any portion of the Principal Sum which is converted into Common Stock as provided in Section 4 hereof shall not be paid and shall be cancelled as provided in such Section. In addition, the Principal Sum shall be automatically reduced (x) by the amount of any indemnification payment(s) made by the Company in respect of indemnification Claims (as defined in Section 7.2(a) of the Purchase Agreement (as defined below)) pursuant to Section 7.2(a) of the Purchase Agreement and/or (y) by the aggregate amount for which the Purchaser is determined to be liable under Section 7.2(b) and Section 7.3 of the Purchase Agreement for any indemnification Claims made by the Company pursuant to Section 7.2(b) of the Purchase AGREEMENT. 1. Payments. Payments of principal and interest shall be made in lawful money of the United States of America at the principal office of the Company in Edina, Minnesota, or at such other place as the Company shall have designated for such purpose to the Holder in writing and may be paid by check mailed, or wire transfer as provided in the Purchase Agreement referred to below, to the registered address designated by the Holder for such purpose. 2. Purchase Agreement. This Note is issued pursuant to a certain Note Purchase Agreement (hereinafter called the "Purchase Agreement") dated as of the Issue Date between the Company and the Holder. This Note is subject to the provisions of, and the Holder is entitled to the benefits of, the Purchase Agreement. The term "Note" as used herein refers only to the notes issued pursuant to the Purchase Agreement, including any note(s) issued upon conversion of less than all the Principal Sum of this Note, note(s) issued in substitution for this Note as provided in Section 1.1(c) of the Purchase Agreement and note(s) issued to any lawful successor or permitted assignee of the Holder in accordance with the Purchase Agreement. Capitalized terms used but not otherwise defined herein shall have their respective meanings as set forth in the Purchase Agreement. 3. Transfer. This Note is transferable only as provided in Section 1.2 of the Purchase Agreement. Notwithstanding the foregoing, however, this Note is registered with the Company as to both principal and interest, and any permitted transfer of this Note may be effected only by surrender of this Note and either reissuance by the Company of this Note or by issuance by the Company of a new Note. The Company shall maintain a register for the registration and transfer of this Note (the "Schedule"), containing the name and address of any holder(s) of this Note. 4. Conversion. (a) General. (i) On or after April 21, 2005, and prior to the Maturity Date or, if sooner, the Call Date (as hereinafter defined), the Holder shall have the right, at the option of the Holder, subject to the terms and provisions of this Section 4, to convert all or any lesser portion of the Principal Sum of the Note held by such Holder into the number of fully paid and nonassessable shares of Common Stock as shall be equal to the aggregate Principal Sum of Notes then being converted divided by the Conversion Price then in effect; provided, however, that such right of conversion shall be exercisable by Holder at any time on or after the date hereof if (i) there has been any call of the Notes by the Company in accordance with Section 5 hereof, (ii) any person or entity commences a tender offer within the meaning of Rule 14d-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, for percent (20%) or more of the Company's outstanding voting securities, which is not recommended by the Company's Board of Directors or otherwise acquires twenty percent (20%) or more of the outstanding Common Stock, (iii) if, in connection with a meeting of stockholders, a proposal to be voted upon by the Company's stockholders has been made in compliance with law or the Company's bylaws but has not been approved by the Company's board of directors, or (iv) a person has been nominated for election to the Company's board of directors in compliance with law or the Company's bylaws and such nomination has not been approved by the Company's board of directors. Such right of conversion shall be exercised by the Holder's delivery of the Notes to the Company at the office of the Company together with a notice signed by the Holder setting forth the amount of the Principal Sum to be converted; provided, however, that the Holder shall exercise its rights with respect to partial conversions as herein described in multiples of Five Thousand and 00/100 ($5,000.00) Dollars of the Principal Sum of Notes; provided, further, that the Company shall not be required to issue any fractional shares in connection with any conversion pursuant to this Note. If the Holder elects to convert less than the entire aggregate Principal Sum outstanding of the Note, the Company shall, or shall direct its transfer agent to, issue to the Holder certificates for the shares of Common Stock for which such Note is being converted, in such denominations as are requested for delivery to the Holder, and the Company shall, or shall direct its transfer agent to, thereupon deliver such certificates to or in 2 accordance with the instructions of the Holder, and the Company shall issue to the Holder a new Note, duly executed by the Company, in form and substance identical to the Note surrendered by the Holder, for the balance of the aggregate Principal Sum of Note that has not been so converted. (ii) As of the date hereof, the Conversion Price is $0.45 per share of Common Stock, which is the price determined by multiplying the average closing selling price per share of Common Stock for the twenty (20) consecutive trading days ending on the fifth trading day prior to the Issue Date by 1.1. The Conversion Price shall be adjusted hereafter in accordance with the provisions of paragraph (d) below. (b) Delivery of Stock Certificates; Time Conversion Effective; No Adjustment for Interest or Dividends. (i) As promptly as practicable after the surrender (as herein provided) of a Note for conversion, the Company shall deliver or cause to be delivered to or upon the written order of the holder of the Note so surrendered, certificates representing the number of fully paid and nonassessable shares of Common Stock into which the Note has been converted. Subject to the further provisions of this paragraph (b), such conversion shall be deemed to have been made at the close of business on the date that such Note shall have been surrendered for conversion at the office of the Company as provided in paragraph 4(a) (the "Conversion Date"), so that the rights of the Holder as a holder of this Note, to the extent of the amount of the Principal Sum so converted, shall cease at such time, and the person or persons entitled to receive any of the shares of Common Stock upon conversion of the Notes shall be treated for all purposes as having become the record holder or holders of such shares of Common Stock at such time; provided, however, that no such surrender on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open or the Company is required to convert Notes. The Company will, at the time of such conversion, upon request of the Holder, acknowledge in writing its continuing obligation to the Holder in respect of any rights (including, without limitation, any right of registration of the shares of Common Stock issued upon such conversion) to which such Holder shall continue to be entitled under this Note and/or the Purchase Agreement after such conversion, provided, that the failure of the Holder to make any such requests or the failure or refusal of the Company to so acknowledge shall not affect the continuing obligation of the Company to such Holder in respect of such rights. (ii) If the day for the exercise of the conversion right shall not be a business day, then such conversion right will automatically be deemed to be effective on the next succeeding day which is a business day. (iii) No adjustment or payment in respect of interest or cash dividends shall be made upon conversion of any Note. All unpaid interest on any Note, to the extent such Note is converted, which has accrued to and including the date upon which such conversion is deemed to have been effected in accordance with this Section 4.2, shall automatically be cancelled. 3 (iv) Each of the certificates representing shares of Common Stock issued upon conversion of a Note shall be subject to stop transfer instructions against the transfer of legended certificates representing such shares and shall bear a legend substantially as follows: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred or otherwise disposed of unless they have been registered under such Act or pursuant to an exemption from registration under such Act." (c) Notice to Holders of Election. Upon the Company's receipt of an election to convert from a Holder pursuant hereto, the Company shall, as soon as practicable, notify the other Holders, if any, of the other outstanding Notes of such election. (d) Adjustment of Conversion Price. The Conversion Price as of the Issue Date shall be subject to adjustment as follows: (i) In case the Company, after the Issue Date, shall (A) pay a stock dividend or make a distribution in shares of its capital stock (whether shares of its Common Stock or of capital stock of any other class), (B) subdivide its outstanding shares of Common Stock, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, the Conversion Price in effect immediately prior to such action shall be adjusted so that the holder of a Note thereafter surrendered for conversion shall be entitled to receive an equivalent number of shares of capital stock of the Company which he would have owned immediately following such action had such Note been converted immediately prior thereto. Any adjustment made pursuant to this subsection (i) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (ii) In case the Company, after the Issue Date, shall distribute to all holders of its outstanding Common Stock any shares of capital stock (other than Common Stock), evidences of its indebtedness or assets (including securities and cash, but excluding any cash dividend paid out of current or retained earnings of the Company and dividends or distributions payable in stock for which adjustment is made pursuant to subparagraph (d)(i)) or warrants, options or rights to subscribe for or purchase securities of the Company, then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date of such distribution by a fraction of which the numerator shall be the Conversion Price then in effect less the fair market value on such record date (as determined in good faith by the Board of Directors of the Company, with the concurrence of a majority of Independent Directors, which determination shall be conclusive) of the portion of the capital stock or the evidences of indebtedness or the assets so distributed to the holder of one share of Common Stock or of such warrants, options or subscription rights applicable to one share of Common Stock and of which the denominator shall be the Conversion Price then in effect. Such adjustment shall become effective immediately after the record date for the determination of stockholders entitled to 4 receive such distribution. If at the end of the period during which warrants, options or rights described in this subparagraph (d)(ii) are exercisable not all such warrants, options or rights shall have been exercised, the adjusted Conversion Price shall be immediately readjusted to what it would have been based on the number of warrants, options or rights actually exercised. Notwithstanding anything in this subparagraph(d)(ii) to the contrary, with respect to any warrants, options or rights covered by this subparagraph(d)(ii), if such warrants, options or rights are only exercisable upon the occurrence of certain triggering events, then for purposes of this subparagraph (d)(ii), such warrants, options or rights shall not be deemed issued or distributed, and any adjustment to the Conversion Price required by this subparagraph (d)(ii) shall not be made until such triggering events occur and such warrants, options or rights become exercisable. (iii) In case the Company, after the Issue Date, shall issue shares of its Common Stock pursuant to the exercise of those rights (including conversion rights), warrants, options, shares of capital stock convertible into Common Stock or evidences of its indebtedness convertible into Common Stock, any of which were outstanding immediately prior to the Issue Date ("Convertible Securities") at a price per share less than the Conversion Price in effect on the date the Company issues such Common Stock, the Conversion Price shall be reduced immediately thereafter so that it shall equal the price determined by multiplying such Conversion Price in effect immediately prior thereto by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate consideration, if any, received by the Company upon such issuance would purchase at the Conversion Price then in effect, and the denominator shall be the number of shares of Common Stock that would be outstanding immediately after the issuance of such additional shares. Such adjustments shall be made successively whenever such an issuance is made. (iv) In any case in which this Section 4 shall require that an adjustment be made immediately following a record date or an effective date, the Company may elect to defer (but only until five (5) business days following the mailing by the Company to the Holders of Notes of the certificate required by subparagraph (d)(vi)) issuing to the holder of any Note converted after such record date or effective date the shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the Conversion Price prior to adjustment, and paying to such holder any amount of cash in lieu of a fractional share. (v) No adjustment in the Conversion Price shall be required to be made unless such adjustment would require an increase or decrease of at least one percent (1%) in such price; provided, however, that any adjustments which by reason of this subparagraph (d)(v) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 4 shall be made and rounded to the nearest whole cent or share, as applicable. (vi) Whenever the Conversion Price is adjusted as provided in Section 4(d) herein, the Company will promptly mail to the Holders of the Notes, a certificate of the Company's Treasurer or Chief Financial Officer setting forth the Conversion Price as so adjusted and a brief statement of facts accounting for such adjustment. 5 (vii) Irrespective of any adjustment in the Conversion Price and the number of shares of Common Stock into which the Notes are convertible as a result of such adjustment, the Notes theretofore and thereafter issued may continue to express the Conversion Price per share of Common Stock and the number of shares of Common Stock into which the Notes are convertible as the Conversion Price per share of Common Stock and the number of shares of Common Stock into which the Notes are convertible as expressed upon the Notes when initially issued. (e) Company's Consolidation or Merger. If the Company shall at any time consolidate or merge with or into another corporation, the Holder of a Note shall thereafter be entitled to receive, upon the conversion thereof, the securities or property to which a holder of the number of shares of Common Stock then deliverable upon the conversion thereof would have been entitled upon such consolidation or merger, and the Company shall take such steps in connection with such consolidation or merger as may be reasonably necessary to assure the Holder that the provisions of this Note, the Purchase Agreement and the Registration Rights Agreement shall thereafter be applicable, as nearly as reasonably may be in relation to any securities or property thereafter deliverable upon the conversion of the Note including, but not limited to, obtaining a written acknowledgment from the continuing corporation or other appropriate corporation of its obligation to supply such securities or property upon such conversion. (f) Reserve of Sufficient Shares. The Company will reserve and keep available a sufficient number of shares of its Common Stock to satisfy the conversion requirements of all outstanding Notes. The Company will take all such action as may be necessary such that all shares of Common Stock issued upon conversion of the Notes will be duly and validly authorized and issued and fully paid and nonassessable. (g) Taxes on Conversion. The issuance of certificates for shares of Common Stock upon the conversion of Notes shall be made without charge to the holders of Notes converting such Notes for any issue or stamp tax in respect of the issuance of such certificates, and such certificates shall be issued in the respective names of, or in such names as may be directed by, the holders of the Notes converted; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the named holder of the Note, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (h) Cancellation of Converted Notes. All Notes which have been converted shall be cancelled by the Company to the extent of the Principal Sum converted, and no Notes shall be issued in lieu thereof. (i) Notice to Holders of Notes. In case at any time: (i) the Company shall take any action which would require an adjustment in the Conversion Price pursuant to paragraph (d); or 6 (ii) there shall be any capital reorganization or reclassification of the Common Stock (other than a change in par value or from par value to no par value or from no par value to par value of the Common Stock), whether or not such reorganization or reclassification results in an adjustment in the Conversion Price, or any consolidation or merger to which the Company and its Subsidiaries is a party and for which approval of any stockholders of the Company is required; or (iii) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, in any one or more of said cases, the Company shall give written notice to the Holders of the Notes, not less than fifteen (15) days before any record date for, or the expected effectiveness of, such action, reorganization, reclassification, consolidation, merger, dissolution, liquidation or winding up, as the case may be. Such notice shall also set forth such facts as shall indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the current Conversion Price and the kind and amount of the shares of Common Stock or other securities or property deliverable upon conversion of the Notes. Such notice shall, if applicable, also specify the date as of which the holders of the Common Stock of record shall be entitled to exchange their Common Stock for securities or other property deliverable upon such action, reorganization, reclassification, sale, consolidation, merger, dissolution, liquidation or winding up, as the case may be (on which date, in the event of voluntary or involuntary dissolution, liquidation or winding up of the Company, the right to convert the Notes into shares of Common Stock shall terminate). Without limiting the obligation of the Company to provide notice to the Holders of Notes or shares of Common Stock of corporate action hereunder, it is agreed that failure of the Company to give such notice shall not invalidate such corporate action of the Company. 5. Call Of Notes By The Company. (a) The Company shall not, directly or indirectly, call for redemption, redeem, prepay, repurchase, or otherwise acquire (any such event referred to herein as a "call") any Notes or any portion thereof except as set forth in this Section 5. (b) Optional Conversion or Redemption Upon Call by the Company. (i) Company Election. The Company may, at its option, call the Notes, either in whole or in part on a pro-rata basis, at a price equal to the outstanding Principal Sum of, plus accrued but unpaid interest on, the Notes as of the date immediately prior to the date of payment of such Principal Sum plus interest pursuant to such call (the "Call Price"), only if: (A) the closing price of the Company's Common Stock on a national securities exchange, the NASDAQ National Market, the Nasdaq SmallCap Market or the OTC Bulletin Board shall be equal to or in excess of 150% of the Conversion Price, for at least twenty (20) consecutive 7 trading days prior to the Call Notice Date (as hereinafter defined); and (B) for a period of at least thirty (30) days following the Call Notice Date, the Holders of the Notes shall be entitled to exercise their conversion rights under Section 4 hereof. (ii) Holder Option. In the event of a call by the Company pursuant to this Section 5, the Holders, at their option, may for a period of thirty (30) days following the Call Notice Date require the Company to convert their Notes into fully paid and nonassessable shares of the Company's Common Stock at the Conversion Price (the "Holder's Option"). (iii) Notice of Call. The right of the Company to call any Notes pursuant to this Section 5 shall be conditioned upon the Company's giving notice of such call (the "Call Notice", and the date the Call Notice is given being referred to as the "Call Notice Date"), by personal delivery, overnight courier, certified mail or by facsimile, signed by an authorized officer, to the Holders of Notes, not less than thirty (30) days prior to the date upon which the call is to be effective (the "Call Effective Date"). The Call Notice shall be irrevocable and shall specify (A) the Call Price and (B) the Call Effective Date, which may not be less than 30 days after the Call Notice Date. Within thirty (30) days after the Call Notice Date, each Holder severally shall notify the Company, by personal delivery, overnight courier, certified mail or by facsimile, signed by the Holder, whether such Holder wishes such Holder's Notes to be converted pursuant to paragraph 5(b)(ii) hereof or redeemed in accordance with this Section 5. If a Holder fails to respond in the manner provided herein to the Call Notice on or before the Call Effective Date, the Holder's right to require conversion of such Holder's Note, to the extent such Note has been called in accordance with this Section 5, shall become void and of no further effect, and the Company shall redeem such Holder's Notes at the Call Price as provided in Section 5(b)(i). (c) Partial Call. In the event of a partial call by the Company pursuant to this Section 5, the aggregate Call Price shall be allocated among the Notes as to which the Call Price is being paid as provided herein, in proportion, as nearly as practicable, to the respective Call Prices for such Notes. (d) Surrender of Notes Upon Call. In the event that any Notes shall be surrendered to the Company upon conversion as provided in this Section 5, interest shall cease to accrue upon such Notes so surrendered and any previously accrued and unpaid interest shall be cancelled upon such surrender and conversion as provided in Section 4(b)(iii). 6. Subordination. (a) Agreement to Be Bound. The Company covenants and agrees, and each Holder of Notes, by the Holder's acceptance hereof, likewise covenants and agrees, that the Notes shall be issued subject to the provisions contained in this Section 6; and each person holding any Notes, whether upon original issue or upon transfer or assignment thereof, accepts 8 and agrees to be bound by such provisions for the benefit of any holder of any Senior Indebtedness. (b) Subordination. All Notes shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness (as defined herein). Except as set forth in the first sentence of Section 6(i) hereof, the Notes shall be pari passu in right of payment to the Company's trade creditors and general unsecured creditors. (c) Priority of Senior Indebtedness. (i) No payment on account of the Principal Sum or interest on the Notes shall be made, nor shall any assets be applied to the purchase or other acquisition or retirement of the Notes, if, at the time of such payment or application or immediately after giving effect thereto, there shall exist a default in the payment of any amount due on any Senior Indebtedness. Within ten (10) business days after becoming aware of any such default referred to in this paragraph 6(c), the Company shall provide written notice thereof to each holder of the Notes. (ii) If there shall have occurred an event of default (other than a default in the payment of any amount due) with respect to any issue of Senior Indebtedness, or in the instrument under which the same has been issued, permitting the holders thereof, whether or not after notice or lapse of time, or both, to accelerate the maturity thereof, then, unless and until such event of default shall have been cured or waived or shall have ceased to exist, no payment on account of principal or interest on the Notes shall be made, nor shall any assets be applied to the redemption or other acquisition or retirement of the Notes until the earliest to occur of (A) the date on which the Senior Indebtedness to which such event of default relates is discharged in accordance with its terms, or (B) the date such event of default is waived by the holders of such Senior Indebtedness or otherwise cured. Within ten (10) business days after becoming aware of any event of default referred to in this paragraph 6(c)(ii), the Company shall provide written notice thereof to each holder of the Notes. (iii) Upon (A) the occurrence and during the continuance of any Event of Default under this Note, or (B) the occurrence of an event described in paragraphs (6(c)(i) or (ii) which gives rise to the non-payment of principal or interest due on the Notes, and notwithstanding any other provision contained herein or in the Notes to the contrary, each Holder hereby agrees, for the benefit of the holders of Senior Indebtedness, not to ask for, demand, sue for, take or receive, including by way of set off, any amount owing under the Notes or exercise any remedy (whether pursuant hereto, including, without limitation, acceleration of the Notes, at law, in equity or otherwise) with respect thereto (1) in the case of clause (A), until the earliest of (x) 60 days after the occurrence of such Event of Default or (y) any voluntary or involuntary petition in bankruptcy filed by or against the Company that has not been dismissed and (2) if clause (B) is applicable (even if and whether or not clause (A) is applicable), until the earliest to occur of (x) the date on which the Senior Indebtedness to which such event of default related is discharged in accordance with its terms or (y) such event of default is waived by the holders of such Senior Indebtedness or otherwise cured. Within ten (10) business days after becoming aware of any Event of Default under this Note, the Company shall provide written notice thereof to the holders of Senior Indebtedness in the manner and at the addresses specified in the documents and/or agreements evidencing the applicable Senior Indebtedness. 9 (d) Acceleration of Notes; Insolvency. Upon (i) any acceleration of the principal amount due on the Notes or Senior Indebtedness or (ii) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full, or payment thereof duly provided for, to the full satisfaction of the holders of Senior Indebtedness before the holders of the Notes shall be entitled to receive or retain any assets so paid or distributed in respect thereof; and upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Notes would be entitled, except for these provisions, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the holders of the Notes if received by them or it, as the case may be, directly to the holders of Senior Indebtedness, to the extent necessary to pay all such Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness before any payment or distribution is made to the holders of the Notes, except that the holders of Senior Indebtedness of the type described in clause (i) of the definition of Senior Indebtedness shall be entitled to receive payment in full of such Senior Indebtedness (or provisions satisfactory to the holders of such Senior Indebtedness shall be made for such payment) before the holders of other types of Senior Indebtedness shall be entitled to receive payment on such other Senior Indebtedness. Nothing contained in this Section 5(d) or any other provision of this Note shall be construed to limit Holder's right to convert the Note in full in accordance with Sections 4(a) and (b) of this Note, notwithstanding the occurrence and continuance of any Event of Default (as defined below). (e) Payments in Trust. In the event that, notwithstanding the provisions of Sections 6(c) and 6(d), any payment or distribution of assets of the Company prohibited by such Sections shall be received by the Holders of the Notes before all Senior Indebtedness is paid in full, or provision made for such payment, to the full satisfaction of the holders of Senior Indebtedness, in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. All payments applied to Senior Indebtedness pursuant to this paragraph shall be allocated among the holders of Senior Indebtedness in accordance with the provisions of Section 6(d). (f) Subrogation, Etc. Upon payment in full of all Senior Indebtedness, the Holders of Notes shall be subrogated to the rights of the holders of Senior Indebtedness, pro rata in proportion to the respective amounts then owing to the Holders of Notes; and for purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the holders of Notes would be entitled except for the provisions of this Section 6, and no payment over pursuant to such 10 provisions to the holders of Senior Indebtedness, shall, as between the Company and its creditors (other than the Holders of Notes and the holders of the Senior Indebtedness), be deemed to be a payment by the Company to or on account of Senior Indebtedness, it being understood that the provisions of this Section 6 are and are intended solely for the purpose of defining the relative rights of the holders of Notes on the one hand and the holders of Senior Indebtedness on the other hand. Any holder of Senior Indebtedness may amend, modify and otherwise deal with Senior Indebtedness without any notice to or approval of any holder of indebtedness ranking junior to Senior Indebtedness (including, without limitation, the Holders of any Notes). (g) Enforcement. The foregoing subordination provisions shall be for the benefit of the holders of Senior Indebtedness and may be enforced directly by such holders against the Holders of the Notes. Each Holder of Notes by its acceptance thereof shall be deemed to acknowledge and agree that the subordination provisions of this Section 6 are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and each holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. (h) Certificate of receiver, et al. Upon any payment or distribution of assets of the Company, the Holders of the Notes shall be entitled to rely upon a certificate of the receiver, trustee in bankruptcy, liquidation trustee, Company, agent or other person making such payment or distribution, delivered to the Holders of the Notes, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertaining thereto or to the provisions of this Section 6. (i) Obligations Unimpaired. Nothing contained in this Section 6 or elsewhere in this Note is intended to or shall impair as between the Company and its creditors other than the holders of Senior Indebtedness and the Holders of the Notes, the obligation of the Company, which shall be absolute and unconditional, to pay the holders of the Notes the principal of and interest on the Notes as and when the same shall become due and payable in accordance with the terms thereof, or, except as provided in the second sentence of Section 6(b), affect the relative rights of the Holders of the Notes and other creditors of the Company other than the holders of Senior Indebtedness. Without limitation of the second sentence of Section 6(b), nothing contained in this Section 6 or elsewhere in this Note shall prevent the Company from making payment of the principal of or interest on the Notes at any time except under the conditions described in Section 6(c) or 6(d) or during the pendency of any dissolution, winding up, liquidation or reorganization of the Company. (j) Definition of Senior Indebtedness. The term "Senior Indebtedness" shall mean the principal and interest on (i) all indebtedness of the Company and its Subsidiaries for money borrowed from time to time, including that owing to banks or other financial institutions, an agency or agencies of the federal government or other institutions engaged in the business of lending money, (ii) all capital leases of the Company and its Subsidiaries, (iii) 11 obligations of the Company for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, and (iv) any deferrals, renewals and extensions of any indebtedness described in clauses (i) through (iii) above, unless under the express provisions of the instrument creating or evidencing any such indebtedness, or pursuant to which the same is outstanding, such indebtedness is not superior in right of payment to the Notes; provided, however, that Senior Indebtedness shall not include indebtedness owed or owing to any Subsidiary or any officer, director or employee of the Company or any Subsidiary. 7. Events of Default; Acceleration of Maturity Date. If any of the following events (herein called an "Event of Default") shall occur and be continuing: (a) If the Company shall default in the payment of any part of the Principal Sum of or interest on any Note when the same shall become due and payable, whether at maturity or by acceleration in accordance with the terms hereof; or (b) If the Company shall (1) make an assignment for the benefit of creditors; (2) admit in writing its inability to pay its debts; (3) suffer the appointment of a receiver or trustee for it or substantially all of its assets and, if appointed without its consent, not to be discharged or stayed within sixty (60) days; (4) suffer proceedings under any law relating to bankruptcy, insolvency or the reorganization or relief of debtors to be instituted by or against it, and, if contested by it, not to be dismissed or stayed within sixty (60) days; or (5) fail generally to pay its debts as they become due; then and in each such event the Holders of twenty-five (25%) percent or more in aggregate principal amount of the Notes then outstanding may at any time (unless all defaults shall theretofore have been remedied) at its or their option, by written notice or notices to the Company, declare all the Notes to be due and payable, whereupon the same shall forthwith mature and become due and payable, together with all interest accrued thereon, without presentment, demand, protest or notice, all of which are hereby waived; provided, however, that this provision is subject to the condition that if, at any time after the principal of the Notes shall so become due and payable, any arrears of principal and interest on the Notes (with interest at the rate specified in the Notes on any overdue principal and, to the extent legally enforceable, on any interest overdue) shall be paid by or for the account of the Company, then the holder or holders of at least fifty-one percent (51%) in aggregate principal amount of the Notes then outstanding, by written notice or notices to the Company, may waive such Event of Default and its consequences (other than non-payment of any portion of the Principal Sum or interest) and rescind or annul such declaration, but no such waiver shall extend to or affect any subsequent Event of Default or impair any right resulting therefrom; provided, further, that notwithstanding the foregoing, if there shall occur an Event of Default under clause (b) above, then the Notes, together with all interest accrued thereon, shall immediately mature and become due and payable, without the necessity of any action by the Holders or notice to the Company. If any Holder of a Note shall give any notice or take any other action with respect to a claimed default, the Company, forthwith upon receipt of such notice or obtaining knowledge of such other action, will give written notice thereof to all other holders of the Notes then outstanding, describing such notice or other action and the nature of the claimed default. Nothing herein shall preclude any Holder (including any Holder who has elected to accelerate the Maturity Date of the Notes) from 12 electing, in such Holder's discretion, to convert all or any lesser portion of the Principal Sum at any time prior to payment in full thereof. 8. Absolute Obligation. Subject to Section 6 hereof, no reference herein to the Purchase Agreement and no provision hereof or thereof, shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the Principal Sum and interest thereon at the respective times and places set forth herein. 9. Governing Law. This Note is delivered in and shall be construed and enforced in accordance with and governed by the laws of the State of New York, without giving effect to any conflict of laws rule which would result in the application of any laws other than those of the State of New York. 10. Successors and Assigns. The Company may treat the person in whose name this Note is registered as the owner and holder of this Note for the purpose of receiving payment of principal and interest on this Note and for all other purposes whatsoever, and the Company shall not be affected by any notice to the contrary. 11. No Third Party Beneficiary. Nothing expressed or implied in this Note is intended, or shall be construed, to confer upon or give any person other than the Company and the Holders and their respective heirs, personal representatives, legal representatives, successors and permitted assigns, any rights or remedies under or by reason of this Note. [SIGNATURE PAGE FOLLOWS:] 13 IN WITNESS WHEREOF, NET PERCEPTIONS, INC. has caused this Convertible Subordinated Note to be dated, and to be executed on its behalf by its officer thereunto duly authorized. NET PERCEPTIONS, INC. By: /s/ Thomas Donnelly ------------------------------- Name: Thomas Donnelly Title: President and CFO EX-99.4 5 file005.txt REGISTRATION RIGHTS AGREEEMENT REGISTRATION RIGHTS AGREEMENT ----------------------------- This Registration Rights Agreement (this "Agreement") is made and entered into as of April 21, 2004, among Net Perceptions, Inc., a Delaware corporation (the "Company"), and Olden Acquisition LLC, a Delaware limited liability company (the "Purchaser"). WITNESSETH: WHEREAS, the parties hereto are parties to a certain Convertible Note Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"); WHEREAS, pursuant to the terms of the Purchase Agreement, the Purchaser is purchasing from the Company a 2% Convertible Subordinated Promissory Note (the "Note"), which is convertible into up to 5,628,300 shares of the Seller's common stock, $0.0001 par value per share (the "Common Stock"), such number of shares constituting 19.9% of the number of shares of Common Stock outstanding as of the Closing Date. NOW, THEREFORE, in consideration of the mutual promises and representations, warranties, covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have the meaning set forth in Section 3(m). "Affiliate" means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" shall have the meaning set forth in the Preamble. "Blackout Period" shall have the meaning set forth in Section 3(n). "Board" shall have the meaning set forth in Section 3(n). "Business Day" means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the state of New York generally are authorized or required by law or other government actions to close. 1 "Commission" means the Securities and Exchange Commission. "Common Stock" shall have the meaning set forth in the second "WHEREAS" clause. "Company" shall have the meaning set forth in the Preamble. "Effectiveness Period" shall have the meaning set forth in Section 2. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Filing Date" means the 45th day following the receipt by the Company of the written request of the Holders holding a majority of the outstanding Registrable Securities that the Registrable Securities be registered under the Securities Act. "Holder" or "Holders" means the holder or holders, as the case may be, from time to time of Registrable Securities, including without limitation the Purchaser and its assignees. "Indemnified Party" shall have the meaning set forth in Section 5(c). "Indemnifying Party" shall have the meaning set forth in Section 5(c). "Losses" shall have the meaning set forth in Section 5(a). "NASDAQ" shall mean the National Association of Securities Dealers Automatic Quotation System. "Note" shall have the meaning set forth in the second "WHEREAS" clause. "Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "Prospectus" means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus. 2 "Purchase Agreement" shall have the meaning set forth in the first "WHEREAS" clause. "Purchaser" shall have the meaning set forth in the Preamble. "Registrable Securities" means (i) the shares of Common Stock issued or issuable upon conversion of the Note and (ii) any other securities (whether issued by the Company or any other Person) distributed as a dividend or other distribution with respect to, issued upon conversion or exchange of, or in replacement of, Registrable Securities referred to in clause (i), provided that (A) such term shall not include any Registrable Securities transferred in a transaction in which, under the terms of this Agreement, rights hereunder may not be, or are not properly, assigned and (B) as to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (1) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of under such registration statement, provided, however, new certificates therefore not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent, and subsequent transfer or disposition of such securities shall not require their registration or qualification under the Securities Act or any similar state law then in force; (2) such securities shall have been transferred pursuant to Rule 144 under the Securities Act (or any successor provision thereto) or are transferable in accordance with paragraph (k) of such Rule 144 (or any successor provision thereto), provided, however, new certificates therefore not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent, and subsequent transfer or disposition of such securities shall not require their registration or qualification under the Securities Act or any similar state law then in force; (3) such securities shall have been otherwise transferred or disposed of; or (4) such securities shall have ceased to be outstanding. "Registration Statement" means the registration statements and any additional registration statements contemplated by Section 2, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference into such registration statement. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 158" means Rule 158 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 3 "Securities Act" means the Securities Act of 1933, as amended. "Special Counsel" means any special counsel to the Holders, for which the Holders will be reimbursed by the Company pursuant to Section 4. 2. Registration. On or prior to the Filing Date, the Company shall prepare and file with the Commission a "shelf" Registration Statement covering all Registrable Securities (but in no event less than 1,860,000 shares of Common Stock, as adjusted as permitted herein) for a secondary or resale offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (or on another form appropriate for such registration in accordance herewith). The Company shall (i) not permit any securities other than the Registrable Securities to be included in the Registration Statement, and (ii) use its commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act (including filing with the Commission a request for acceleration of effectiveness in accordance with Rule 12dl-2 promulgated under the Exchange Act) by the earlier of (i) five (5) Business Days after the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that a Registration Statement will not be "reviewed," or not be subject to further review or (ii) the 60th day after the Filing Date, and to keep such Registration Statement continuously effective under the Securities Act until such date as is the earlier of (x) the date when all Registrable Securities covered by such Registration Statement have been sold or (y) as to any particular Holder, the date on which all such Holder's Registrable Securities may be sold without any restriction pursuant to Rule 144(k), provided that if a Holder requests, the Company shall deliver unlegended certificates evidencing the Registrable Securities to such Holder (the "Effectiveness Period"). 3. Registration Procedures. In connection with the Company's registration obligations hereunder, the Company shall: (a) Prepare and file with the Commission on or prior to the Filing Date a Registration Statement on Form S-3 (or on another form appropriate for such registration in accordance herewith) in accordance with the method or methods of distribution thereof as specified by the Holders, and cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than five (5) Business Days prior to the filing of the Registration Statement or any related Prospectus and not less than three (3) Business Days prior to the filing of any amendment or supplement thereto (including any document that would be incorporated therein by reference), the Company shall (i) furnish to the Holders and any Special Counsel, copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the review of such Holders and such Special Counsel, and (ii) at the request of any Holder, cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of counsel to such Holders, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities or any Special Counsel shall reasonably object in writing within three (3) Business Days after their 4 receipt thereof, in which event the Filing Date shall be extended until five business days after the parties hereto reach agreement on the content of the applicable Registration Statement, Prospectus, or amendment or supplement thereto. (b) (i) If necessary to keep such Registration Statement accurate and complete, prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously (but for the filing of such post-effective amendment) effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as reasonably practicable to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably practicable provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the applicable period in accordance with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented. (c) Notify the Holders of Registrable Securities to be sold and any Special Counsel as promptly as reasonably practicable (A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement; and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective, and thereafter: (i) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (ii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (iv) of the occurrence of any event that makes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any 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, in the light of the circumstances under which they were made, not misleading. (d) Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, (i) any order suspending the effectiveness of the Registration Statement or 5 (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction within the United States, at the earliest practicable moment. (e) If requested by the Holders of a majority in interest of the Registrable Securities, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to the Registration Statement such information regarding a Holder or the plan of distribution as such majority of Holders may reasonably request, provided that such information is true and complete in all material respects, and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (f) Furnish to each Holder and any Special Counsel, without charge, at least one conformed copy of each Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (g) Promptly deliver to each Holder and any Special Counsel, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request; and the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto in conformity with the requirements of the Securities Act. (h) Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with the Holders and any Special Counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject the Company to general service of process in any jurisdiction were it is not then so subject. (i) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to a Registration Statement, which certificates shall be free of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any Holder may request. (j) Upon the occurrence of any event contemplated by Section 3(c)(iv), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to 6 the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an 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 the light of the circumstances under which they were made, not misleading. (k) Use its commercially reasonable efforts to cause all Registrable Securities relating to such Registration Statement to be listed on NASDAQ or any other securities exchange, quotation system, market or over-the-counter bulletin board, if any, on which similar securities issued by the Company are then listed. (l) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 3-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158. (m) (i) Require each Holder to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the Registration Statement, Prospectus, supplemented Prospectus and/or amended Registration Statement, including any information necessary to allow the Company to fulfill its undertakings made in accordance with Item 512 of Regulation S-K, and the Company may exclude from such registration the Registrable Securities of any such Holder who fails to furnish such information within a reasonable time prior to the filing of each Registration Statement, Prospectus, supplemented Prospectus and/or amended Registration Statement. (ii) If the Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (if such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force) the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed at a time when such reference is not required. (iii) Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(ii), 3(c)(iii) or 3(c)(iv), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3(j), or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide stop orders to enforce the provisions of this paragraph, 7 provided that the Company shall promptly remove any such stop orders as soon as such stop orders are no longer necessary. (n) If (i) there is material non-public information regarding the Company which the Company's Board of Directors (the "Board") reasonably determines not to be in the Company's best interest to disclose and which the Company is not otherwise required to disclose, or (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Board reasonably determines not to be in the Company's best interest to disclose and which the Company would be required to disclose under the Registration Statement, then, notwithstanding anything to the contrary in this Agreement, the Company may postpone or suspend filing or effectiveness of a registration statement for a period not to exceed 60 consecutive days, provided that the Company may not postpone or suspend its obligation under this Section 3(n) for more than 90 days in the aggregate during any 12 month period (each, a "Blackout Period"). 4. Registration Expenses All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with NASDAQ or any other securities exchange, quotation system, market or over-the-counter bulletin board on which Registrable Securities are required hereunder to be listed, (B) with respect to filings required to be made with the Commission, (C) with respect to filings required to be made under NASDAQ and any other securities exchange, quotation system, market or over-the-counter bulletin board and (D) in compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of the Holders' Special Counsel in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the Holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) Securities Act liability insurance, if the Company so desires such insurance, and (v) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company's independent public accountants (including the expenses of any comfort letters or costs associated with the delivery by independent public accountants of a comfort letter or comfort letters, if requested by any underwriter) and legal counsel. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any audit, the fees and expenses incurred in connection with the listing of the Registrable 8 Securities on any securities exchange as required hereunder and the reasonable fees and expenses of Special Counsel. 5. Indemnification (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained or incorporated by reference in (i) the Registration Statement, (ii) any Prospectus or any form of prospectus, (iii) any amendment or supplement thereto, or (iv) any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (A) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, which information was reasonably relied on by the Company for use therein or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto, or (B) such Losses arise in connection with the use by such Holder of a Prospectus (x) after the Company has notified such Holder of the occurrence of an event as described in Section 3(n) and prior to receipt by such notice, or (y) during a Blackout Period of which the Holder has received written notice from the Company. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party and shall survive the transfer of the Registrable Securities by the Holders. (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, the directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in the Registration Statement, any Prospectus, or any form of prospectus, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the 9 extent, that (i) such untrue statement or omission is contained in or omitted from any information furnished in writing by such Holder to the Company specifically for inclusion in the Registration Statement or such Prospectus and that such information was reasonably relied upon by the Company for use in the Registration Statement, such Prospectus or such form of prospectus or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus Supplement, or (ii) such Losses arise in connection with the use by such Holder of a Prospectus (x) after the Company has notified such Holder of the occurrence of an event as described in Section 3(n) and prior to receipt of such notice, or (y) during a Blackout Period of which the Holder has received written notice from the Company. Notwithstanding anything to the contrary contained herein, the Holder shall be liable under this Section 5(b) for only that amount as does not exceed the net proceeds to such Holder as a result of the sale of Registrable Securities pursuant to such Registration Statement. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the "Indemnifying Party) in writing, and the Indemnifying Party shall diligently assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly, diligently and appropriately to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; (3) the Indemnified Party shall reasonably determine that there may be legal defenses available to it which are not available to the Indemnifying Party; or (4) the Indemnified Party shall reasonably determine that there is an actual or potential conflict of interest between it and the Indemnifying Party, including, without limitation, situations in which there are one or more legal defenses available to the Indemnified Party that are antithetical or in opposition to those available to the Indemnifying Party, and in any of such cases, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such 10 Indemnified Party from all liability on claims that are the subject matter of such Proceeding and does not impose any monetary or other obligation or restriction on the Indemnified Party. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder). (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. Notwithstanding anything to the contrary contained herein, the Holder shall be liable or required to contribute under this Section 5(c) for only that amount as does not exceed the net proceeds to such Holder as a result of the sale of Registrable Securities pursuant to such Registration Statement. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. The indemnity and contribution agreements herein are in addition to and not in diminution or limitation of any indemnification provisions under the Purchase Agreement. 11 6. Rule 144. As long as any Holder owns Registrable Securities or the Note, the Company covenants to timely file all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. As long as any Holder owns Registrable Securities or the Note, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders and make publicly available in accordance with Rule 144(c) promulgated under the Securities Act annual and quarterly financial statements, together with a discussion and analysis of such financial statements in form and substance substantially similar to those that would otherwise be required to be included in reports required by Section 13(a) or 15(d) of the Exchange Act, as well as any other information required thereby, in the time period that such filings would have been required to have been made under the Exchange Act. The Company further covenants that it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Person to sell Registrable Securities or the Note without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements. 7. Miscellaneous. (a) Remedies. In the event of a breach by the Company or by a Holder of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Inconsistent Agreements. Neither the Company nor any of its subsidiaries has, as of the date hereof, entered into and currently in effect, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Without limiting the generality of the foregoing, without the written consent of the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Holders set forth herein, and are not otherwise in conflict with the provisions of this Agreement. (c) No Piggyback on Registrations. Except as expressly permitted herein, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statement, and the Company shall not 12 after the date hereof enter into any agreement providing such right to any of its security holders, unless the right so granted is subject in all respects to the prior rights in full of the Holders set forth herein, and is not otherwise in conflict with the provisions of this Agreement. (d) Piggy-Back Registrations. If at any time when there is not an effective Registration Statement covering all of the Registrable Securities, the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to each holder of Registrable Securities written notice of such determination and, if within twenty (20) days after receipt of such notice, any such Holder shall so request in writing (which request shall specify the Registrable Securities intended to be disposed of by the Holders), the Company will cause the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holder, to the extent required to permit the disposition of the Registrable Securities so to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to such Holders and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 4 hereof), and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities being registered pursuant to this Section 7(d) for the same period as the delay in registering such other securities. The Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the case of an underwritten public offering, if the managing underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company after consultation with the managing underwriter should reasonably determine that the inclusion of such Registrable Securities would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer or none of the Registrable Securities of the Holders, then (x) the number of Registrable Securities of the Holders to be included in such registration statement shall be reduced pro-rata among such Holders (based upon the number of Registrable Securities requested to be included in the registration), if the Company after consultation with the underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y) none of the Registrable Securities of the Holders shall be included in such registration statement, if the Company after consultation with the underwriter(s) recommends the inclusion of none of such Registrable Securities; provided, however, that if securities are being offered for the account of other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities (other than the Company). The right of any Holder to participate in an 13 underwritten public offering hereunder shall be conditioned upon such Holder's entering into the underwriting agreement and lock-up agreement with the representative of the underwriter or underwriters on the same terms as required of other selling securities holders in such offering. Notwithstanding the foregoing, this subsection 7(d) shall automatically terminate and be of no further force or effect as to any Holder of Registrable Securities when the Effectiveness Period has expired with respect to such Holder. (e) Specific Enforcement, Consent to Jurisdiction. (i) The Company and the Holders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the Purchase Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the Purchase Agreement and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. (ii) Each of the Company and the Holders (i) hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts located in New York County, New York, for the purposes of any suit, action or proceeding arising out of or relating to this Agreement or the Purchase Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Company and the Holders consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 7(f) shall affect or limit any right to serve process in any other manner permitted by law. (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and each of the Holders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (g) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earlier of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m., Eastern United States time, on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified for notice later 14 than 5:00 p.m., Eastern United States time, on any date and earlier than 11:59 p.m., Eastern United States time, on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: with respect to the Holder: Olden Acquisition LLC One Pickwick Plaza, 1st Floor Greenwich, CT 06830 Facsimile: (203) 552-9607 Attention: Warren B. Kanders with a copy to: Kane Kessler PC 1350 Avenue of the Americas New York, NY 10019 Facsimile: (212) 245-3009 Attention: Robert L. Lawrence, Esq. with respect to the Company: Net Perceptions, Inc. 7700 France Avenue South Edina, Minnesota 55435 Attention: CEO Facsimile No.: (952) 842-5005 with a copy to: Skadden, Arps, Slate, Meagher & Flop LLP One Beacon Street 31st Floor Boston, MA 02108 Attention: Kent A. Coit, Esq. Facsimile No. : (617) 573-4822 or to such other address or addresses or facsimile number or numbers as any such party may most recently have designated in writing to the other parties hereto by such notice. (h) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of each Holder and its successors and assigns. The Company may not assign this Agreement or any of 15 its rights or obligations hereunder without the prior written consent of each Holder. A Holder may assign its rights hereunder to a transferee of Registrable Securities to the extent provided in Section 7(i) below. (i) Assignment of Registration Rights. The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be assignable by each Holder to any transferee of such Holder of Registrable Securities or the Note held by such Holder, if such transferee acquires (through a permitted whole or partial transfer of the Note in accordance with Section 1.2(a) of the Purchase Agreement and/or of Registrable Securities outright) at least 20% of the total number of Registrable Securities into which the Note was convertible as of the Closing Date, and if: (i) the Holder agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, and (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned. In addition, each Holder shall have the right to assign its rights hereunder to any other Person with the prior written consent of a majority of the Independent Directors (as such term is defined in the Purchase Agreement) of the Company, which consent shall not be unreasonably withheld. The foregoing rights to assignment shall apply to the Holders (and to subsequent) successors and assigns. (j) Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (k) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of law thereof which would require the application of the laws of any other jurisdiction. The Company hereby irrevocably consents to the exclusive jurisdiction of the State and Federal Courts located in New York County, New York in connection with any action or proceeding arising out of or relating to this Agreement. (l) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (m) Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable in any respect, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, 16 covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (n) Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. (o) Shares Held by the Company and its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than any Holder or transferees or successors or assigns thereof if such Holder is deemed to be an Affiliate solely by reason of its holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (p) Notice of Effectiveness. Within two (2) Business Days after the Registration Statement which includes the Registrable Securities is ordered effective by the Commission, the Company shall deliver, and if requested by the Company's transfer agent, shall use commercially reasonable efforts to cause legal counsel for the Company in connection with such Registration Statement to deliver, to the transfer agent for such Registrable Securities (with copies to the Holders whose Registrable Securities are included in such Registration Statement) confirmation that the Registration Statement has been declared effective by the Commission substantially in the form attached hereto as Exhibit A. [SIGNATURE PAGE FOLLOWS:] 17 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed by their respective authorized persons as of the date first indicated above.
HOLDER: COMPANY: OLDEN ACQUISITION LLC NET PERCEPTIONS, INC. By: /s/ Warren B. Kanders By: /s/ Thomas Donnelly ----------------------------- ----------------------------- Name: Warren B. Kanders Name: Thomas Donnelly Title: Manager Title: President and CFO
EXHIBIT A FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT [Name and Address of Transfer Agent] [Date] RE: NET PERCEPTIONS, INC. Dear [______]: We are special counsel to Net Perceptions, Inc. a Delaware corporation (the "COMPANY"), and have represented the Company in connection with the preparation of a Registration Statement pursuant to a Registration Rights Agreement between the Company and Olden Acquisition LLC (the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Registration Rights Agreement), under the Securities Act of 1933, as amended (the "1933 ACT") upon the demand of the Purchaser. In connection with the Company's obligations under the Registration Rights Agreement, on __________, 200__, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the "REGISTRATION STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which may be sold under such Registration Statement by the selling stockholder(s) named therein. In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC. Very truly yours, By:__________________________________ cc: [LIST NAMES OF HOLDERS] -----END PRIVACY-ENHANCED MESSAGE-----