Accounts Receivable Purchase Agreement - CTAC Funding Corp. and Scient Inc.
ACCOUNTS RECEIVABLE PURCHASE AGREEMENT
THIS ACCOUNTS RECEIVABLE PURCHASE AGREEMENT made as of the 12th day of
April, 2002 by and among CTAC FUNDING CORP., a New York corporation ("CTAC"),
Scient, Inc. ("Scient," and as agent for the Companies (as defined below), the
"Company Agent") and each other company set forth on Exhibit A hereto (Scient
and each such other company shall hereinafter be referred to, individually, as
a "Company" and, collectively, as the "Companies").
WITNESSETH:
WHEREAS, each Company has requested CTAC to purchase from it, from
time to time, all of the right, title and interest of such Company in and to
certain accounts receivable due to such Company from its customers; and
WHEREAS, CTAC is willing to purchase accounts receivable from each
Company from time to time, upon the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, to induce CTAC to purchase such accounts receivable,
and for other good valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is agreed as follows:
1. Tender of Accounts Receivable; Invoices.
(a) The Company Agent will tender to CTAC all of the accounts
receivable from customers located in the United States of America of the
Companies (individually, an "Account Receivable," and, collectively, "Accounts
Receivable") by delivering to CTAC or, at CTAC's direction, Access Capital,
Inc. as CTAC's servicing agent ("Access Capital"), all of the invoices to be
rendered to such customers promptly after the creation thereof. Delivery of
invoices shall be made by hard copy to Access Capital together with all
supporting documentation included with such invoices. CTAC or Access Capital
will forward all such invoices delivered to such Company's customers (without
regard to whether such invoices are offered for purchase by CTAC), in
accordance with CTAC's or Access Capital's standard procedures, together with
notice by such Company to its customers, in the form prescribed by CTAC or
Access Capital, of the assignment of payment of such invoices to CTAC.
(b) CTAC and/or Access Capital will conduct such examination
and verification of the invoices delivered to it, and such credit investigation
of the account debtors, as it considers necessary or desirable. CTAC will, on a
regular basis, advise the Company Agent of the credit worthiness of the account
debtors and will, by 5:00 p.m. New York City time on the business day
immediately following the business day on which CTAC or Access Capital shall
have received by 11:00 a.m. New York City time Accounts Receivable tendered by
the Company, notify the Company Agent as to which such Accounts Receivable CTAC
shall purchase and deem Eligible Accounts Receivable (the "Eligibility
Determination"); provided, however, in the event CTAC's and/or Access Capital's
credit department, in the exercise of its reasonable business judgment and
<PAGE>
in accordance with its regular operating procedures, requires additional time
to verify any information with respect to a specific Account Receivable, it
shall have the right to do so and in connection therewith the time period for
response shall be extended for the period necessary to receive such
verification, in which case the Company Agent by written notice to CTAC may
withdraw such Account Receivable from consideration by CTAC. CTAC shall have
the right, in the exercise of its reasonable discretion, not to purchase any of
the Accounts Receivable tendered to it by any Company, irrespective of whether
CTAC has previously purchased Accounts Receivable from such Company or has
purchased Accounts Receivable of any particular account debtor (individually,
an "Account Debtor," and, collectively, "Account Debtors").
2. Purchase and Sale of Accounts Receivable.
(a) Those Accounts Receivable which CTAC elects to purchase
from each Company from time to time shall be listed in an Invoice Delivery
Schedule, substantially in the form of Exhibit B (such form, together with any
schedules and attachments thereto is hereinafter referred to as an "Invoice
Schedule"), executed by the Company Agent and accepted by CTAC from time to
time throughout the term of this Agreement. Upon acceptance by CTAC of an
Invoice Schedule, the applicable Company shall be deemed to have sold,
assigned, transferred, conveyed and delivered to CTAC, and CTAC shall be deemed
to have purchased and received from such Company, all right, title and interest
of such Company in and to the Accounts Receivable listed in such Invoice
Schedule. Notwithstanding the foregoing, if any Company or CTAC fails to
include in any Invoice Schedule a particular Account Receivable tendered by
such Company to CTAC, but CTAC nonetheless makes an Initial Payment (as
hereinafter defined) to such Company, or the Company Agent, for such Account
Receivable, then CTAC shall be presumed conclusively to have purchased, and
such Company shall be presumed conclusively to have sold, such Account
Receivable pursuant to this Agreement, and such Account Receivable shall be
governed by the terms and conditions (including, without limitation, such
Company's representations and warranties to CTAC) of this Agreement. The
Accounts Receivable which CTAC has purchased, either by its acceptance of an
Invoice Schedule or by making an Initial Payment with respect thereto, are
sometimes referred to herein as "Purchased Receivables." The initial payment to
be made by CTAC (the "Initial Payment") shall be in the amount of 75% of the
Net Amount (as hereafter defined) of such Eligible Accounts Receivable
("Initial Payment Percentage"), provided, however, that in the event the
Companies' Dilution Rate (as hereafter defined) with respect to Accounts
Receivable exceeds 5%, the Initial Payment Percentage shall be reduced by 1%
for each 1% increase in the Dilution Rate. As used herein, "Eligible Accounts
Receivable" shall mean those Accounts Receivable arising in the ordinary course
of the Companies business which do not fall within any one or more of the
following ineligibility criteria as determined by CTAC in the exercise of its
reasonable discretion exercised in good faith: (i) such Account Receivable is
due from an Account Debtor with respect to which 25% or more of the Accounts
Receivable from such Account Debtor are unpaid more than 75 days from invoice
date, (ii) such Account Receivable is due or unpaid more than 75 days from
invoice date, (iii) such Account Receivable is due from an affiliate or
subsidiary of such Company or from a person or entity controlled by an
affiliate or subsidiary of such Company, (iv) CTAC believes, in the good faith
exercise of its reasonable credit judgment, that collection of such Account
Receivable is insecure or that such Account Receivable may not be paid due to
the Account Debtor's poor credit, poor past performance with respect to timely
payment or other circumstances that would cause CTAC in the good faith exercise
of its reasonable credit
-2-
<PAGE>
judgment to determine not to purchase such Account Receivable, (v) such Account
Receivable is subject to any offset, deduction, defense, dispute or
counterclaim; provided, however, in the event CTAC shall have received a
writing signed by a person authorized to bind the applicable Account Debtor
indicating that such Account Receivable shall be payable in full by such
Account Debtor other than with respect to any such offset, deduction, defense,
dispute or counterclaim, then such Account Receivable shall only be deemed
ineligible under this clause "(v)" with respect to the amount relating to any
such offset, deduction, defense, dispute or counterclaim, (vi) such Account
Receivable is due from a creditor or supplier of such Company or is otherwise
contingent in any respect or for any reason, (vii) such Account Receivable is
due from an Account Debtor located outside the United States of America, (viii)
such Account Receivable is due from an Account Debtor from whom more than
$1,750,000 in Accounts Receivable remain unpaid, but only to the extent of such
amount over $1,750,000, (ix) such Account Receivable is not payable in United
States Dollars, (x) the Account Debtor liable in respect of such Account
Receivable shall not have delivered to CTAC a written confirmation
acknowledging that such Account Receivable is due and owing by such Account
Debtor without offset, deduction, defense, dispute or counterclaim, or (xi)
such Account Receivable is not otherwise satisfactory to CTAC as determined by
CTAC in the good faith exercise of its reasonable discretion. In connection
with CTAC's activities in determining the eligibility of Accounts Receivable,
the Companies shall cooperate in an updated collateral audit by an independent
field auditor engaged by CTAC to confirm to CTAC's reasonable satisfaction the
adequacy of (i) the Companies' collateral management systems, including a
centralized contract maintenance system and timely invoicing procedures with
proper documentation in accordance with the respective contract to which such
invoice relates (i.e.: milestone schedules with customer sign off, and
deliverable schedules with customer sign off) and (ii) the Companies' legal
administration systems to ensure that contracts from which Accounts Receivable
are created and tendered for purchase have been properly and duly executed. As
used herein, (a) "Net Amount" shall mean the gross amount of Eligible Accounts
Receivable less returns, discounts and allowances to customers and (b)
"Dilution Rate" shall mean any reduction in the value of an Account Receivable
at any time caused by: return of goods, discounts, allowances, rebills, credits
and/or any other non-cash offsets asserted or assertable by an Account Debtor.
Without the consent of CTAC, in no event shall the aggregate outstanding amount
of Initial Payments made by CTAC with respect to Purchased Receivables exceed
the lesser of (i) $5,000,000 ("Capital Availability Amount") at any time or
from time to time or (ii) 75% of Eligible Accounts Receivable at such date.
Notwithstanding anything contained herein to the contrary, the purchase of an
Account Receivable by CTAC at any time despite the existence of one or more the
previous ineligibility criteria shall not constitute a waiver by CTAC of any of
its rights hereunder with respect to any subsequent Accounts Receivable
tendered for purchase.
(b) As soon as a wire transfer may be reasonably initiated
following an Eligibility Determination (but in no event later than 1 business
day thereafter), CTAC shall deliver to the Company Agent the amount of the
Initial Payment specified in the Fee Schedule, a copy of which is attached as
Exhibit C hereto and made a part hereof (the "Fee Schedule") with respect to
the Accounts Receivable subject to such Eligibility Determination.
(c) By the Company Agent's execution of each Invoice Schedule
with respect to Accounts Receivable or acceptance by the Company Agent of an
Initial Payment with respect to an Account Receivable, each Company, jointly
and severally, shall be deemed to represent, warrant
-3-
<PAGE>
and covenant to CTAC with respect to each such Purchased Receivable that:
(i) The Company in whose name the invoice has
been billed is the sole owner of such Purchased Receivable and such
Purchased Receivable has not previously been assigned or encumbered in
any manner; such Company has the full power and authority to sell such
Purchased Receivable and its sale to CTAC has been duly authorized by
all necessary corporate action;
(ii) The goods or services listed or referred to in
the invoice related to such Purchased Receivable have been shipped or
rendered to the Account Debtor, and the prices and terms of shipment
set forth therein conform in all material respects to the terms of any
related purchase order or agreement with the Account Debtor;
(iii) The invoice representing such Purchased
Receivable correctly sets forth the full purchase price of the goods
or services covered thereby, and such amount is due and owing from the
Account Debtor, subject to no set-offs, deductions, disputes,
contingencies or counterclaims against such Company or the invoice,
and payment thereof is not contingent upon fulfillment of any
obligation other than delivery of the goods or services referred to in
such invoice and not dependent upon the performance of any additional
work; and
(iv) Upon acceptance of the Invoice Schedule related
thereto and payment of the Initial Payment with respect thereto, CTAC
shall be vested with all right, title and interest in and to such
Purchased Receivable, including all proceeds thereof, rights of
stoppage in transit and rights of return, contract rights and rights
under policies of insurance.
(d) If any Purchased Receivable is not paid by the Account
Debtor within 75 days after the date that such Purchased Receivable was
invoiced, or if any Purchased Receivable becomes ineligible by virtue of the
discovery of the ineligibility of such Purchased Receivable subsequent to the
date of such purchase, the Companies shall jointly and severally reimburse CTAC
on demand for the amount of the Initial Payment with respect to any such
Purchased Receivable (either in cash or, with the consent of CTAC, by way of
offset from other Initial Payments and/or collections of Accounts Receivables
of the Companies) plus a 1% adjustment fee of the amount of the Purchased
Receivable; provided, however, no such adjustment fee shall be payable to the
extent the Company shall have reimbursed CTAC for the amount of the Initial
Payment made with respect to any such Purchased Receivable whether by cash,
offset from other Initial Payments and/or collection of Accounts Receivable.
Each Company shall be obligated to pay (and CTAC shall have the right to
retain) any and all fees set forth in this Agreement and on the Fee Schedule
attached hereto as Exhibit C (the "Fee Schedule") with respect to such
Purchased Receivable even if such Company is required to reimburse CTAC for
such Purchased Receivable.
(e) CTAC shall deliver weekly collection activity reports to
the Company Agent identifying collections of Accounts Receivable for the period
from the last delivered weekly collection report through the business day
immediately preceding the date of such current report.
3. Conditions Precedent. CTAC shall not be obligated to
(i) purchase, or at any time to
-4-
<PAGE>
continue to purchase, any Accounts Receivable from any Company or (ii) at any
time make Initial Payments to the Company Agent or any Company unless, in each
case, as of the date such purchase and/or Initial Payment is made each of the
following conditions shall have been satisfied or waived by CTAC:
(a) CTAC shall have filed Uniform Commercial Code financing
statements covering the Collateral (as such term is hereinafter defined) with
the appropriate filing officer or officers in each jurisdiction where, in the
opinion of CTAC, such filing is necessary or desirable to perfect the security
interests granted herein;
(b) The Companies shall have delivered to CTAC an opinion of
counsel to the Companies, in form and substance satisfactory to CTAC and its
counsel;
(c) Each Company shall have executed and delivered to CTAC
an Internal Revenue Service Form 8821 authorizing CTAC to inspect and/or
receive all information regarding all of such Company's taxes for all periods;
(d) CTAC shall have received such grants of security
interests, liens on assets and other related documentation, in form and
substance acceptable to CTAC and its counsel, including, without limitation, on
intellectual properties, securities and other assets of Scient and its
subsidiaries, to give to CTAC a first perfected security interest on the assets
of Scient and its subsidiaries;
(e) Each Company shall have executed and/or delivered to CTAC
all other documents, agreements, instruments, certificates and opinion letters
as shall be reasonably required by CTAC in connection with the transactions
contemplated by this Agreement;
(f) All security interests and liens covering the Collateral
in favor of parties other than CTAC shall have been released, terminated or
otherwise subordinated in each case in a manner satisfactory to CTAC and its
counsel;
(g) Each of the representations and warranties made by each
Company in or pursuant to this Agreement and the other Transaction Documents,
and each of the representations and warranties contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any other Transaction Document shall be true
and correct in all material respects on and as of such date;
(h) No Default shall have occurred and be continuing, or
would exist after giving effect to the Initial Payments then requested to be
made;
(i) The Companies shall have satisfied the eligibility
requirements set forth in Paragraph 2(a) with respect to Eligible Accounts
Receivable such that sufficient availability exists to support all Initial
Payments then requested to be made;
(j) CTAC shall have received each of the items set forth on
Exhibit D attached hereto, each of which shall be in form and substance
acceptable to CTAC;
-5-
<PAGE>
(k) Scient shall have received not less than $9,400,000 (the
"Maximum Term Loan Amount") in term loan proceeds (the "Term Loan") from North
Fork Bank (assignee of Inmark Capital Corp.) ("NFB") pursuant to the Promissory
Note dated March 18, 2002 made by Scient in favor of NFB (the "NFB Note");
(l) The Maximum Term Loan Amount shall then be outstanding,
except to the extent the same shall have been reduced in connection with a
Payment Event under and as defined in the NFB Note;
(m) The Company Agent shall have delivered to CTAC evidence
that of all tax liabilities of each Company shall have been satisfied,
including without limitation: (i) $500,000 in penalties and interest for fourth
quarter 1999 payroll taxes; (ii) approximately $204,146.96 in tax liabilities
plus accrued interest and penalties thereon owing by the Companies to the
unemployment trust fund and applicable city, state and county taxing
authorities for and (iii) $300,000 due for taxable relocation compensation in
2000; and
(n) The Company Agent shall have provided to CTAC a monthly
cash flow analysis projection for the Companies that corresponds to the third
and fourth quarter 2002 cash flow projection for the Companies (base case with
risks and opportunities) previously provided to CTAC.
4. Collection of Accounts Receivable.
(a) Commencing on the date of this Agreement, CTAC or Access
Capital, as applicable, shall administer the collection of all Accounts
Receivable originated by each Company. Following identification of payments and
application to the related invoices, payments received with respect to Accounts
Receivable, net of CTAC's fees as set forth in this Agreement and the Fee
Schedule and any amounts due with respect to Purchased Receivables, shall be
remitted to the Company Agent by CTAC at weekly intervals (or such other
intervals to which the Company Agent and CTAC may agree from time to time).
(b) CTAC shall have the right of endorsement on all payments
received in connection with each Account Receivable and each Company hereby
appoints CTAC the attorney-in-fact and agent of such Company for this purpose,
which appointment is coupled with an interest and is irrevocable during the
term of this Agreement.
(c) CTAC shall have no liability to any Company for any
mistake in the application of any payment received by it with respect to any
Account Receivable, so long as it acts in good faith and without gross
negligence.
5. Administration of Purchased Receivables. As CTAC collects the
Purchased Receivables, it will pay to the Company Agent an amount equal to the
excess, if any, of (i) the aggregate amount collected by CTAC with respect to
such Purchased Receivable, less (ii) the sum of (A) the Initial Payment made by
CTAC with respect to such Purchased Receivable, (B) the fees as set forth in
this Agreement and the Fee Schedule earned by CTAC with respect to such
-6-
<PAGE>
Purchased Receivable, (C) the aggregate amount theretofore paid by CTAC (in
excess of the amounts specified in clauses (ii)(A) and (ii)(B)) with respect to
such Purchased Receivable, if any, and (D) any amounts due pursuant to Sections
8 and 10 below which have not theretofore been paid.
6. Post-Default Collection. If a Default (as defined in
Section 11 below) shall have occurred and be continuing, in addition to any
other rights and remedies of CTAC hereunder, CTAC shall have the right, which
may be exercised in its sole and absolute discretion at any time and from time
to time during the continuance of such Default, to apply all amounts collected
with respect to Accounts Receivable as follows, before any payment from such
collections shall be made to the Company Agent: (i) against the unreimbursed
balance of the Initial Payments made by CTAC to the Company Agent; (ii) to the
payment of all fees accrued with respect to Accounts Receivable purchased by
CTAC from each Company, whether or not such fees have become due and payable
pursuant to the terms of this Agreement; and (iii) to the payment of any and
all other liabilities and obligations of each Company to CTAC pursuant to this
Agreement and any other agreement entered into in connection with the
transactions contemplated hereby (the "Transaction Documents"). For purposes of
this Section 6, "Company" means and includes each person named as a Company in
the preamble to this Agreement and any parent, subsidiary, controlling person
or other affiliate.
7. Collection of Accounts Receivable.
(a) Each Company will instruct all Account Debtors
obligated with respect to its Accounts Receivable to mail or deliver payments
on such Accounts Receivable directly to Access Capital at its address set forth
at the end of this Agreement or to such other address that CTAC may specify in
a written notice to the Company Agent. Such instructions shall not be rescinded
or modified without CTAC's prior written consent. If, despite such
instructions, any Company shall receive any payments with respect to any
Accounts Receivable purchased by CTAC, such Company shall receive such payments
in trust for the benefit of CTAC, shall segregate such payments from its other
funds, and shall deliver or cause to be delivered to Access Capital, in the
same form as so received with all necessary endorsements, all such payments
received as soon as practicable, but in no event later than seven business days
after the receipt thereof by such Company. The Companies shall jointly and
severally pay CTAC fifteen percent (15%) per annum of the amount of any payment
on account of Purchased Receivables which has been received by any Company and
not delivered in kind to Access Capital no later than seven business days
following receipt by such Company.
(b) CTAC, or Access Capital, as applicable shall have
the full power and authority to collect each Account Receivable, through legal
action or otherwise, and may, in its sole discretion, settle, compromise, or
assign (in whole or in part) the claim for any of the Accounts Receivable, or
otherwise exercise any other right now existing or hereafter arising with
respect to any of the Accounts Receivable, if such action will facilitate
collection. The amount of any reduction resulting from any such settlement,
compromise, assignment or other collection action shall reduce the balance
otherwise due to the Companies hereunder. Each Company acknowledges and agrees
that CTAC shall have the sole and exclusive right to commence legal action to
collect any Account Receivable.
-7-
<PAGE>
8. Payment of Expenses and Taxes; Indemnification. The Companies
will jointly and severally (a) pay or reimburse CTAC and its participants for
all of their respective reasonable out-of-pocket costs and expenses incurred in
connection with the preparation and execution of, and any amendment, supplement
or modification to, the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, including, without limitation,
the reasonable fees and disbursements of counsel to CTAC and its participants
(whether or not such counsel is affiliated with CTAC and/or its participants),
(b) pay or reimburse CTAC and its participants for all of their respective
reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under the Transaction Documents, and the
verification of the Accounts Receivable and the credit worthiness of the
account debtors, including, without limitation, reasonable fees and
disbursements of counsel to CTAC and its participants (whether or not such
counsel is affiliated with CTAC and/or its participants) and any collateral
evaluation (e.g. field examinations, collateral analysis or other business
analysis) performed by CTAC or for its benefit as CTAC deems necessary; (c)
pay, indemnify, and hold CTAC and its participants harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from, any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement of modification of, or any waiver
or consent under or in respect of, the Transaction Documents; (d) pay,
indemnify, and hold CTAC, its participants and Access Capital harmless from and
against any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, whether threatened, pending or determined (including
attorneys' fees and court costs now or hereafter arising from the enforcement
of this clause), (1) with respect to the execution, delivery, enforcement and
performance of the Transaction Documents, including, without limitation, the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any collateral, or (2) arising directly or indirectly
from the activities of any Company or any subsidiary, its predecessors in
interest, or third parties with whom any Company or any subsidiary has a
contractual relationship, or arising directly or indirectly from the violation
of any environmental protection, health, or safety law, whether such claims are
asserted by any governmental agency or any other person, or (3) arising by
virtue of or in connection with any representation or warranty by any Company
being untrue as of the date made or any agreement or covenant by any Company
not being performed as and when required hereunder, or (4) arising directly or
indirectly from any commissions, fees or other compensation owing or claimed to
be owing by one or more of the Companies to any person or entity in connection
with the transactions contemplated hereby (all of the foregoing, collectively,
the "indemnified liabilities"); provided, that the Companies shall have no
obligation hereunder to CTAC, its participants and/or Access Capital with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of CTAC, its participants and/or Access Capital, (ii)
salaries and other amounts payable by CTAC, its participants and/or Access
Capital to its employees in the ordinary course of business (other than for
legal fees specifically billed with respect to a particular matter to which the
foregoing relates) or (iii) expenses incurred by CTAC, its participants and/or
Access Capital (other than those specifically enumerated above) in the ordinary
course of business in connection with the performance of its obligations
hereunder. To the extent that CTAC, its participants and/or Access Capital
shall incur costs or expenses, or shall provide amounts to any Company in
excess of amounts otherwise delivered hereunder as Initial Payments, all such
amounts shall bear interest at a rate equal to the Prime Rate plus two percent
per annum of the amounts so provided, for each month
-8-
<PAGE>
or portion thereof as such amounts shall be outstanding; provided, however, if
any such amounts shall be outstanding on and after the seventh day following
the month in which such amounts became due, such amounts shall thereafter bear
interest at a rate equal to 15% per annum of the amounts so provided for each
month or portion thereof as such amounts shall be outstanding. The agreements
in this Section 8 shall survive the termination of this Agreement.
9. Term.
(a) This Agreement shall be effective for a period
commencing on the date hereof and continuing until the close of business on the
third anniversary of the date on which the Company Agent shall first receive
proceeds of an Initial Payment from CTAC (the "Initial Term"). In the event
CTAC elects to extend the term of this Agreement beyond the Initial Term or any
renewal term, CTAC shall deliver a renewal notice to the Company Agent at least
60 days prior to the expiration date of the Initial Term or any renewal term,
as applicable, in which case this Agreement shall be deemed to be automatically
renewed for an additional period equal to the Initial Term unless the Company
Agent shall deliver written notice of cancellation to CTAC not earlier than 45
days and not later than 30 days prior to the expiration date of the Initial
Term or any succeeding renewal term. Anything in this Agreement to the contrary
notwithstanding, the Company Agent shall have the right to terminate this
Agreement upon 30 days prior written notice to CTAC; provided that the
Companies shall have paid to CTAC, at or prior to such termination, in addition
to all amounts due hereunder, including without limitation all fees payable
hereunder, an early termination fee equal to (i) 4% of the Capital Availability
Amount if such termination occurs at any time prior to the commencement of the
second year of a term of this Agreement, (ii) 3% of the Capital Availability
amount if such termination occurs at any time during the second year of a term
of this Agreement and (iii) 2% of the Capital Availability Amount if such
termination occurs at any time during the final year of a term of this
Agreement.
(b) The representations, warranties and covenants of
each Company and the remedies of CTAC for a breach of such representations,
warranties and/or covenants, shall survive the termination of this Agreement,
and such termination shall not affect the rights of CTAC to enforce its
remedies under the Transaction Documents against any Company or against any
collateral after a default by any Company.
10. Origination Fee. The Companies shall jointly and severally
pay to CTAC an annual origination fee in an amount equal to 2% of the Capital
Availability Amount, which such origination fee shall be deemed fully earned on
the date hereof and on each anniversary date hereof. The fee shall be payable
subject to acceleration upon the occurrence of a Default (a) with respect to
the first year of the Initial Term, in six equal monthly installments of
$16,666.66 each with the initial installment of $16,666.66 payable on the date
hereof and the remaining five payments on the first day of each month hereafter
and (b) with respect to each anniversary date hereof, in full on the first day
of each such anniversary date. The annual origination fee may, at the option of
CTAC, be deducted from amounts otherwise due to the Companies. In the event no
amounts shall be due or otherwise available to the Companies hereunder at a
time when all or any portion of the annual origination fee is payable to CTAC,
Company Agent shall cause a wire transfer of such amount to be made to CTAC
when due in accordance with CTAC's instructions.
-9-
<PAGE>
11. Non-Compliance; Defaults; Remedies. If any of the following
events (each herein referred to as a "Default") shall occur:
(a) Any representation, warranty or covenant made by any
Company in any of the Transaction Documents shall prove to have been incorrect,
incomplete or misleading in any material respect on or as of the date made or
deemed made; or
(b) Any Company shall fail to perform or observe any
term, covenant or agreement contained in any Transaction Document and such
failure shall continue for a period of five (5) days after written notice
thereof from CTAC shall have been received by the Company Agent; or
(c) CTAC shall have evidence that any Company is failing
to tender all of its Accounts Receivable to CTAC for purchase pursuant to
Section 1 of this Agreement; or any Company shall have failed to tender
Accounts Receivable to CTAC for purchase within seven (7) business days after
the last day of the prior calendar month; or
(d) Any Company shall instruct any Account Debtor to
mail or deliver payment on Accounts Receivable to such Company or to any person
other than CTAC, or at CTAC's direction, Access Capital or deposit any check
from an Account Debtor for payment of an Account Receivable and not deliver the
amount received within seven (7) business days; or
(e) Any Company (i) shall generally not pay, or shall be
unable to pay, or shall admit in writing its inability to pay its debts as such
debts become due; or (ii) shall make an assignment for the benefit of
creditors, or petition or apply to any tribunal for the appointment of a
custodian, receiver, or trustee for it or a substantial part of its assets; or
(iii) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution, or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect; or (iv) shall have had
any such petition or application filed or any such proceeding commenced against
it in which an order for relief is entered or an adjudication or appointment is
made, or (v) shall take any corporate action indicating its consent to,
approval of, or acquiescence in any such petition, application, proceeding, or
order for relief or the appointment of a custodian, receiver, or trustee for
all or any substantial part of its properties; or (vi) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged; or
(f) The Companies on a consolidated basis shall fail to
maintain, as of the end of each month (calculated on a rolling 2 month basis),
EBITDA of (i) at least 85% of the EBITDA amount for such month as set forth on
the projections attached hereto as Exhibit E (the "Projections") to the extent
the EBITDA amount reflected on the Projections is a positive number and (ii)
85% or such lesser percentage of the EBITDA amount for such month as set forth
on the Projections to the extent the EBITDA amount reflected on the Projection
is a negative number. For purposes hereof, "EBITDA" means Scient's net income
before interest and taxes exclusive of depreciation, amortization,
extraordinary gains and losses and all other non-cash charges; or
(g) The Companies on a consolidated basis shall fail to
maintain, as of the end of
-10-
<PAGE>
each month (calculated on a rolling 2 month basis), Net Income of (i) at least
85% of the Net Income amount for such month as set forth on the Projections to
the extent the Net Income amount reflected on the Projections is a positive
number and (ii) 85% or such lesser percentage of the Net Income amount for such
month as set forth on the Projections to the extent the Net Income amount
reflected on the Projection is a negative number. For purposes hereof, "Net
Income" means, for any period with respect to the Companies, the net income (or
loss) of the Companies for such period (excluding for such period (I)
extraordinary gains and losses and (II) expenses relating to this Agreement);
or
(h) The Companies on a consolidated basis shall fail to
maintain at any time a Tangible Net Worth plus Subordinated Debt Availability
of at least $9,500,000. For purposes hereof, "Tangible Net Worth plus
Subordinated Debt Availability" means, at a particular date, (1) the sum of the
aggregate amount of all assets of Scient as may be properly classified as such
in accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP plus the aggregate of all
amounts then available to be borrowed by Scient under the Term Loan, less (2)
the aggregate amount of all liabilities of Scient; or
(i) The Companies on a consolidated basis shall at any
time fail to be profitable and/or cash flow positive on a monthly basis
(calculated on a rolling 2 month basis) commencing with the month ending
January 31, 2003; or
(j) An Event of Default shall have occurred and be
continuing under and as defined in the NFB Note.
then, in any of the foregoing events (a) through (j) above, and in any such
event, there shall be jointly and severally due from the Companies a
non-compliance fee equal to 1.5% of the then outstanding Accounts Receivable
and the Accounts Receivable thereafter created until the Companies are again in
compliance and CTAC, without notice to the Company Agent, may exercise all of
the rights provided in Section 6 and, by notice to the Company Agent, may: (i)
declare all fees payable hereunder, including, without limitation, CTAC's
accrued fees with respect to the Purchased Receivables (calculated as provided
in the Fee Schedule as if all Purchased Receivables had been paid in full on
the date of such declaration) and all other amounts payable under the
Transaction Documents to be forthwith due and payable, whereupon such fees and
all such other amounts shall become and be forthwith due and payable, without
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by each Company; or (ii) declare that its obligation to
purchase and/or administer Accounts Receivable pursuant to this Agreement is
terminated, whereupon such obligation or obligations shall forthwith terminate;
or (iii) both. CTAC may terminate its obligation to purchase additional
Accounts Receivable pursuant to this Agreement without terminating this
Agreement or its right to administer Accounts Receivable pursuant to the terms
hereof. In addition, the Companies shall jointly and severally pay CTAC a
liquidation fee ("Liquidation Fee") in the amount of fifteen percent (15%) of
the face amount of each Purchased Receivable outstanding at any time during a
"liquidation period" (as defined below). For the purposes hereof, "liquidation
period" means a period: (i) beginning on the earliest date of (x) an event
referred to in Section 11(f); or (y) the cessation of business of the
Companies; and (ii) ending on the date on which CTAC has actually received
fees, costs, expenses and other amounts due and owing to it under the
Transaction Documents. The Liquidation Fee shall
-11-
<PAGE>
be paid on the earlier to occur of: (i) the date on which CTAC, or Access
Capital, collects the applicable Account Receivable; and (ii) the 90th day from
the invoice of such Account Receivable by deduction from any amount otherwise
due from CTAC to the Companies directly, at the option of CTAC. The Companies
and CTAC acknowledge that the actual damages that would be incurred by CTAC
after the occurrence of a Default would be difficult to quantify and that the
Companies and CTAC have agreed that the fees and obligations set forth in this
paragraph and in this Agreement would constitute fair and appropriate
liquidated damages in the event of any such termination.
12. Security Interest.
(a) Each Company hereby grants CTAC a security interest
(the "Security Interest") in all of the following property now owned or at any
time hereafter acquired by it, or in which it now has or at any time in the
future may acquire any right, title or interest (the "Collateral"): all
accounts whether or not purchased by CTAC pursuant to this Agreement, all other
personal property and fixtures of each Company, including, without limitation,
inventory, equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general intangibles (including,
without limitation, payment intangibles and software), chattel paper (whether
tangible or electronic), supporting obligations, investment property,
letter-of-credit rights, trademarks and tradestyles in which such Company now
has or hereafter may acquire any right, title or interest and the proceeds and
products thereof (including without limitation, proceeds of insurance) and all
additions, accessions and substitutions thereto or therefor, all rights of each
Company pursuant to this Agreement, and all contract rights and other general
intangibles related to the Accounts Receivable and associated therewith and the
proceeds and products thereof (including without limitation proceeds of
insurance) and all additions, accessions and substitutions thereto or therefor.
Terms used in the foregoing language of this Section which are defined in the
Uniform Commercial Code as enacted and in effect from time to time in the State
of New York (the "Code") are used as so defined in the Code.
(b) This Security Interest shall secure any and all
obligations and liabilities of the each Company under any of the Transaction
Documents, whether such liabilities and obligations be direct or indirect,
absolute or contingent, secured or unsecured, now existing or hereafter arising
or acquired, due or to become due (the "Obligations").
(c) Each Company will do all lawful acts which CTAC
deems necessary or desirable to protect the Security Interest or otherwise to
carry out the provisions of this Agreement, including, but not limited to, the
execution of any and all documents, instruments and agreements in form
satisfactory to CTAC and will promptly pay on demand any filing fees or other
costs in connection with the filing or recordation of any and all Uniform
Commercial Code financing, continuation, amendment and termination statements
and similar instruments. Each Company irrevocably appoints CTAC as its
attorney-in-fact during the term of this Agreement, to do all acts which it may
be required to do in connection with the creation and perfection of its
security interest under this Agreement, such appointment being deemed to be a
power coupled with an interest.
(d) Each Company warrants that (i) its principal place
of business, chief executive office and the place where the records concerning
its accounts and contract rights are
-12-
<PAGE>
located at the address set forth on Exhibit F hereto, (ii) it is duly organized
in the State set forth on Exhibit F hereto with organization identification
numbers set forth on Exhibit F hereto, (iii) it has the full power, authority
and legal right to enter into this Agreement and the other Transaction
Documents and to perform its obligations hereunder and thereunder, (iv) it is
in good standing under the laws of the State of its organization and is
qualified to do business in the States listed on Exhibit F hereto, which
constitute all States in which qualification is necessary to conduct its
business and own its property, except to the extent the failure to so qualify
could not be reasonably expected to have a material adverse effect on the
applicable Company and (v) the information set forth on Exhibit G hereto
relating to each Company is true and correct.. None of the Accounts Receivable
is evidenced by a promissory note or other instrument. No Company will
reincorporate itself under the laws of any jurisdiction other than the
jurisdiction in which it is incorporated or organized as of the date hereof.
Each Company will keep its principal place of business and chief executive
office and the office where it keeps its records concerning its accounts and
contract rights at the location therefor specified in the previous sentence or,
upon 30 days' prior written notice to CTAC, at any other locations in a
jurisdiction where all actions required by this Section 4 shall have been taken
with respect to the Collateral. Each Company will hold and preserve its records
concerning its accounts and contract rights and will permit access to
representatives of CTAC at any time during normal business hours to inspect and
make abstracts from such records.
(e) Each Company warrants that it has title to the
Collateral purportedly owned by it and that there are no sums owed or claims,
liens, security interests or other encumbrances (collectively, "Liens") against
the Collateral, other than the Liens in favor of (i) North Fork Bank ("NFB"),
the lien priorities with respect to which are governed by the terms of an
Intercreditor Agreement dated as of the date hereof between CTAC and NFB and
(ii) Foothill Capital Corp. ("Foothill"), the lien priorities with respect to
which are governed by the terms of an Intercreditor Agreement dated as of the
date hereof between CTAC and Foothill, as each such agreement may be amended,
modified and supplemented from time to time (collectively, the "Permitted
Liens"). The Company Agent will notify CTAC of any Liens against the
Collateral, will defend the Collateral against any Liens adverse to CTAC, and
will not create, incur, assume, or suffer to exist now or at any time
throughout the duration of the term of this Agreement, any Liens against the
Collateral, whether now owned or hereafter acquired, except liens in favor of
CTAC and Permitted Liens.
(f) Each Company authorizes CTAC to file one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral. CTAC may file a photographic or other reproduction of this
Agreement in lieu of a financing or continuation statement in any filing office
where it is permissible to do so.
(g) Each Company irrevocably appoints CTAC and Access
Capital as its attorney-in-fact (which power of attorney is coupled with an
interest) and proxy, with full authority in the place and stead of such Company
and in its name or otherwise, from time to time in CTAC's discretion, to take
any action or execute any instrument which CTAC may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation:
(i) to obtain and adjust insurance required to be paid to CTAC pursuant to this
Agreement; (ii) to ask, demand, collect, sue for, recover, compound, receive,
and give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral; (iii) to receive, endorse, and collect any
checks, drafts or other instruments, documents, and chattel paper in connection
with clause (i) or
-13-
<PAGE>
clause (ii) above; (iv) to sign such Company's name on any invoice or bill of
lading relating to any account, on drafts against customers, on schedules and
assignments of accounts, on notices of assignment, financing statements and
other public records, on verification of accounts and on notices to customers
(including notices directing customers to make payment directly to CTAC); (v)
if a Default has occurred and is continuing, to notify the postal authorities
to change the address for delivery of its mail to an address designated by
CTAC, to receive, open and process all mail addressed to such Company, to send
requests for verification of accounts to customers; and (vi) to file any claims
or take any action or institute any proceedings which CTAC may deem necessary
or desirable for the collection of any of the Collateral or otherwise to
enforce the rights of CTAC with respect to any of the Collateral. Each Company
ratifies and approves all acts of said attorney; and so long as the attorney
acts in good faith and without gross negligence it shall have no liability to
any Company for any act or omission as such attorney.
(h) If any Company fails to perform any agreement
contained herein, CTAC may itself perform, or cause performance of, such
agreement or obligation, and the costs and expenses of CTAC incurred in
connection therewith shall be jointly and severally payable by the Companies
and shall be fully secured hereby.
(i) The powers conferred on CTAC hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon CTAC
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
CTAC shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
(j) Anything herein to the contrary notwithstanding, (i)
each Company shall remain liable under any contracts and agreements relating to
the Collateral, to the extent set forth therein, to perform all of its
obligations thereunder, to the same extent as if this Agreement had not been
executed; (ii) the exercise by CTAC of any of its rights hereunder shall not
release any Company from any of its obligations under the contracts and
agreements relating to the Collateral; and (iii) CTAC shall not have any
obligation or liability by reason of this Agreement under any contracts and
agreements relating to the Collateral, nor shall CTAC be obligated to perform
any of the obligations or duties of any Company thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
(k) In recognition of CTAC's right to have its
attorney's fees and other expenses incurred in connection with this Agreement
secured by the Collateral, notwithstanding payment in full of all liabilities
and obligations of each Company to CTAC under the Transaction Documents, CTAC
shall not be required to record any terminations or satisfactions of any of
CTAC's liens on the Collateral unless and until each Company has executed and
delivered to CTAC a general release in a form reasonably satisfactory to CTAC.
(l) If any Default shall have occurred and be
continuing:
(i) CTAC may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code (whether or not the Code applies to the affected
Collateral),
-14-
<PAGE>
and also may (1) require each Company to, and each Company hereby agrees that
it will at its expense and upon request of CTAC forthwith, assemble all or part
of the Collateral as directed by CTAC and make it available to CTAC at a place
to be designated by CTAC which is reasonably convenient to both parties and (2)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of CTAC's
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as CTAC may deem commercially reasonable. Each Company agrees that,
to the extent notice of sale shall be required by law, at least ten days'
notice to the Company Agent of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. CTAC shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. CTAC may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefore, and any such sale may, without further notice, be made at the time
and place which it was so adjourned.
(ii) Any cash held by CTAC as Collateral and all
cash proceeds received by CTAC in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the discretion
of CTAC, be held by CTAC as Collateral for, and/or then or any time thereafter
be applied in whole or in part by CTAC against, all or any part of the
Obligations in such order as CTAC shall elect. Any surplus of such cash or cash
proceeds held by CTAC and remaining after payment in full of all the
Obligations shall be paid over to the Company Agent for the benefit of the
Companies or to whomsoever may be lawfully entitled to receive such surplus.
(iii) CTAC may exercise any and all rights and
remedies of each Company under or in connection with the Collateral, including,
without limitation, any and all rights of each Company to demand or otherwise
require payment of any amount under, or performance of any provision of, any
account, contract or agreement.
(iv) All payments received by any Company under
or in connection with the Collateral shall be received in trust for the benefit
of CTAC, shall be segregated from other funds of such Company and shall be
forthwith paid over to CTAC in the same form as so received (with any necessary
endorsement).
13. Additional Representations, Warranties, Covenants and
Agreements.
(a) Commencing with the fiscal year ending December 31, 2002,
Company Agent shall furnish to CTAC within one hundred and five (105) days
after the end of each fiscal year of Scient, the financial statements of Scient
and the other Companies on a consolidated basis including, but not limited to,
statements of income and stockholders' equity and cash flow from the beginning
of the current fiscal year, all prepared in accordance with generally accepted
accounting principles in effect from time to time ("GAAP") applied on a basis
consistent with prior practices, reported upon without qualification by an
independent certified public accounting firm selected by Company Agent and
satisfactory to CTAC (the "Accountants"). The report of the Accountants shall
be accompanied by a statement of the Accountants certifying that (i) they have
caused this Agreement to be reviewed, (ii) in making the examination upon which
such report was based either no information came to their attention which to
their knowledge constituted a Default hereunder or, if such information came to
their attention, specifying any such Default, its nature, when it occurred
-15-
<PAGE>
and whether it is continuing. In addition, the report shall be accompanied by a
certificate of Scient's Chief Financial Officer, which shall state that, based
on an examination sufficient to permit him to make an informed statement, no
Default exists, or, if such is not the case, specifying such Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
the applicable Company with respect to such event, and such certificate shall
have appended thereto calculations which set forth the Companies' compliance
with the financial covenants set forth in Paragraphs 11(g), (h), (i) and (j)
hereof.
(b) Company Agent shall furnish to CTAC within thirty (30) days
after the end of each month, an unaudited balance sheet of Scient and the other
Companies on a consolidated basis and unaudited statements of income and
stockholders' equity and cash flow of Scient and the other Companies on a
consolidating and consolidated basis reflecting results of operations from the
beginning of the fiscal year to the end of such month and for such month,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal year end adjustments. The reports
shall be accompanied by a certificate of Scient's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default exists, or, if such is not the case, specifying
such Default, its nature, when it occurred, whether it is continuing and the
steps being taken by the applicable Company with respect to such event and,
such certificate shall have appended thereto calculations which set forth the
Companies' compliance with the financial covenants set forth in Paragraph
11(g), (h), (i) and (j) hereof.
(c) Other than a broker's fee payable by the Companies to ITF
Global Partners (the "Broker") in connection with the transactions contemplated
hereby, no person or entity has, as a result of the transactions contemplated
by this Agreement, any valid right, interest or claim against or upon any
Company, any subsidiary thereof or CTAC for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of CTAC.
(d) Promptly after the filing thereof, Scient shall provide CTAC
with copies of Scient's most recent Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 (the "2001 10-K"), which such 2001 10-K is the
only filing required of Scient pursuant to the Exchange Act for such period.
Scient and its subsidiaries are engaged only in the business described in the
2001 10-K.
(e) At the time of filing thereof, the SEC Filings (as defined in
the following clause "(g)") complied as to form in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Securities Act"), and did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(f) Each registration statement and any amendment thereto filed
by Scient pursuant to the Securities Act, as amended, and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the Securities Act
and did not contain any untrue statement of a material fact or omit to state
any
-16-
<PAGE>
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the Securities Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto, did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(g) The financial statements included in the 2001 10-K and all
other reports to be filed by Scient pursuant to the Exchange Act after the
filing of the 2001 10-K (collectively, the "SEC Filings") will fairly present
(as required by GAAP), in all material respects, the consolidated financial
position of Scient as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with GAAP applied on a consistent basis
(except as be disclosed therein or in the notes thereto). Except as set forth
in the financial statements of Scient included in the SEC Filings filed prior
to the date hereof, neither Scient nor any of its subsidiaries has incurred any
liabilities, contingent or otherwise, except those incurred in the ordinary
course of business, consistent (as to amount and nature) with past practices
since the date of such financial statements, none of which, or in the
aggregate, have had or is reasonably expected to have a material adverse effect
on any Company.
(h) Scient shall comply at all times with the filing requirements
and provisions of the Exchange Act and the Securities Act.
(i) Company Agent shall provide CTAC (1) within 20 days after the
end of each month, monthly accounts payable agings for the Companies, and (2)
within 30 days prior to the beginning of each fiscal quarter of Scient,
quarterly projections for the Companies which shall include, without
limitation, projected profit and loss statements, balance sheets and statements
of cash flow for the Companies, such projections to be accompanied by a
certificate signed by Scient's Chief Financial Officer indicating that such
projections have been prepared on the basis of sound financial planning
practice consistent with prior projections and financial statements and that
such officer has no reason to question the reasonableness of any material
assumptions on which such projections were prepared.
(j) Immediately upon the occurrence of any of the following as a
result of a capital raising transaction (such events being hereafter described
as "Liquidity Events"): (1) any issuance of Scient's debt or equity securities
(including, without limitation, any shares of capital stock of Scient,
securities convertible into or exchangeable for shares of capital stock of
Scient, or warrants, options or other rights for the purchase or other
acquisition from Scient of such shares, and other ownership or profit interests
in Scient (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting); or (2) a Change of Control
(as hereafter defined), Scient shall remit to CTAC in immediately available
funds an amount equal to $100,000 (the "Remittance Amount"); provided, however,
in the event of the occurrence of a Liquidity Event set forth in the foregoing
clause "(j)(1)", the Remittance Amount shall be deemed fully earned by CTAC on
the date such Liquidity Event occurs and shall be payable by Scient to CTAC in
two equal installments, the first installment of which shall be payable on the
date such Liquidity Event occurred and the second installment of which shall be
payable on the sixth month anniversary
-17-
<PAGE>
thereafter, or earlier upon termination of this Agreement. Scient shall keep
CTAC apprised of all material developments that might lead to a Liquidity Event
(which information CTAC acknowledges may be material non-public information and
shall be treated accordingly by CTAC) and shall notify CTAC in writing promptly
(but in no event later than 2 days thereafter) following the occurrence of a
Liquidity Event. Scient's obligations under this clause "(j)" shall be deemed
Obligations hereunder secured by the Collateral. For purposes hereof, "Change
of Control" shall mean any consolidation or merger of Scient with or into
another entity, or sale, transfer or other disposition of all or substantially
all of Scient's assets to another entity.
14. Notices. All notices and other communications hereunder and
under any other Transaction Document (unless otherwise specified in such
Transaction Document) shall be deemed given when delivered or deposited in the
mails, first class postage prepaid (provided, however, that notices given by
telegram, telex or telefax shall be deemed given when dispatched by telegram,
telex or telefax, as the case may be) and if to a party hereto addressed as set
forth beneath its name at the foot hereof unless a party shall give notice in
writing of a different address or telefax number in the manner provided herein.
15. Amendments. No amendment, modification, termination, or
waiver of any provision of any Transaction Document to which any Company is a
party, nor consent to any departure by any Company from any Transaction
Document to which it is a party, shall in any event be effective unless the
same shall be in writing and signed by CTAC, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
16. No Waiver. No course of dealing between CTAC and any Company,
nor any failure or delay on the part of CTAC in exercising any right, power, or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power, or remedy preclude any other or
further exercise thereof or the exercise of any other right, power, or remedy
hereunder. The rights and remedies provided in the Transaction Documents are
cumulative, and are not exclusive of any other rights, powers, privileges, or
remedies, now or hereafter existing, at law or in equity or otherwise.
17. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each Company and CTAC and their respective
successors and assigns, except that the no Company may assign or transfer any
of its rights under any Transaction Document to which it is a party without the
prior written consent of CTAC. Notwithstanding anything to the contrary
contained herein, CTAC may, at any time and without the prior consent of any
Company, assign or transfer the rights of CTAC hereunder to any parent or
affiliate, or to a participant of CTAC hereunder or to a parent, subsidiary or
affiliate of a participant of CTAC hereunder.
18. Integration. This Agreement and the other Transaction
Documents contain the entire agreement between the parties relating to the
subject matter hereof and supersede all oral statements and prior writings with
respect thereto.
19. Severability of Provisions. Any provision of any
Transaction Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
of such
-18-
<PAGE>
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
20. Additional Reports. In the event that at any time after the
expiration of the term of this Agreement (as the same may be extended or
modified, or terminated following the occurrence of a Default), any Company or
any successor or assignee of any Company, shall request additional information
from CTAC including, without limitation, account reports, collections advice
for previously concluded transactions or information, including information for
any Company's accounting records, such information shall be supplied by CTAC to
such Company if available, and such Company shall pay CTAC based on the time
spent by CTAC personnel in the preparation of such information for such
Company, and for the disbursements incurred by CTAC in connection therewith, at
the hourly rates established by CTAC for the consulting services of its
personnel.
21. Joint and Several Arrangement.
(a) Each Company hereby irrevocably designates the
Company Agent to be its attorney and agent and in such capacity to request
Initial Payments, sign and endorse notes, and execute and deliver all
instruments, documents, writings and further assurances now or hereafter
required hereunder, on behalf of such Company, and hereby authorizes CTAC to
pay over or credit all proceeds of such Initial Payments and other amounts due
to any Company hereunder in accordance with the request of the Company Agent.
(b) The handling of the accounts receivable purchase
arrangement contemplated hereby with the Company Agent as the agent for the
Companies in the manner set forth in this Agreement is solely as an
accommodation to the Companies and at their request. Neither CTAC nor Access
Capital shall incur any liability to any Company as a result thereof. To induce
CTAC to enter into this Agreement and in consideration thereof, each Company,
jointly and severally, hereby indemnifies CTAC and Access Capital and holds
CTAC and Access Capital harmless from and against any and all liabilities,
expenses, losses, damages and claims of damage or injury asserted against CTAC
and/or Access Capital by any person or entity arising from or incurred by
reason of the handling of the transactions contemplated hereby as provided
herein, reliance by CTAC and/or Access Capital on any request or instruction
from the Company Agent or any other action taken by CTAC and/or Access Capital
in accordance with the terms of this Agreement and applicable law, except to
the extent due to the willful misconduct or gross (not mere) negligence of CTAC
and/or Access Capital.
(c) All Obligations shall be joint and several (whether
or not expressly stated herein), and each Company shall make payment upon the
maturity of the Obligations, by acceleration or otherwise, and such obligation
and liability on the part of each Company shall in no way be affected by any
extensions, renewals and forbearance granted by CTAC to any Company, failure of
CTAC to give any Company any notice, any failure of CTAC to pursue or preserve
its rights against any Company, the release by CTAC of any Collateral now or
thereafter acquired from any Company, and such agreement by each Company to pay
upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by CTAC to any other Company or any Collateral for such
Company's Obligations or the lack thereof.
-19-
<PAGE>
(d) Each Company expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which such Company may now or hereafter have against any other Company or
other person or entity directly or contingently liable for the Obligations, or
against or with respect to any other Company's property (including, without
limitation, any property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until all Obligations have been
paid in full in cash and this Agreement has been irrevocably terminated
(e) Each Company represents and warrants to CTAC that
(i) the Companies have one or more common shareholders, directors and officers,
(ii) the businesses and corporate activities of the other Companies are closely
related to, and substantially benefit, the business and corporate activities of
such Company, (iii) the financial and other operations of the Companies are
performed on a combined basis as if the Companies constituted a consolidated
corporate group, (iv) such Company will receive a substantial economic benefit
from entering into this Agreement and will receive a substantial economic
benefit from the application of each Initial Payment hereunder, in each case,
whether or not such amount is used directly by such Company and (v) all
requests for Initial Payments hereunder by the Company Agent are for the
exclusive and indivisible benefit of each Company as though, for purposes of
this Agreement, the Companies constituted a single entity.
22. Headings. Section headings in the Transaction Documents are
included in such Transaction Documents for the convenience of reference only
and shall not constitute a part of the applicable Transaction Documents for any
other purpose.
23. CONSENT TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN, THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY AGREES
THAT A FINAL JUDGMENT IN ANY SUCH SUIT ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT, AFTER ALL APPROPRIATE APPEALS, SHALL BE CONCLUSIVE AND BINDING UPON IT
NOTHING CONTAINED HEREIN SHALL LIMIT IN ANY MANNER WHATSOEVER CTAC'S RIGHT TO
LITIGATE ANY AND ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT IN ANY OTHER COURTS AS CTAC MAY SELECT, WHICH SUCH COURTS ARE
CONVENIENT FORUMS AND EACH PARTY HERETO SUBMITS TO THE PERSONAL JURISDICTION OF
SUCH COURTS.
24. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
25. JURY TRIAL WAIVER. THE PARTIES HERETO DO HEREBY WAIVE ANY
-20-
<PAGE>
AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF
THIS AGREEMENT.
26. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, ALL OF WHICH SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT, AND
ANY PARTY HERETO MAY EXECUTE THIS AGREEMENT BY SIGNING ONE OR MORE
COUNTERPARTS.
[SIGNATURE LINES ON FOLLOWING PAGE]
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
CTAC FUNDING CORP.
By: /s/ Miles M. Stuchin
--------------------------------------
Name: Miles M. Stuchin
Title: President
Address for Notices to CTAC and Access
Access Capital, Inc.:
405 Park Avenue
New York, New York 10022
Attn: Client Services Department
Telephone Number: (212) 644-9300
Telefax Number: (212) 644-5488
SCIENT, INC.
SCIENT ENTERPRISES, INC.
IXL, INC.
IXL ENTERPRISES, INC.
By: /s/ Jacques Tortoroli
--------------------------------------
Name: Jacques Tortoroli
Title: Duly Authorized Officer of
each of the foregoing Companies
Address for Notices:
79 Fifth Avenue
New York, New York 10003
Attn: Jacques Tortoroli, Chief Financial
Officer
Telephone Number: (212) 500-4936
Telefax Number: (212) 500-5032
-22-
<PAGE>
EXHIBIT A
(Other Companies)
Scient Enterprises, Inc.
iXL, Inc.
iXL Enterprises, Inc.
-23-
<PAGE>
EXHIBIT B
INVOICE DELIVERY SCHEDULE
Bulk #:
CTAC Invoice #:
Aggregate Amount of Invoices: $
Initial Payment: $
Date: 2002
Pursuant to the terms and conditions of the Accounts Receivable
Purchase Agreement dated as of the 12th day of April, 2002 (the "ARPA") in
effect by and among the Companies (as such term is defined in the ARPA) and
CTAC Funding Corp ("CTAC"), one or more of the Companies hereby sell to CTAC,
and CTAC hereby purchases from the respective Company or Companies, the
accounts receivable of the Company or Companies set forth on Schedule A
attached hereto and made a part hereof. Reference is made to the ARPA among the
undersigned and the other parties to the ARPA, the terms and conditions of
which are incorporated herein by this reference.
Accepted:
SCIENT, INC., as Company Agent CTAC FUNDING CORP.
By: By:
------------------------------- ---------------------------------
Name Name:
Title Title:
-24-
<PAGE>
EXHIBIT C
FEE SCHEDULE
This is the Fee Schedule to the Accounts Receivable Purchase Agreement
(the "ARPA") dated as of the 12th day of April, 2002 by and among CTAC Funding
Corp ("CTAC") and each of the undersigned, the terms and conditions of which
are incorporated herein by this reference. Defined terms not otherwise defined
in this Fee Schedule shall have the meanings set forth in the ARPA.
The fee earned by CTAC for purchasing Accounts Receivable shall be
equal to the daily discount rate equivalent of Prime + 2.0% on the amount of
the Initial Payment until such time as such Initial Payment is collected in
full. Prime shall mean the "base" or "prime" lending rate as announced by
Citibank, N.A. Proceeds of collections shall be effectively credited to the
outstanding balances on the fifth (5th) business day after its receipt.
For processing and supervising the Companies' Accounts Receivable,
CTAC will collect a monthly collateral management fee of .75% (three-quarters
of one percent) on the outstanding Obligations during each month.
If, for any month during the term of the ARPA, the average daily
unpaid balance of all Initial Payments does not equal the Capital Availability
Amount, CTAC will earn a fee equal to .15% (fifteen basis points) of the amount
by which the Capital Availability Amount exceeds such average daily unpaid
balance, payable monthly.
AGREED TO AND ACCEPTED:
SCIENT, INC.
SCIENT ENTERPRISES, INC.
IXL, INC.
IXL ENTERPRISES, INC.
By:
-------------------------------
Name: Jacques Tortoroli
Title: Duly Authorized Officer of each
of the foregoing Companies
-25-
<PAGE>
EXHIBIT D
POST-CLOSING DELIVERIES
1. Evidence that the trademarks previously owned by Boxtop Interactive,
Inc., Green Room Productions, LLC, Digital Planet, Micro Interactive,
Inc., Next Century Communications Corp., iXL Holdings, Inc. and Scient
Corporation have been assigned to one of the Companies pursuant to an
assignment recorded with the United States Patent and Trademark Office
and each such Company shall have entered into all such documentation
as shall be reasonably required by CTAC to grant to CTAC a first
priority perfected security interest in such trademarks.
2. UCC, tax lien and judgment searches with respect to the Companies and
from the jurisdictions as CTAC shall require in its reasonable
discretion.
3. Certificates of Insurance for each Company with respect to the
liability insurance policies naming CTAC as additional insured.
4. Evidence of Property Insurance naming CTAC as lender's loss payee and
a lender's loss payable endorsement in connection with each Company's
casualty insurance policies.
5. A good standing certificate with respect to each Company from the
state of incorporation of such Company and an authorization to do
business from each state where such Company is qualified to do
business.
-26-
<PAGE>
EXHIBIT E
PROJECTIONS
-27-
<PAGE>
EXHIBIT F
(Places of Business, States of Incorporation,
Organization Identification Numbers, Qualifications to Do Business)
SCIENT, INC.
Places of Business:
79 Fifth Avenue, New York, New York 10003
433 Las Colinas, Irving, Texas 75039
39 York Road, London, England
2210 Midwest Road, Oak Brook, Illinois
1930 Camden Road, Charlotte, North Carolina 28203
1888/1900 Emery Street, Atlanta, Georgia 30318
363 West Inc, Chicago, Illinois 60610
State of Incorporation: Delaware
Organization Identification Number: 3419676
Qualifications to Do Business: Georgia and New York
SCIENT ENTERPRISES, INC.
Places of Business:
79 Fifth Avenue, New York, New York 10003
433 Las Colinas, Irving, Texas 75039
39 York Road, London, England
2210 Midwest Road, Oak Brook, Illinois 60523
1930 Camden Road, Charlotte, North Carolina 28203
1888/1900 Emery Street, Atlanta, Georgia 30318
363 West Inc, Chicago, Illinois 60610
State of Incorporation: Delaware
Organization Identification Number: 3001397
Qualifications to Do Business: North Carolina, California and New York
IXL, INC.
Places of Business:
79 Fifth Avenue, New York, New York 10003
433 Las Colinas, Irving, Texas 75039
39 York Road, London, England
-28-
<PAGE>
2210 Midwest Road, Oak Brook, Illinois 60523
1930 Camden Road, Charlotte, North Carolina 28203
1888/1900 Emery Street, Atlanta, Georgia 30318
363 West Inc, Chicago, Illinois 60610
State of Incorporation: Delaware
Organization Identification Number: 2673257
Qualifications to Do Business: Georgia, California, New Hampshire, Colorado,
Pennsylvania, Tennessee, New Jersey and New York
IXL ENTERPRISES, INC.
Places of Business:
79 Fifth Avenue, New York, New York 10003
433 Las Colinas, Irving, Texas 75039
39 York Road, London, England
2210 Midwest Road, Oak Brook, Illinois 60523
1930 Camden Road, Charlotte, North Carolina 28203
1888/1900 Emery Street, Atlanta, Georgia 30318
363 West Inc, Chicago, Illinois 60610
State of Incorporation: Delaware
Organization Identification Number: 3416155
Qualifications to Do Business: None
-29-
<PAGE>
EXHIBIT G
Scient, Inc.
Scient, Inc. is a Delaware corporation that was incorporated on July 13, 2001
under the name India-Sierra Holdings, Inc. India-Sierra Holdings, Inc. changed
its name to Scient, Inc. on November 7, 2001. On November 8, 2001, Scient, Inc.
began publicly trading its common stock on the NASDAQ National Market.
Scient, Enterprises, Inc.
Scient Enterprises, Inc. is a Delaware corporation that was incorporated on
February 26, 1999 under the name Scient Corporation. On May 14, 1999, Scient
Corporation began publicly trading its common stock on the NASDAQ National
Market. On November 7, 2001, the following events occurred in the following
chronological order: (a) Sierra Merger Sub, Inc. merged with and into Scient
Corporation with Scient Corporation as the surviving corporation, (b) Scient
Corporation changed its name to Scient Enterprises, Inc. and (c) Scient
Enterprises, Inc. terminated its registration under the Securities and Exchange
Act of 1934. As a result of the merger, Scient Enterprises, Inc. became a
wholly owned subsidiary of Scient, Inc. and common stockholders of Scient
Enterprises, Inc. received 1.24 shares of Scient, Inc. common stock for each
share of Scient Enterprises, Inc. common stock they owned.
iXL Enterprises, Inc.
iXL Enterprises, Inc. was a Delaware corporation that, on June 3, 1999
began publicly trading its common stock on the NASDAQ National Market. On
November 7, 2001, the following events occurred in the following chronological
order: (a) iXL Enterprises, Inc. merged with and into India Merger Sub, Inc., a
Delaware corporation that was incorporated on July 30, 2001, with India Merger
Sub, Inc. as the surviving corporation, (b) India Merger Sub, Inc. changed its
name to iXL Enterprises, Inc. and (c) iXL Enterprises, Inc. terminated its
registration under the Securities Exchange Act of 1934. As a result of the
merger, iXL Enterprises, Inc. became a wholly owned subsidiary of Scient, Inc.
and common stockholders of iXL Enterprises, Inc. received 1.00 share of Scient,
Inc. common stock for each share of iXL Enterprises, Inc. common stock they
owned.
iXL, Inc.
iXL, Inc. is a Delaware corporation that was incorporated on
October 15, 1996. iXL, Inc. is a wholly owned subsidiary of iXL Enterprises,
Inc. iXL, Inc. merged with and into the following corporations on the following
dates and was the surviving corporation following each merger:
(a) iXL Interactive Excellence, Inc. and Creative Video, Inc. -
December 30, 1996;
(b) Swan Interactive Media, Inc. - March 25, 1998;
(c) Exchange Place Solutions, Inc. - September 10, 1998;
(d) Entrepreneur Television, Inc. - September 30, 1998;
(e) iXL Boston, iXL-Charlotte, Inc., iXL-Denver, Inc.,
iXL-Connecticut, Inc., iXL-Denver, Inc., iXL-Los Angeles,
Inc., iXL-New York, Inc., iXL-
-30-
<PAGE>
Richmond, Inc., iXL-San Diego, Inc. and iXL-San Francisco,
Inc. - December 30, 1999;
(f) iXL- D.C., Inc. and iXL-Chicago, Inc. - January 27, 2000;
(g) iXL-Massachusetts, Inc. - August 31, 2000; and
(h) iVisit, Inc. - April 3, 2001.
-31-
<PAGE>
SCIENT, INC.
79 Fifth Avenue
New York, New York 10003
April 12, 2002
Access Capital, Inc.
405 Park Avenue
New York, New York 10022
Re: Loans to Scient, Inc.
Ladies and Gentlemen:
This Letter Agreement (the "AGREEMENT") is being delivered by Scient,
Inc., a Delaware corporation (the "COMPANY") in connection with the term loan
and accounts receivable purchase facility which Access Capital, Inc. ("ACI")
facilitated and provided and is helping to facilitate and provide for the
Company (collectively the "LOANS"). In consideration of the assistance provided
by ACI to the Company in connection with the Loans, the Company has agreed to
issue to ACI a warrant for the purchase of shares (the "SHARES") of the common
stock, par value $.0001 per share of the Company (the "COMMON STOCK"), in the
form of EXHIBIT A attached hereto (the "WARRANT"). This Agreement shall govern
the terms of the issuance of the Warrant to ACI.
1. As a material inducement to ACI to accept the Warrant as
consideration for facilitating and providing and helping to facilitate and
provide the Loans, the Company is making to ACI the representations and
warranties set forth in this Section 1.
(a) Authorization. The Company has the requisite
corporate power and authority and has taken all requisite corporate action
necessary for the: (i) authorization, execution and delivery of this Agreement
and the Warrant (collectively the "AGREEMENTS"); (ii) authorization of the
performance of all obligations of the Company under the Agreements, and (iii)
authorization, issuance and delivery of the Warrant and the Shares. The
Agreements constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms
subject, as to enforcement of indemnification provisions, to limitations under
applicable securities laws.
(b) Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 500,000,000 shares of
common stock of which 188,792,328 shares are issued and outstanding and
10,000,000 shares of blank check preferred stock of which no shares are issued
and outstanding. All of the outstanding shares of capital stock of the Company
have been, or upon issuance will be, validly authorized and issued, fully paid
and non-assessable, and issued in accordance with the registration provisions
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), or pursuant
to valid
<PAGE>
exemptions therefrom. Other than in connection with 147 shares of common stock
which are subject to outstanding options or warrants, the Company has no
outstanding options or warrants with an exercise price which is less than the
initial Warrant Price (as defined in the Warrant).
(c) Valid Issuance. The Shares are, and will at all
times hereafter continue to be, duly authorized and reserved for issuance and
upon issuance upon exercise of the Warrant in accordance with the terms thereof
will be validly issued, fully paid and non-assessable, free and clear of all
liens, encumbrances and Company rights of first refusal, other than liens and
encumbrances created by ACI and will not be subject to any preemptive or
similar rights. The issuance by the Company of the Warrant and the Shares is
exempt from registration under the Securities Act, assuming the accuracy of
ACI's representations and warranties contained herein.
(d) Consents. The execution, delivery and performance by
the Company of the Agreements and the offer, issuance and sale of the Warrant
and the Shares require no consent of, action by or in respect of, or filing
with, any Person or governmental official other than filings that have been
made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws which the Company
undertakes to file within the applicable time periods (including, without
limitation the filing of an application to list the Shares with Nasdaq as
contemplated by the Warrant). The Company has taken all action necessary to
exempt: the sale of the Warrant and the issuance of the Shares pursuant to the
Warrant from the provisions of any anti-takeover or business combination law or
statute binding on the Company or to which the Company or any of its assets and
properties may be subject.
(e) Compliance with Nasdaq Continued Listing
Requirements. Except for the receipt by the Company of a staff determination
notice from Nasdaq on February 14, 2002 as reflected in the Company's Form 8-K,
dated February 19, 2002, as filed with the Securities and Exchange Commission
(the "NASDAQ Notice"), the Company is in compliance with applicable Nasdaq
continued listing requirements as currently enforced by Nasdaq. Except in
connection with the Nasdaq Notice, there are no proceedings pending or, to the
Company's Knowledge, threatened against the Company relating to the continued
listing of the Company's Common Stock on Nasdaq and the Company has not
received any notice of, nor to the Company's Knowledge is there any basis for,
the delisting of the Common Stock from Nasdaq.
(f) Brokers and Finders. No Person has, as a result of
the transactions contemplated by this Agreement, any valid right, interest or
claim against or upon the Company, any of its subsidiaries or ACI for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company other than
International Technologies & Finance LLC.
(g) Private Offering. Subject to the accuracy and
completeness of the representations and warranties of ACI contained in
Section 2 hereof, the Company and all Persons acting on its behalf have not
made, directly or indirectly, and will not make, offers or sales of any
securities or solicited any offers to buy any security under
-2-
<PAGE>
circumstances that would require registration of the Warrant or the Shares or
the issuance of such securities under the Securities Act. The offer, sale and
issuance of the Warrant and the Shares to ACI will not be integrated with any
other offer, sale and issuance of the Company's securities (past, current or
future) under the Securities Act or any regulations of any exchange or
automated quotation system on which any of the securities of the Company are
listed or designated or for purposes of any stockholder approval provision
applicable to the Company or its securities. Subject to the accuracy and
completeness of the representations and warranties of ACI contained in Section
2 hereof, the offer, sale and issuance by the Company to ACI of the Warrant and
the Shares are exempt from the registration requirements of the Securities Act.
(h) Purchase Agreement Representations. The Company
hereby makes to ACI each and every representation and warranty that it made in
that certain Accounts Receivable Purchase Agreement, dated the date hereof,
among the Company, CTAC Funding Corp. and the other parties thereto, with the
same force and effect as if ACI were a party thereto, and all of such
representations and warranties are hereby expressly incorporated into this
Agreement as if set forth at length herein.
(i) Disclosures. No representation or warranty contained
in this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
2. As a material inducement to the Company to issue the Warrant
to ACI as consideration for facilitating and providing the Loans, ACI is making
to the Company the representations and warranties set forth in this Section 2.
(a) Authorization. The Agreements to which ACI is a
party each constitute the valid and legally binding obligation of ACI,
enforceable against ACI in accordance with their respective terms subject, as
to enforcement of indemnification provisions, to limitations under applicable
securities laws.
(b) Purchase Entirely for Own Account. The Warrant to be
received by ACI hereunder will be acquired for ACI's own account, not as
nominee or agent, and not with a view to the resale or other transfer or
distribution of the Warrant or any portion thereof or interest therein in
violation of the Securities Act, and ACI will not sell, grant any participation
in, or otherwise transfer or distribute the Warrant or any portion thereof or
interest therein in violation of the Securities Act. The Shares to be received
by ACI upon an exercise of the Warrant in accordance therewith will be acquired
for ACI's own account, not as nominee or agent, and not with a view to the
resale or other transfer or distribution of the Shares or any portion thereof
or interest therein in violation of the Securities Act, and ACI will not sell,
grant any participation in, or otherwise transfer or distribute the Shares or
any portion thereof or interest therein in violation of the Securities Act.
(c) Investment Experience. ACI acknowledges that it can
bear the economic risk and complete loss of its investment in the Warrant, and
has such
-3-
<PAGE>
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated hereby.
(d) Disclosure of Information. ACI has had an
opportunity to receive information related to the Company requested by it and
to ask questions of and receive answers from the Company regarding the Company,
its business and the terms and conditions of the offering of the Warrant.
Neither such inquiries nor any other due diligence investigation conducted by
ACI shall modify, amend or affect ACI's right to rely on the Company's
representations and warranties contained in this Agreement. ACI, in making its
investment decision, has relied for advice on its own legal, accounting and tax
advisors.
(e) Restricted Securities. ACI understands that the
Warrant and the Shares are characterized as "restricted securities" under the
U.S. federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
(f) Legends.
(i) It is understood that, until the earlier
of: (a) registration for resale pursuant to the Securities Act or (b) the time
when the Warrant and/or Shares, as the case may be, may be sold pursuant to
Rule 144(k), certificates evidencing the Warrant and/or Shares, as the case may
be, may bear the following or any substantially similar legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
EXEMPTION FROM REGISTRATION UNDER THE FOREGOING LAWS".
(ii) Upon the earlier of: (A) registration for
resale pursuant to the Securities Act and receipt by the Company of ACI's
written confirmation that such securities will not be disposed of except in
compliance with the prospectus delivery requirements of the Securities Act; and
(B) Rule 144(k) becoming available, the Company shall, upon ACI's written
request, promptly cause certificates evidencing the Warrant and/or the Shares to
be replaced with certificates which do not bear such restrictive legends.
(g) Accredited Investor. ACI is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
-4-
<PAGE>
(h) Brokers and Finders. No Person has, as a result of
the transactions contemplated by this Agreement, any valid right, interest or
claim against or upon the Company, any subsidiary thereof or ACI for any
commission, fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of ACI.
(i) State of Residence. ACI's principal office is located
in the State of New York.
(j) No Registration. ACI acknowledges that the Warrant
and the Shares have not been registered under the Securities Act, and that the
Company has no obligation to register the Warrant or the Shares under the
Securities Act.
3. Survival and Indemnification. All representations, warranties,
covenants and agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants and agreements as of the date hereof and
shall survive the execution and delivery of this Agreement for the longer of (a)
the period that the Warrant or any portion thereof is outstanding, and (b) three
(3) years from the date of this Agreement; provided, however, that the
provisions contained in Section 3 hereof shall survive in accordance therewith.
The Company agrees to indemnify and hold harmless ACI and its Affiliates and
their respective directors, officers, employees and agents from and against any
and all losses, claims, damages, liabilities and reasonable expenses (including
without limitation reasonable attorney fees and disbursements and other expenses
incurred in connection with investigating, preparing or defending any action,
claim or proceeding, pending or threatened and the costs of enforcement hereof)
to which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be performed on
the part of the Company under the Agreements including, without limitation, for
any broker commission, fee or other amount owed by the Company in connection
with the transactions contemplated hereby or in connection with the Loans
including, without limitation, to International Technologies & Finance LLC, and
will reimburse any such Person for all such amounts as they are incurred by such
Person.
4. Definitions. For the purposes of this Agreement, the following
terms shall have the meanings herein set forth:
"Affiliate" means, with respect to any Person, any other
Person which directly or indirectly Controls, is controlled by, or is under
common control with, such Person.
"Company's Knowledge" means the actual knowledge of the
executive officers of the Company, after due inquiry.
"Control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
-5-
<PAGE>
"Nasdaq" means The NASDAQ Stock Market, Inc. National Market
System.
"Person" means an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically listed
herein.
5. Miscellaneous.
(a) Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telecopy, facsimile or electronic transmission, (iii) sent by
overnight courier, or (iv) sent by certified mail, return receipt requested,
postage prepaid.
If to the Company to: 79 Fifth Avenue
New York, New York 10003
Fax: (212) 500-5032
Attn: Jacques Tortoroli
With a copy to: Greenberg Traurig, LLP
The Forum
3290 Northside Parkway, Suite 400
Atlanta, Georgia 30327
Fax: (678) 553-2212
Attn: James S. Altenbach, Esq.
If to ACI: Access Capital, Inc.
405 Park Avenue
New York, New York 10022
Fax: (212) 644-5488
Attn: Client Services Department
With a copy to: Lowenstein Sandler PC
1330 Avenue of the Americas, 21st Floor
New York, New York 10019
Fax: (212) 262-7402
Attn: Scott J. Giordano, Esq.
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telecopy, facsimile or electronic transmission, at the time
that receipt thereof has been acknowledged by electronic confirmation or
otherwise, (iii) if sent by overnight courier, on the next business day
following the day such notice is delivered to the courier service, or (iv) if
-6-
<PAGE>
sent by registered or certified mail, on the fifth (5th) business day following
the day such mailing is made.
(b) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof.
(c) Modifications and Amendments. This Agreement may not
be amended or modified, and no provision hereof may be waived, without the
written consent of the Company and ACI.
(d) Benefit. This Agreement shall be binding on and shall
inure to the benefit of the parties hereto and their respective heirs,
successors, permitted assigns and legal representatives.
(e) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York
without giving effect to the conflict of law principles thereof.
(f) Jurisdiction and Service of Process. Any action or
proceeding with respect to this Agreement shall be brought in the courts of the
State of New York in New York City or of the United States of America for the
Southern District of New York. By execution and delivery of this Agreement, each
of the parties hereto accepts for itself and in respect of its property,
generally and unconditionally, the exclusive jurisdiction of the aforesaid
courts. Each of the parties hereto irrevocably consents to the service of any
summons and complaint and any other process in any action or proceeding relating
to this Agreement, on behalf of itself or its property, by the delivery of
copies of such process to such party in the same manner as notice is to be
provided pursuant to Section 3(a) hereof Nothing in this Section 3(f) shall
affect the right of any party hereto to serve legal process in any other manner
permitted by law.
(g) Severability. In the event that any court of
competent jurisdiction shall determine that any provision, or any portion
thereof, contained in this Agreement shall be unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court deems it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.
(h) Headings and Captions. The headings and captions of
the various subdivisions of this Agreement are for convenience of reference only
and shall in no way modify or affect the meaning or construction of any of the
terms or provisions hereof.
(i) No Waiver of Rights, Powers and Remedies. No failure
or delay by a party hereto in exercising any right, power or remedy under this
Agreement, and no course of dealing among the parties hereto, shall operate as a
waiver of any such right, power or remedy of the party. No single or partial
exercise of any right, power or remedy
-7-
<PAGE>
under this Agreement by a party hereto, nor any abandonment or discontinuance of
steps to enforce any such right, power or remedy, shall preclude such party from
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder. The election of any remedy by a party hereto shall not
constitute a waiver of the right of such party to pursue other available
remedies. No notice to or demand on a party not expressly required under this
Agreement shall entitle the party receiving such notice or demand to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the party giving such notice or demand to any other or
further action in any circumstances without such notice or demand.
(j) Counterparts; Facsimile. This Agreement may be
executed in one or more counterparts, and by different parties hereto on
separate counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument and shall be
effective upon delivery of counterpart signatures by all parties hereto.
Execution and delivery of this Agreement by facsimile transmission shall
constitute execution and delivery of this Agreement for all purposes, with the
same force and effect as execution and delivery of an original manually signed
copy hereof.
(k) No Jury Trial. Each party acknowledges and agrees
that any controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each such party hereby
irrevocably and unconditionally waives any right such party may have to a trial
by jury in respect to any litigation directly or indirectly arising out of or
relating to this Agreement or the transactions contemplated by this Agreement.
Each party certifies and acknowledges that (i) no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the foregoing
waiver, (ii) each such party understands and has considered the implications of
this waiver, (iii) each such party makes this waiver voluntarily, and (iv) each
such party has been induced to enter into this Agreement by, among other things,
the waivers and certifications in this Section 3(k).
[INTENTIONALLY LEFT BLANK; SIGNATURES ARE ON THE NEXT PAGE]
-8-
<PAGE>
By delivering this Agreement, the Company agrees to be bound by its
terms effective the date hereof. If you are in agreement with the foregoing,
please countersign this Agreement in the space provided below.
SCIENT, INC.
By: /s/ Jacques Tortoroli
--------------------------------------
Name: Jacques Tortoroli
Title: Treasurer
ACKNOWLEDGED AND AGREED:
ACCESS CAPITAL, INC.
By: /s/ Scott J. Giordano
-------------------------------
Name: Scott J. Giordano
Title: Vice President
-9-
<PAGE>
EXHIBIT A
WARRANT
-10-
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
OTHER SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR
RESALE. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT
COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933
AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2) AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
SCIENT, INC.
WARRANT TO PURCHASE 1,887,923 SHARES OF COMMON STOCK
April 12, 2002 Warrant No. [ ]
For value received, SCIENT, INC., a Delaware corporation (the
"COMPANY"), hereby certifies that ACCESS CAPITAL, INC., or its registered
transferees, successors or assigns (each person or entity holding all or part of
this Warrant being referred to as a "HOLDER"), is the registered holder of
warrants (the "Warrants") to subscribe for and purchase One Million Eight
Hundred Eighty Seven Thousand Nine Hundred Twenty Three (1,887,923) shares (as
adjusted pursuant to Section 3 hereof, the "WARRANT SHARES") of the fully paid
and nonassessable common stock, par value $.0001 per share, of the Company, at a
purchase price per share initially equal to Ten Cents ($.10) (the "WARRANT
PRICE") on or before, 5:00 P.M., Eastern Time, on April 12, 2012 (the
"EXPIRATION DATE"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used in this Warrant, the term "BUSINESS DAY" shall
mean any day except a Saturday, Sunday or other day on which commercial banks
are authorized by law to close in New York, New York.
Section 1. EXERCISE.
(a) METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(i) Subject to the provisions hereof, the Holder may
exercise this Warrant, in whole or in part and from time to time, by the
surrender of this Warrant (with the Notice of Exercise form attached hereto as
APPENDIX A duly executed) at the principal office of
<PAGE>
the Company, or such other office or agency of the Company as it may reasonably
designate by written notice to the Holder, during normal business hours on any
Business Day, and the payment by the Holder by cash, certified check payable to
the Company or wire transfer of immediately available funds to an account
designated to the exercising Holder by the Company of an amount equal to the
then applicable Warrant Price multiplied by the number of Warrant Shares then
being purchased, or in the event of a cashless exercise pursuant to Section 1(b)
below, with the net issue election notice attached hereto as APPENDIX B duly
executed and completed. On the date on which the Holder shall have satisfied in
full the Holder's obligations set forth herein regarding an exercise of this
Warrant (provided such date is prior to the Expiration Date), the Holder (or
such other person or persons as directed by the Holder) shall be treated for all
purposes as the holder of record of such Warrant Shares as of the close of
business on such date.
(ii) In the event of any exercise of the rights
represented by this Warrant, certificates for the whole number of shares of
Common Stock so purchased shall be delivered to the Holder (or such other person
or persons as directed by the Holder) as promptly as is reasonably practicable
(but not later than three (3) Business Days) after such exercise at the
Company's expense, and, unless this Warrant has been fully exercised, a new
Warrant representing the whole number of Warrant Shares, if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the Holder as soon as reasonably practicable thereafter (but not later than
three (3) Business Days) after such exercise.
(b) CASHLESS RIGHT TO CONVERT WARRANT INTO COMMON STOCK.
(i) In addition to and without limiting the
rights of the Holder hereof under the terms of this Warrant, the Holder may
elect to receive, without the payment by the Holder of the Warrant Price,
Warrant Shares equal to the value of this Warrant or any portion hereof by the
surrender of this Warrant (or such portion of this Warrant being so exercised)
together with the Net Issue Election Notice annexed hereto as APPENDIX B duly
executed and completed, at the office of the Company, or such other office or
agency of the Company as it may reasonably designate by written notice to the
Holder, during normal business hours on any Business Day. Thereupon, the Company
shall issue to the Holder such number of fully paid, validly issued and
nonassessable Warrant Shares, as is computed using the following formula:
X=Y(A-B)
------
A
where
X = the number of shares of Common Stock to be
issued to the Holder (or such other person or persons as directed by the Holder)
upon such exercise of the rights under this Section 1(b)
Y = the total number of shares of Common Stock
covered by this Warrant which the Holder has surrendered for cashless exercise
-2-
<PAGE>
A = the "Fair Market Value" of one share of
Common Stock on the date that the Holder delivers the Net Issue Election Notice
to the Company as provided herein
B = the Warrant Price in effect under this
Warrant on the date that the Holder delivers the Net Issue Election Notice to
the Company as provided herein
The "FAIR MARKET VALUE" of a share of Common Stock as of a particular date (the
"VALUATION DATE") shall mean the following: (v) if the Common Stock is then
listed on a national stock exchange, the closing sale price of one share of
Common Stock on such exchange on the last trading day prior to the Valuation
Date, provided that if such stock has not traded in the prior ten (10) trading
sessions, the Fair Market Value shall be the average closing price of one share
of Common Stock in the most recent ten (10) trading sessions during which the
Common Stock has traded, (w) if the Common Stock is then included in The Nasdaq
Stock Market, Inc. ("NASDAQ"), the closing sale price of one share of Common
Stock on Nasdaq on the last trading day prior to the Valuation Date or, if no
such closing sale price is available, the average of the high bid and the low
ask price quoted on Nasdaq as of the end of the last trading day prior to the
Valuation Date, provided that if such stock has not traded in the prior ten (10)
trading sessions, the Fair Market Value shall be the average closing price of
one share of Common Stock in the most recent ten (10) trading sessions during
which the Common Stock has traded; (x) if the Common Stock is then included in
the Over-the-Counter Bulletin Board the closing sale price of one share of
Common Stock on the Over-the-Counter Bulletin Board on the last trading day
prior to the Valuation Date or, if no such closing sale price is available, the
average of the high bid and the low ask price quoted on the Over-the-Counter
Bulletin Board as of the end of the last trading day prior to the Valuation
Date, provided that if such stock has not traded in the prior ten (10) trading
sessions, the Fair Market Value shall be the average closing price of one share
of Common Stock in the most recent ten (10) trading sessions during which the
Common Stock has traded, (y) if the Common Stock is then included in the "pink
sheets", the closing sale price of one share of Common Stock on the "pink
sheets" on the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and the low ask
price quoted on the "pink sheets" as of the end of the last trading day prior to
the Valuation Date, provided that if such stock has not traded in the prior ten
(10) trading sessions, the Fair Market Value shall be the average closing price
of one share of Common Stock in the most recent ten (10) trading sessions during
which the Common Stock has traded; or (z) if the Common Stock is not then listed
on a national stock exchange or quoted on Nasdaq or the Over-the-Counter
Bulletin Board or the "pink sheets", the Fair Market Value of one share of
Common Stock as of the Valuation Date, shall be equal to book value as of the
date of the Company's most recently completed audited financial statements. The
Chief Financial Officer of the Company shall respond promptly in writing to an
inquiry by the Holder prior to the exercise hereunder as to the Fair Market
Value of a share of Common Stock.
(c) In addition to and not in limitation of the other
provisions of this Warrant, beginning on the date that is two (2) years next
following the original issue date of this Warrant, in the event that (A) the
Warrant Shares are not then included in an effective registration statement
under the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder, as amended (the "Act") and the provisions of Rule 144(k)
promulgated under the Act do not permit the public sale of the Warrant Shares,
or (B) the Company has not reserved an
-3-
<PAGE>
adequate number of shares from its authorized and unissued shares of common
stock to cover all of the Warrant Shares, the Holder shall at any time have the
right in its sole and absolute discretion to deliver written notice (the "PUT
NOTICE") to the Company to require the Company to purchase from the Holder all
of the Holder's rights and interest in this Warrant for an amount equal to (A)
the product of the Fair Market Value as of the date of the Put Notice pursuant
to this Section 1(c) and the number of Warrant Shares issuable hereunder, minus
(B) the product of the Warrant Price as of the date of the Put Notice pursuant
to this Section 1(c) and the number of Warrant Shares issuable hereunder. The
amount to be paid by the Company to the Holder pursuant to this Section 1(c)
shall be paid by the Company to the Holder within seven (7) days of the delivery
of the Put Notice to the Company in immediately available funds.
Section 2. RESERVATION OF SHARES; STOCK FULLY PAID; LISTING. The
Company shall keep reserved a sufficient number of shares of the authorized and
unissued shares of Common Stock, to provide for the exercise of the rights of
purchase represented by the Warrant in compliance with its terms. All Warrant
Shares issued upon exercise of this Warrant shall be, at the time of delivery of
the certificates for such Warrant Shares upon payment in full of the Exercise
Price therefor in accordance with the terms of this Warrant (or proper exercise
of the cashless exercise rights contained in Section 1(b) hereof), duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock
of the Company. The Company shall, at all times, keep the shares of Common Stock
issuable upon the exercise of this Warrant included for quotation on Nasdaq or
if the Common Stock is no longer included for quotation on Nasdaq on such other
exchange or board as the Common Stock is then listed or on which it is included
for quotation.
Section 3. ADJUSTMENTS AND DISTRIBUTIONS. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) If the Company shall at any time or from time to time
while the Warrant is outstanding, pay a dividend or make a distribution on its
Common Stock in shares of Common Stock, subdivide its outstanding shares of
Common Stock into a greater number of shares or combine its outstanding shares
of Common Stock into a smaller number of shares, then the number of Warrant
Shares purchasable upon exercise of the Warrant and the Warrant Price in effect
immediately prior to the date upon which such change shall become effective,
shall be adjusted by the Company so that the Holder thereafter exercising the
Warrant shall be entitled to receive the number of shares of Common Stock or
other capital stock which the Holder would have received if the Warrant had been
exercised immediately prior to such event upon payment of a Warrant Price that
has been proportionally adjusted to reflect such event. Such adjustments shall
be made successively whenever any event listed above shall occur.
(b) If any recapitalization, reclassification or
reorganization of the capital stock of the Company (other than a change in par
value or a subdivision or combination as provided for in Section 3(a) above)
shall be effected in such a manner that holders of Common Stock shall be
entitled to receive stock, securities, or other assets or property (a
"REORGANIZATION"), then, as a condition of such Reorganization, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to
-4-
<PAGE>
purchase and receive (in lieu of the shares of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby) such shares of stock, securities or other assets or
property as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby. In the event of any Reorganization,
appropriate provision shall be made by the Company with respect to the rights
and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Warrant
Price and of the number of Warrant Shares) shall thereafter be applicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The provisions of this Section 3(b) shall similarly
apply to successive recapitalizations, reclassifications and reorganizations.
(c) So long as this Warrant shall be outstanding, if the
Company proposes to enter into a Mandatory Exercise Transaction (as hereinafter
defined), then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least twenty (20) days prior to the date such
proposed Mandatory Exercise Transaction is to be effectuated, a notice
containing (i) a brief description of the proposed Mandatory Exercise
Transaction; and (ii) the date upon which such proposed Mandatory Exercise
Transaction is to take place. The failure to give such notice, however, shall
not affect the validity of any proposed Mandatory Exercise Transaction for which
the notice was required to be given but shall relieve the Holder of its
obligation to exercise the Warrant pursuant to this provision. During the period
beginning on the date of Holder's receipt of such notice and ending on the date
which is two (2) days prior to the date upon which such proposed Mandatory
Exercise Transaction is to take place, as set forth in the notice (the
"MANDATORY EXERCISE PERIOD"), Holder must exercise its right, in accordance with
all applicable conditions of exercise set forth in this Warrant, to purchase
Warrant Shares which Holder is entitled to purchase hereunder, and if Holder
fails to so exercise such right within the Mandatory Exercise Period (unless the
Company has failed to give the notice required hereunder), all Warrant Shares
for which Holder has not exercised its right to receive hereunder shall expire.
For purposes hereof, a "MANDATORY EXERCISE Transaction" shall mean any of the
following:
(A) any merger or consolidation of the Company
with or into any corporation or other entity
that is not a wholly-owned subsidiary of the
Company, other than a merger in which the
Company or a wholly-owned subsidiary of the
Company is the surviving entity; or
(B) any sale or disposition of all or
substantially all of the assets of the
Company to a person or entity other than a
wholly-owned subsidiary of the Company.
(d) If any consolidation or merger of the Company with
another entity where the Company is to be the surviving entity shall be
effected, then, as a condition of such consolidation or merger lawful and
adequate provision shall be made whereby the Holder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
herein specified and in lieu of the Warrant Shares immediately theretofore
issuable upon exercise of the Warrant, such shares of stock, securities or
assets as would have been
-5-
<PAGE>
issuable or payable with respect to or in exchange for a number of Warrant
Shares equal to the number of Warrant Shares immediately theretofore issuable
upon exercise of the Warrant, had such consolidation, merger, sale, transfer or
other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Holder to the end
that the provisions hereof (including, without limitation, provision for
adjustment of the Warrant Price and of the number of Warrant Shares issuable
hereunder) shall thereafter be applicable, as nearly equivalent as may be
practicable in relation to any shares of stock, securities or properties
thereafter deliverable upon the exercise thereof. The provisions of this Section
3(d) shall similarly apply to successive consolidations and mergers.
(e) In case the Company shall fix a payment date for the
making of a distribution to all holders of Common Stock of evidences of
indebtedness or assets, or subscription rights or warrants, the Company shall
cause to be mailed by certified mail to the Holder, at least twenty (20) days
prior to the date such proposed distribution is to be effectuated, a notice
containing (i) a brief description of the proposed distribution; and (ii) the
date upon which such proposed distribution is to take place. The failure to give
such notice, however, shall not affect the validity of any proposed distribution
for which the notice was required to be given but shall relieve the Holder of
its obligation to exercise the Warrant pursuant to this provision. During the
period beginning on the date of Holder's receipt of such notice and ending on
the date which is two (2) days prior to the date upon which such proposed
distribution is to take place, as set forth in the notice (the "DISTRIBUTION
EXERCISE PERIOD"), Holder must exercise its right, in accordance with all
applicable conditions of exercise set forth in this Warrant, to purchase Warrant
Shares which Holder is entitled to purchase hereunder, and if Holder fails to so
exercise such right within the Distribution Exercise Period (unless the Company
has failed to give the notice required hereunder), Holder shall not have any
right to participate in such distribution with regard to the Warrant Shares for
which exercise has not been made and no adjustment shall be made to the number
of Warrant Shares issuable hereunder or to the Warrant Price in effect
hereunder; PROVIDED, HOWEVER, that if the Company does not provide such notice
to the Holder as provided herein, the Warrant Price to be in effect after such
payment date shall be determined by multiplying the Warrant Price in effect
immediately prior to such payment date by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding multiplied by
the Fair Market Value per share of Common Stock immediately prior to such
payment date, less the fair market value (as determined by an independent
investment bank mutually acceptable to the Holder and to the Company; PROVIDED,
HOWEVER that the Holder shall have the absolute right to contest any such
valuation in arbitration to be conducted by a single arbitrator acting in
accordance with the Rules of the American Arbitration Association, using
expedited procedures for resolution of commercial disputes, which arbitration
shall be held in the City of New York) of said assets or evidences of
indebtedness so distributed, or of such subscription rights or warrants, and the
denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such Fair Market Value per share of Common Stock
immediately prior to such payment date. The costs and expenses of the investment
bank shall be borne solely by the Company and in the event of any arbitration,
each party shall bear its own costs and expenses. Such adjustment shall be made
successively whenever such a payment date is fixed.
(f) For the term of this Warrant, in addition to the
provisions contained above, the Warrant Price shall be subject to adjustment as
provided below. An adjustment to the
-6-
<PAGE>
Warrant Price shall become effective immediately after the payment date in the
case of each dividend or distribution and immediately after the effective date
of each other event which requires an adjustment.
(g) In the event that, as a result of an adjustment made
pursuant to this Section 3, the Holder shall become entitled to receive any
shares of capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon exercise of this Warrant shall be
subject thereafter to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Warrant
Shares contained in this Warrant.
(h) Except as provided in Section 3(i) hereof, if and
whenever the Company shall issue or sell, or is, in accordance with any of
Sections 3(h)(i) through 3(h)(vi) hereof, deemed to have issued or sold, any
shares of Common Stock for a consideration per share less than the Warrant Price
in effect immediately prior to the time of such issue or sale, then and in each
such case (a "TRIGGER ISSUANCE") the then-existing Warrant Price, shall be
reduced, as of the close of business on the effective date of the Trigger
Issuance, to the lowest price per share at which any share of Common Stock was
issued or sold or deemed to be issued or sold.
For purposes of this subsection (h), "ADDITIONAL SHARES OF
COMMON STOCK" shall mean all shares of Common Stock issued by the Company or
deemed to be issued pursuant to this Section 3(h), other than Excluded Issuances
(as defined in Section 3(i) hereof).
For purposes of this Section 3(h), the following
Section 3(h)(i) to 3(h)(vi) shall also be applicable (subject, in each such
case, to the provisions of Section 3(i) hereof) and to each other subsection
contained in this Section 3(h):
(i) ISSUANCE OF RIGHTS OR OPTIONS. In case at any
time the Company shall in any manner grant any warrants or
other rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or security
convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "OPTIONS" and such
convertible or exchangeable stock or securities (including
debt securities) being called "CONVERTIBLE SECURITIES")
whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities
(determined by dividing (A) the sum (which sum shall
constitute the applicable consideration) of (x) the total
amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus (z), in
the case of such Options which relate to Convertible
Securities, the aggregate amount of additional consideration,
if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (B)
the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or
exchange of all such
-7-
<PAGE>
Convertible Securities issuable upon the exercise of such
Options) shall be less than the Warrant Price in effect
immediately prior to the time of the granting of such Options,
then the total number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of
the total amount of such Convertible Securities issuable upon
the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of
such Options or the issuance of such Convertible Securities
and thereafter shall be deemed to be outstanding for purposes
of adjusting the Warrant Price. Except as otherwise provided
in Section 3(h)(iii), no adjustment of the Warrant Price shall
be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon
the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. In case the
Company shall in any manner issue or sell any Convertible
Securities, whether or not the rights to exchange or convert
any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing (A)
the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable
by the Company as consideration for the issue or sale of such
Convertible Securities, plus (y) the aggregate amount of
additional consideration, if any, payable to the Company upon
the conversion or exchange thereof, by (B) the total number of
shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less
than the Warrant Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares
of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be
deemed to be outstanding for purposes of adjusting the Warrant
Price, provided that (A) except as otherwise provided in
Section 3(h)(iii), no adjustment of the Warrant Price shall be
made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities and (B)
no further adjustment of the Warrant Price shall be made by
reason of the issue or sale of Convertible Securities upon
exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Warrant Price have
been made pursuant to the other provisions of Section 3(h).
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon
the happening of any of the following events, namely, if the
purchase price provided for in any Option referred to in
Section 3(h)(i) hereof, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in Sections 3(h)(i) or 3(h)(ii), or the
rate at which Convertible Securities referred to in Sections
3(h)(i) or 3(h)(ii) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed
to protect against dilution), the Warrant Price in effect at
the time of such event shall forthwith be readjusted to the
Warrant Price
-8-
<PAGE>
which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted,
issued or sold. On the termination of any Option for which any
adjustment was made pursuant to this Section 3(h) or any right
to convert or exchange Convertible Securities for which any
adjustment was made pursuant to this Section 3(h) (including
without limitation upon the redemption or purchase for
consideration of Convertible Securities by the Company), the
Warrant Price then in effect hereunder shall forthwith be
changed to the Warrant Price which would have been in effect
at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to
such termination, never been issued.
(iv) CONSIDERATION FOR STOCK. In case any shares of
Common Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the net amount received by the Company
therefor, after deduction therefrom of any expenses incurred
or any underwriting commissions or concessions paid or allowed
by the Company in connection therewith. In case any shares of
Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash or for a
consideration including cash and such other consideration, the
amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such
consideration (as determined by an independent investment bank
mutually acceptable to the Holder and to the Company;
PROVIDED, HOWEVER that the Holder shall have the absolute
right to contest any such valuation in arbitration to be
conducted by a single arbitrator acting in accordance with the
Rules of the American Arbitration Association, using expedited
procedures for resolution of commercial disputes, which
arbitration shall be held in the City of New York), after
deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith. The costs and expenses of the investment
bank shall be borne solely by the Company and in the event of
any arbitration, each party shall bear its own costs and
expenses. In case any Options shall be issued in connection
with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no
specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been
issued for consideration as determined by an independent
investment bank mutually acceptable to the Holder and to the
Company; PROVIDED, HOWEVER that the Holder shall have the
absolute right to contest any such valuation in arbitration to
be conducted by a single arbitrator acting in accordance with
the Rules of the American Arbitration Association, using
expedited procedures for resolution of commercial disputes,
which arbitration shall be held in the City of New York. The
costs and expenses of the investment bank shall be borne
solely by the Company and in the event of any arbitration,
each party shall bear its own costs and expenses.
-9-
<PAGE>
(v) RECORD DATE. In case the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (A) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed
to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or
purchase, as the case may be. If the Company shall have taken
a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally
abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter
no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
(vi) TREASURY SHARES. The number of shares of Common
Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company or any of
its wholly-owned subsidiaries, and the disposition of any such
shares (other than the cancellation or retirement thereof)
shall be considered an issue or sale of Common Stock for the
purpose of this Section 3(i).
(i) EXCLUDED ISSUANCES. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
Warrant Price in the case of the issuance of (i) shares of Common Stock upon the
conversion or exercise of Options or Convertible Securities outstanding on the
date hereof; PROVIDED, HOWEVER, that if the conversion or exercise price of any
Option or Convertible Security is repriced or otherwise adjusted downward to a
conversion or exercise price that is less than the then effective Warrant Price
other than on account of a stock split, the exclusion provided by this Section
3(i)(i) shall be inoperable in all regards in respect of such Options or
Convertible Securities and such Options or Convertible Securities shall be
deemed to be issued after the date of this Warrant and the provisions of Section
3(h) shall apply in all respects, (ii) shares of Common Stock issued or issuable
by reason of a dividend, stock split or other distribution payable pro rata to
all holders of Common Stock (but only to the extent that such a dividend, split
or distribution results in an adjustment in the Warrant Price pursuant to the
other provisions of this Warrant) and (iii) options issued pursuant to the
Company's 2001 Equity Incentive Plan (collectively, "EXCLUDED ISSUANCES").
(j) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment
in the Warrant Price pursuant to this Section 3, the number of Warrant Shares
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Warrant Shares purchasable
immediately prior to such adjustment by a fraction, (i) the numerator of which
shall be the Warrant Price immediately prior to such adjustment, and (ii) the
denominator of which shall be the Warrant Price immediately thereafter.
Notwithstanding the
-10-
<PAGE>
foregoing, under no circumstances shall the number of Warrant Shares issuable
hereunder exceed 19.9% of the outstanding shares of the Company.
(k) NOTICE OF ADJUSTMENTS. With each adjustment pursuant
to this Section 3, the Company shall deliver a certificate signed by its chief
financial or executive officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price and the number of Warrant
Shares purchasable hereunder after giving effect to such adjustment, which shall
be mailed by first class mail, postage prepaid to the Holder.
(l) PARALLEL WARRANTS. If any Options or Convertible
Securities now existing or hereafter granted or created has or have rights
protecting dilution or impairment that are more favorable than the rights
granted in this Warrant, then, at the Holder's option and without further action
of the Company, this Warrant shall be deemed amended, as practicably as
possible, to have such more favorable rights as such Options or Convertible
Securities.
Section 4. TRANSFER TAXES. The Company will pay any documentary
stamp taxes attributable to the initial issuance of Warrant Shares issuable upon
the exercise of the Warrant; PROVIDED, HOWEVER, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificates for Warrant Shares in a
name other than that of the registered holder of this Warrant in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company's reasonable satisfaction that such tax
has been paid.
Section 5. MUTILATED OR MISSING WARRANTS. In case this Warrant
shall be mutilated, lost, stolen, or destroyed, the Company shall issue in
exchange and substitution of and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of the Warrant, and with respect to a lost, stolen or
destroyed Warrant, reasonable indemnity with respect thereto, if requested by
the Company.
Section 6. FRACTIONAL SHARES. No fractional shares of Common
Stock shall be issued in connection with any exercise or cashless exercise
hereunder, and in lieu of any such fractional shares the Company shall make a
cash payment therefor to the Holder (or such other person or persons as directed
by the Holder) based on the Fair Market Value of a share of Common Stock on the
date of exercise or cashless exercise of this Warrant.
Section 7. COMPLIANCE WITH SECURITIES ACT AND LEGENDS. The
Holder, by acceptance hereof, agrees that this Warrant and the shares of Common
Stock to be issued upon exercise hereof, are being acquired for investment and
that such Holder will not offer, sell or otherwise dispose of this Warrant, or
any shares of Common Stock to be issued upon exercise hereof except under
circumstances which will not result in a violation of the Act or any state's
securities laws. Upon exercise of this Warrant, the Holder shall confirm in
writing, by executing the form
-11-
<PAGE>
attached as SCHEDULE 1 to EXHIBIT A hereto, that the shares of Common Stock so
purchased are being acquired for investment and not with a view toward
distribution or resale. All shares of Common Stock issued upon exercise of this
Warrant (unless registered under the Act) shall be stamped or imprinted with a
legend substantially similar to that contained on the face of this Warrant.
Section 8. RIGHTS AS STOCKHOLDERS; INFORMATION. Except as
expressly provided in this Warrant, no Holder, as such, shall be entitled to
vote or receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of the directors or upon any
matter submitted to stockholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise, until
this Warrant shall have been exercised and the Warrant Shares purchasable upon
the exercise hereof shall have become deliverable, as provided herein. The
foregoing notwithstanding, the Company will transmit to the holder of this
Warrant such information, documents, notices and reports as are distributed from
time to time to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the stockholders.
Section 9. MODIFICATION AND WAIVER. This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the Company and the then current Holder, and
such change, waiver, discharge or termination shall be binding on all future
Holders.
Section 10. NOTICES. Unless otherwise specifically provided
herein, all communications under this Warrant shall be in writing and shall be
deemed to have been duly given (a) on the date personally delivered to the party
to whom notice is to be given, (b) on the day of transmission if sent by
facsimile transmission to a number provided to a party specifically for such
purposes and the sending party receives confirmation of the completion of such
transmission, (c) on the Business Day of delivery to Federal Express or similar
overnight courier which utilizes a written form of receipt, or (d) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to each such Holder at its address as shown
on the books of the Company or to the Company at the address indicated therefor
on the signature page of this Warrant. Any party hereto may change its address
for purposes of this Section 10 by giving the other party written notice of the
new address in the manner set forth herein, PROVIDED, HOWEVER that a change of
address will be effective only upon the delivery of such written notice.
Section 11. DESCRIPTIVE HEADINGS. The descriptive headings
contained in this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
Section 12. GOVERNING LAW. The validity, interpretation and
performance of this Warrant shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts made and to be
performed entirely within such State, regardless of the law that might be
applied under principles of conflicts of law. The Company and, by
-12-
<PAGE>
accepting this Warrant, the Holder, each irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in the City of New
York and the United States District Court for the Southern District of New York
for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Warrant and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Warrant. The Company and, by accepting this
Warrant, the Holder, each irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court. The Company and, by accepting this Warrant, the Holder, each irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 13. ACCEPTANCE. Receipt of this Warrant by the Holder
hereof shall constitute acceptance of and agreement to the foregoing terms and
conditions.
Section 14. IDENTITY OF TRANSFER AGENT. The Transfer Agent for
the Common Stock is U.S. Stock & Transfer. Upon the appointment of any
subsequent transfer agent for the Common Stock or other shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by this Warrant, upon the request of the Holder the Company will mail to the
Holder a statement setting forth the name and address of such transfer agent.
Section 15. NO IMPAIRMENT OF RIGHTS. The Company will not, by
amendment of its Certificate of Incorporation or through any other means, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
material impairment.
Section 16. ASSIGNMENT. A Holder may transfer its rights
hereunder, in whole or in part, to any other person without the consent of the
Company provided that such transfer is in accordance with applicable law.
Following a transfer and upon receipt by the Company of notice by a Holder of a
transfer of any portion of this Warrant, the Company shall promptly deliver to a
transferee a Warrant in the form hereof exercisable for the number of Warrant
Shares the right of which to purchase has been transferred. In addition to, and
not in limitation of, the foregoing, a Holder that is a corporation, a
partnership or a limited liability company, may distribute any portion of a
warrant to its respective shareholders, partners or members.
-13-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
SCIENT, INC.
By: /s/ Jacques Tortoroli
---------------------------------
79 Fifth Avenue <-ISSUER'S Name: Jacques Tortoroli
--------------------------- ADDRESS Title: Treasurer
New York, New York 10003 FAX
---------------------------
(212) 500-5032
---------------------------
-14-
<PAGE>
APPENDIX A
NOTICE OF EXERCISE
To: SCIENT, INC.
1. The undersigned hereby irrevocably elects to purchase [ ] shares of
Common Stock of Scient, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full, by cash,
certified check/wire transfer/surrender of the originally executed Warrant.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
----------------------------------
----------------------------------
(Name)
----------------------------------
(Address)
(Signature)
----------------------------------
(Date)
----------------------------------
3. Please issue a new Warrant of equivalent form and tenor for the
unexercised portion of the attached Warrant in the name of the undersigned or in
such other name as is specified below:
---------------------------------------
Date:
----------------------------------
(Warrantholder)
------------------------
Name: (Print)
--------------------------
By:
------------------------------------
-15-
<PAGE>
SCHEDULE 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
-----------------------------
Company: Scient, Inc.
Security: Common Stock
Amount:
-------------------------------
Date:
-------------------------------
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Securities have not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the Purchaser's
investment intent as expressed herein. In this connection, the Purchaser
understands that, in the view of the Securities and Exchange Commission ("SEC"),
the statutory basis for such exemption may be unavailable if the Purchaser's
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under applicable tax
laws, for a deferred sale, for or until an increase or decrease in the market
price of the Securities, or for a period of one year or any other fixed period
in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. In addition, the Purchaser understands
that the certificate evidencing the Securities will be imprinted with the legend
referred to in the Warrant under which the Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended)
-16-
<PAGE>
and the amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the one-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden or proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
The representations contained in this Investment Representation Statement do not
in any way alter, limit, change, modify or diminish Scient, Inc.'s obligations
to the Purchaser contained in any written agreement between or among the
Purchaser and Scient, Inc.
Purchaser:
-----------------------------
-17-
<PAGE>
APPENDIX B
Net Issue Election Notice
To: Scient, Inc.
Date:[ ]
The undersigned hereby elects under Section 1(c) of this Warrant to
surrender the right to purchase [ ] shares of Common Stock pursuant
to this Warrant and hereby requests the issuance of [ ] shares of
Common Stock. The certificate(s) for the shares issuable upon such net issue
election shall be issued in the name of the undersigned or as otherwise
indicated below.
-----------------------------------------
Signature
-----------------------------------------
Name for Registration
-----------------------------------------
Mailing Address
-18-