-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SSGV/74a9jGR3JfLeVubXfq2a2YjV1CQVAin9Q10jquGlnmWVjiLV22h2JVPGLkC SVaCIurpn/BSswG8bUQ5ew== /in/edgar/work/20000621/0001102119-00-000020/0001102119-00-000020.txt : 20000920 0001102119-00-000020.hdr.sgml : 20000920 ACCESSION NUMBER: 0001102119-00-000020 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000616 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERIDIAN USA HOLDINGS INC CENTRAL INDEX KEY: 0001093819 STANDARD INDUSTRIAL CLASSIFICATION: [6770 ] IRS NUMBER: 650510294 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-28223 FILM NUMBER: 657997 BUSINESS ADDRESS: STREET 1: 3350 NW BOCA RATON BLVD STREET 2: SUITE A-28 CITY: BOCA RATON STATE: FL ZIP: 33431 MAIL ADDRESS: STREET 1: 3350 NW BOCA RATON BLVD STREET 2: SUITE A-28 CITY: BOCA RATON STATE: FL ZIP: 33431 FORMER COMPANY: FORMER CONFORMED NAME: MERIDIAN HOLDINGS INC /FL DATE OF NAME CHANGE: 19990825 8-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission File No. 0-28223 Date of Report (Date of earliest event reported): June 16, 2000 MERIDIAN USA HOLDINGS, INC. ---------------------------------------------------- Exact Name of Registrant as Specified in Its Charter) Florida 65-0510294 ------------------------------- ----------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3350 N.W. 2nd Avenue, Suite A28, Boca Raton, FL 33431 -------------------------------------------------------------- (Address of Principal Executive Offices) (561)-417-6800 ----------------------------------------------- (Issuer's Telephone Number, Including Area Code) NOT APPLICABLE ------------------------------------------------------------ (Former name or former address, if changed since last report) 1 Item 5. Other Events ------------- On June 16, 2000, Meridian entered into a Securities Purchase Agreement and related agreements with U.S. Bancorp Libra, a Division of U.S. Bancorp Investments, Inc., pursuant to which U.S. Bancorp Libra purchased Meridian's Series A Convertible 5% Note due 2010 ("Convertible Note") for $8 million. The proceeds from the issuance of the Convertible Note will be used by Meridian for marketing, product development, working capital and other corporate uses. The bridge loan from U.S. Bancorp Libra dated May 11, 2000 in the amount of $500,000 was repaid from the proceeds of the Convertible Note. The Convertible Note, upon satisfaction of certain conditions, is convertible into Series II Preferred Stock, which in turn is convertible into shares of Common Stock at an exercise price of $1.70 per share. Assuming full conversion of the Convertible Note on the date of issuance, U.S. Bancorp Libra would receive approximately 4,700,000 shares of Meridian's Common Stock. The Convertible Note is required to be converted to Series II Preferred Stock upon the earlier of (i) one (1) year from the date of issuance, or (ii) at the option of Meridian or the Noteholders, upon U.S. Bancorp Libra's compliance with 1843(k)(H) of the Bank Holding Company Act of 1956, as amended. Series II Preferred Stock is convertible into the number of shares of Common Stock determined by dividing $8 million plus interest accrued at 5% compounded quarterly, by a conversion price of $1.70 (subject to adjustment for recapitalization, stock splits, stock dividends, etc.). The Series II Preferred Stock also carries a mandatory redemption feature, which obligates Meridian to redeem the Series II Preferred Stock ten (10) years after the date of issuance, to the extent not previously converted into Common Shares, at principal plus five (5%) percent interest compounded quarterly. Pursuant to a Registration Rights Agreement, Meridian is required to use its best efforts to complete, on or before December 31, 2000, a Shelf Registration pursuant to Rule 415 under the Securities Act of 1933 with respect to the shares of Common Stock underlying the Series II Preferred Stock. Meridian is required to maintain the effectiveness of the Shelf Registration until all shares of Common Stock underlying the Series II Preferred Stock have been sold into the market. Pursuant to the terms of the Convertible Note and the Series II Preferred Stock, Meridian has agreed that certain corporate actions, including mergers, acquisitions, sales of all or substantially all its assets, issuance of debt or equity securities or transactions between Meridian and its affiliates, will be subject to the approval of a majority of the Noteholders or Series II Preferred Stockholders, as the case may be. The Noteholders and the Series II Preferred Stockholders have the right to designate one nominee for election to the Board of Meridian and Meridian's principal shareholders have agreed to vote for such nominee. Series II Preferred Stockholders have the right to vote, together with the Common Stockholders, on all matters coming before the stockholders of Meridian on an "as converted" basis and have agreed to vote their shares in favor of the nominees for director proposed by Meridian through and including Meridian's 2001 Annual Meeting of Shareholders. 2 In consideration for financial advisory services provided by U.S. Bancorp Libra related to this transaction, Meridian has paid U.S. Bancorp Libra an investment advisory fee of 7% of the principal amount of the Convertible Note and issued warrants to U.S. Bancorp Libra and its designees to purchase an aggregate of 5% of the fully diluted equity of Meridian at an exercise price of $1.75 per share. The warrant has a seven (7) year term and contains certain anti-dilution and registration rights. Item 7. Financial Statements and Exhibits ------------------------------------ (C) EXHIBITS -------- 3.1 Articles of Amendment to Articles of Incorporation Designating the Series II Convertible Preferred Stock. 4.1 Series A Convertible 5% Note due 2010 of Meridian USA Holdings, Inc. 4.2 Form of Common Stock Purchase Warrant expiring June 16, 2007, issued to U.S. Bancorp Libra and its designees, aggregating 698,948 Warrants. 10.1 Securities Purchase Agreement dated June 16, 2000 between Meridian USA Holdings, Inc. and U.S. Bancorp Investments, Inc. 10.2 Registration Rights Agreement dated June 16, 2000 between Meridian USA Holdings, Inc. and U.S. Bancorp Investments, Inc. 10.3 Investor Rights Agreement dated June 16, 2000 between Meridian USA Holdings, Inc. and U.S. Bancorp Investments, Inc. 10.4 Securityholders Agreement dated June 16, 2000 among Meridian USA Holdings, Inc., Alan Posner, Mark Streisfeld, Paul Galant, Joel Flig, Ronald Shapss and U.S. Bancorp Investments, Inc. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Meridian USA Holdings, Inc. By: /s/ Mark Streisfeld ---------------------- Name: Mark Streisfeld Title: President Date: June 20, 2000 4 EX-3.1 2 0002.txt ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION TO DESIGNATE SERIES II CONVERTIBLE PREFERRED STOCK OF MERIDIAN USA HOLDINGS, INC., A FLORIDA CORPORATION (PURSUANT TO SECTION 607.1006 OF THE FLORIDA GENERAL CORPORATION ACT) ___________________ The undersigned, Mark Streisfeld and Alan Posner do hereby certify that: (i) They are the duly elected and acting President and Secretary, respectively, of Meridian USA Holdings, Inc., a Florida corporation (the "Corporation").They are the duly elected and acting President and Secretary, respectively, of Meridian USA Holdings, Inc., a Florida corporation (the Corporation). (ii) Pursuant to the authority conferred upon the Board of Directors of the Corporation (the "Board") by the Corporation's Articles of Incorporation (the "Certificate"), the Board on May 31, 2000 adopted the following resolutions creating a series of preferred stock designated as Series II Convertible Preferred Stock: WHEREAS, the Certificate provides for a class of shares known as Preferred Stock, issuable from time to time in one or more series; and WHEREAS, the Board is authorized by the Certificate to determine the powers, rights, preferences, qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, to fix the number of shares constituting any such series, and to determine the designation thereof, or any of them; WHEREAS, the Board desires, pursuant to its authority as aforesaid, to determine and fix the powers, rights, preferences, qualifications, limitations and restrictions relating to Series II Convertible Preferred Stock and the number of shares constituting, and the designation of, such series: NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority vested in the Board in accordance with the provisions of the Certificate, a series of Preferred Stock is hereby created, and the Board of Directors hereby fixes and determines the designation of, the number of shares constituting, and the rights, preferences, privileges, powers and restrictions relating to, such series of Preferred Stock as follows: 1. Designation. The series of Preferred Stock of the Corporation shall be designated as "Series II Convertible Preferred Stock," $.01 par value per share (the "Series II Preferred Stock"). 2. Authorized Number. The number of shares constituting the Series II Preferred Stock shall be Eight Thousand Five Hundred (8,500) shares. The rights, preferences, privileges, powers, restrictions and other matters relating to the Series II Preferred Stock set forth below are subject to the issuance of any subsequent series of preferred stock. The Board is also authorized to decrease the number of shares of Series II Preferred Stock prior or subsequent to the issue of that series, but not below the number of shares of Series II Preferred Stock then outstanding. 3. Dividend Provisions. (a) General. When and as declared by the Board or as otherwise provided herein, and to the extent permitted under the Delaware General Corporation Law, the Corporation will pay preferential cumulative dividends to the holders of Series II Preferred Stock as provided in this Section 3. Except as otherwise provided herein, dividends on each share of Series II Preferred Stock will accrue on a daily basis at the rate of 5.0% per annum, compounded quarterly, of the Liquidation Value thereof from and including the date of issuance of such share of Series II Preferred Stock to and including the earliest of (i) the date on which such share of Series II Preferred Stock is converted into Common Stock in accordance with Section 6, or (ii) the date on which such share of Series II Preferred Stock is redeemed in accordance with Section 5. Such dividends will accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The date on which the corporation initially issues any share of Series II Preferred Stock will be deemed to be its "date of issuance" regardless of the number of times a transfer of such share of Series II Preferred Stock is made on the stock records maintained by or for the Corporation and regardless of the number of certificates that may be issued to evidence such share of Series II Preferred Stock. Any dividend declared pursuant to this Section 3(a) shall be declared and distributed among the holders of Series II Preferred Stock pro rata based on the number of shares of Series II Preferred Stock held by each such holder. Accrued and unpaid dividends shall be declared and paid in cash, from any source of funds legally available therefor, concurrently with the consummation of (i) a public offering of equity securities by the Corporation (other than equity securities registered pursuant to registration statements on Form S-4 or S-8 or any successor or similar forms), or (ii) a Designated Event. Each share of Series II Preferred Stock shall entitle the holder thereof to receive preferential dividends on the Series II Preferred Stock prior and in preference to any dividend with respect to all other shares of preferred stock and Common Stock - i.e., preferential dividends shall be declared and paid on all of the shares of Series II Preferred Stock of the Corporation prior to the declaration and payment of preferential dividend on any other series or class of preferred stock or Common Stock. No dividend shall be paid on any other series of preferred stock or the Common Stock unless and until the entire accrued preferential dividend provided for in this Section 3(a) shall have been paid or declared and a sum sufficient for the payment thereof set apart. (b) Participating Dividends. After the preferential dividends on the Series II Preferred Stock provided for in Section 3(a) and all other preferential dividends on all other series of Preferred Stock shall have been paid or declared and a sum sufficient for the payment thereof set apart, then the Corporation may (when, as and if declared by the Board) declare and distribute in such year dividends on the Common Stock; provided, however, that from and after such time as the holders of the Common Stock have received dividends on the Common Stock in an amount equal on a per share basis (determined on an as-converted basis) to the preferential dividend paid or declared and set aside for payment pursuant to Section 3(a), no subsequent dividend on the shares of Common Stock shall be declared or paid unless and until a dividend of an equal amount per share (determined on an as-converted basis) is concurrently declared and paid to the holders of the Series II Preferred Stock. (c) Termination. The Corporation's obligation to pay dividends, including accumulated and unpaid dividends, with respect to the Series II Preferred Stock shall be extinguished on the Conversion Effective Date. 4. Liquidation Preference. (a) Special Liquidation Payment. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of Series II Preferred Stock shall be entitled to receive, prior and in prefer ence to any distribution of any of the assets of the Corporation to the holders of any other series of preferred stock and the holders of Common Stock by reason of their ownership thereof, cash in an amount per share equal to the sum of (i) $1,000.00 for each outstanding share of Series II Preferred Stock (the "Original Series II Issue Price"), as adjusted for stock splits, stock dividends or recapitalizations of the Series II Preferred Stock, and (ii) an amount equal to all accrued but unpaid dividends, if any, in respect of such share (the "Accrued Dividends" and together with the Original Series II Issue Price, the "Special Liquidation Payment"). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series II Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Series II Preferred Stock. (b) Distributions after Special Liquidation Payment. Upon the completion of the distribution required by Section 4(a) and any preferential distribution to the Series I Preferred Stock or any other series of preferred stock, the remaining assets of the Corporation available for distribution to stockholders shall be distributed ratably among the holders of the Series II Preferred Stock and the holders of the Common Stock according to the number of shares of Common Stock (1) then held, with respect to holders of the Common Stock, and (2) into which the then outstanding shares of Series II Preferred Stock are then convertible, with respect to holders of the Series II Preferred Stock. 5. Redemption. (a) Mandatory Redemption. (i) The Corporation shall redeem on the tenth anniversary of the date of initial issuance of the Series II Preferred Stock, from any source of funds legally available therefore, in the manner provided in Section 5(c), all outstanding shares of Series II Preferred Stock for cash in an amount per share equal to the Redemption Price. (ii) If there remains outstanding any Series II Preferred Stock on or after the occurrence of a Designated Event (such date, the "Redemption Trigger Date"), each of the holders of the then outstanding shares of Series II Preferred Stock shall have the right to require the Corporation to redeem all or any of such holder's shares of Series II Preferred Stock in accordance with this Section 5 for cash in an amount per share equal to the Redemption Price, such right being referred to as the "Redemption Right". The Corporation shall give each holder of record of Series II Preferred Stock written notice of such impending transaction not later than twenty (20) days prior to the stockholders' meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 5, and the Corporation shall thereafter give such holders prompt notice of any material change. The transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than fifteen (15) days after the Corporation has given notice of any material change provided for herein; provided, however, that such periods may be shortened upon the written consent of the Majority Preferred Stockholders. Within ten (10) days after the Redemption Trigger Date, the Corporation shall notify all holders of Series II Preferred Stock that the Redemption Right may be exercised, and each holder of Series II Preferred Stock shall have the right, exercisable by delivery of a Redemption Notice to the Corporation within thirty (30) days after receipt of such notice from the Corporation, to request that all or a portion of such holder's shares of Series II Preferred Stock be redeemed on the Redemption Date. The Corporation shall be obligated to redeem the total number of shares of Series II Preferred Stock requested to be redeemed in accordance herewith on the Redemption Date. In the event that the Corporation does not have sufficient funds legally available for redemption of the Series II Preferred Stock in accordance with this Section 5(a)(ii), the Corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 5(a)(ii) may be complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series II Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 5(a)(ii). (b) Optional Redemption. (i) The Corporation may, at the option of the Board of Directors, redeem at any time on or after the third anniversary of the date of initial issuance of the Series II Preferred Stock, from any source of funds legally available therefor, in whole or in part, in the manner provided in Section 5(c), any or all of the shares of Series II Preferred Stock, for cash in an amount per share equal to the Redemption Price; provided that no optional redemption shall be made unless full, preferential dividends have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment on the Series II Preferred Stock in accordance with Section 3(a) for the period ending on the Redemption Date. (ii) In the event of a redemption pursuant to Section 5(b) (i) of only a portion of the then outstanding shares of Series II Preferred Stock, the Corporation shall effect such redemption pro rata according to the number of shares held by each holder of Series II Preferred Stock, except that the Corporation may redeem such shares held by holders of fewer than 100 shares (or shares held by holders who would hold less than 100 shares as a result of such redemption), as may be determined by the Corporation. (iii) (A) At least thirty (30) days and not more than sixty (60) days prior to the date fixed for any optional redemption of the Series II Preferred Stock pursuant to Section 5(b), written notice (the "Optional Redemption Notice") shall be given by first class mail, postage prepaid, to each holder of record on the record date fixed for such redemption of the Series II Preferred Stock at such holder's address as the same appears on the stock register of the Corporation. The Optional Redemption Notice shall state: 1. the Redemption Price; 2. whether all or less than all the outstanding shares of the Series II Preferred Stock redeemable thereunder are to be redeemed and the total number of shares of such Series II Preferred Stock being redeemed; 3. the number of shares of Series II Preferred Stock held, as of the appropriate record date, by the specific holder that the Corporation intends to redeem; 4. the Redemption Date; 5. that dividends on the shares of the Series II Preferred Stock to be redeemed shall cease to accumulate on the Redemption Date unless the Corporation defaults in the payment of the amounts necessary for such redemption, in which case, dividends shall continue to accumulate until such payment is made. (c) Procedure. Each holder of Series II Preferred Stock shall surrender the certificate or certificates representing such shares of Series II Preferred Stock to the Corporation, duly endorsed, at the office of the Corporation or any transfer agent for the Series II Preferred Stock, and on the Redemption Date the full Redemption Price for such shares so surrendered shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof. (d) Inadequate Funds. In the event of a redemption pursuant to Section 5(a)(i) or 5(b), if the funds of the Corporation legally available for redemption of Series II Preferred Stock on a Redemption Date are insufficient to redeem the total number of shares of Series II Preferred Stock to be redeemed on such date, those funds that are legally available will be used to redeem the maximum possible number of shares of Series II Preferred Stock ratably among the holders of such shares to be redeemed based upon the respective Redemption Price amounts then owed to each holder. Thereafter, when additional funds of the Corporation are legally available for the redemption of Series II Preferred Stock, such funds will be used to redeem the balance of the shares of the Series II Preferred Stock that the Corporation became obligated to redeem on such Redemption Date but which it has not redeemed (such redemptions to be made on a monthly basis). (e) Reissuance of Certificate. In case fewer than the total number of shares of Series II Preferred Stock represented by any certificate are redeemed in any installment, a new certificate representing the number of unredeemed shares of such of Series II Preferred Stock will be issued to the holder thereof without cost to such holder promptly after surrender of the certificate representing the redeemed shares of Series II Preferred Stock. (f) Redeemed or Otherwise Acquired Shares. Any shares of Series II Preferred Stock that are redeemed or otherwise acquired by the Corporation will be canceled and will not be reissued, sold or otherwise transferred. (g) Termination. The rights of the Corporation and the holders of the Series II Preferred Stock under this Section 5 shall terminate and be of no effect upon the conversion of all shares of Series II Preferred Stock into Common Stock. 6. Conversion. The holders of the Series II Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series II Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (x) the Special Liquidation Payment by (y) the Conversion Price, as adjusted from time to time in accordance with Sections 6(c), (d), (e), (f) and (g), in effect on the date the certificate is surrendered for conversion. (b) Mechanics of Conversion. Before any holder of Series II Preferred Stock shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series II Preferred Stock, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Corporation shall, as soon as practicable thereafter, but in no event later than three (3) business days thereafter, issue and deliver at such office to such holder of Series II Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series II Preferred Stock to be converted (except as otherwise provided in the immediately following sentence), and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten offering of securities registered pursuant to the Securities Act, the conversion may, at the option of any holder tendering Series II Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock upon conversion of the Series II Preferred Stock shall not be deemed to have converted such Series II Preferred Stock until the closing of such sale of securities. (c) Conversion Price Adjustments of Preferred Stock for Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series II Preferred Stock shall be subject to adjustment from time to time as follows: (i) In the event the Corporation should at any time or from time to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or Common Stock Equivalents without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding and issuable with respect to such Common Stock Equivalents.In the event the Corporation should at any time or from time to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or Common Stock Equivalents without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding and issuable with respect to such Common Stock Equivalents. (ii) If the number of shares of Common Stock outstanding at any time after the Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares. (d) Conversion Price Adjustments for Sale of Shares Below Conversion Price. (i) If at any time or from time to time after the Purchase Date hereof, the Corporation issues or sells, or is deemed by the express provisions of this Section 6(d) to have issued or sold, Additional Shares of Common Stock (as defined in clause (v) below)), other than upon a subdivision or combination of, or as a dividend or other distribution on, the Common Stock as provided in Section 6(c), for an Effective Price less than the then existing Conversion Price, then the Conversion Price shall independently be reduced, as of the opening of business on the date of such issue or sale, to the price determined by multiplying the then existing Conversion Price by a fraction (A) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately preceding the date of such issue or sale, plus (2) the number of shares of Common Stock that the aggregate consideration received (or by the express provisions hereof deemed to have been received) by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at the applicable existing Conversion Price, and (B) the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date of such issue after giving effect to such issue of Additional Shares of Common Stock; provided, however, that for the purposes of this clause (i), all shares of Common Stock that would be issuable upon conversion in full of all outstanding shares of Series I Preferred Stock shall be deemed to be outstanding. (ii) For the purpose of making any adjustment required under this Section 6(d), the consideration received by the Corporation for any issue or sale of securities shall (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Corporation before deducting any expenses payable by the Corporation and any underwriting or similar commissions, compensation, or concessions paid or allowed by the Corporation in connection with such issue or sale, (B) to the extent it consists of property, be computed as determined in good faith by the Board and the Majority Preferred Stockholders, and (C) if Additional Shares of Common Stock, Convertible Securities or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options, as the case may be. (iii) For the purpose of the adjustment required under this Section 6(d), if the Corporation issues or sells any Options to purchase Common Stock or any Convertible Securities and if the Effective Price of the Additional Shares of Common Stock underlying such Options or Convertible Securities is less than the Conversion Price then in effect, the Corporation shall be deemed to have issued at the time of the issuance of such Options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such Options or Convertible Securities, plus, in the case of such Options, the minimum amount of consideration, if any, payable to the Corporation upon the exercise of such Options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion thereof. No further adjustment of the Conversion Price, adjusted upon the issuance of such Options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such Options or the conversion of any such Convertible Securities. If the purchase price provided for in any Option or the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted immediately to the Conversion Price that would have been in effect at such time had such Option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(d), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of the Convertible Preferred Stock are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided, however, that no such change shall at any time cause the Conversion Price thereunder to be increased. If any such Options issued after the date hereof or the conversion privilege represented by any such Convertible Securities issued after the date hereof shall expire without having been exercised, the Conversion Price, adjusted upon the issuance of such Options or Convertible Securities issued after the date hereof shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such Options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such Options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities. (iv) For the purpose of the adjustment required under this Section 6(d), if the Corporation issues or sells any Options for the purchase of Convertible Securities and if the Effective Price of the Additional Shares of Common Stock underlying such Convertible Securities is less than the Conversion Price in effect, the Corporation shall be deemed to have issued at the time of the issuance of such Options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such Options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such Options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the exercise of such Options and plus the minimum amount of consideration, if any, payable to the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion of such Convertible Securities. No further adjustment of the Conversion Price, adjusted upon the issuance of such Options, shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such Options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities. If the purchase price provided for in any Option or the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted immediately to the Conversion Price that would have been in effect at such time had such option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(d), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of the Series II Preferred Stock are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided that no such change shall at any time cause the Conversion Price thereunder to be increased. The provisions of clause (iii) above for the readjustment of the Conversion Price upon the expiration of Options or the rights of conversion of Convertible Securities shall apply, the necessary changes having been made, to the Options and Convertible Securities referred to in this subpart (iv). (v) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Corporation after the date hereof, whether or not subsequently reacquired or retired by the Corporation, other than shares of Common Stock issued (A) upon conversion of the Preferred Stock; (B) to officers, employees or directors of, or consultants, contractors and advisors to, the Corporation or any subsidiary pursuant to any stock purchase or stock option plans or other awards, contracts or arrangements that are approved by the Board, and the Majority Preferred Stockholders which when added together with all such other plans, awards, contracts, or arrangements, if not to exceed [2 %] shares of Common Stock in the aggregate; (C) a stock split or stock dividend; or (D) pursuant to Options, warrants, notes or other rights, if any, to acquire securities of the Corporation, that are in existence on the date the first shares of Series II Preferred Stock are issued hereunder (other than Options, warrants or shares issued under plans or arrangements described in clause (B)). (vi) The "Effective Price" of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Corporation under this Section 6(d), into the aggregate consideration received, or deemed to have been received by the Corporation for such issue under this Section 6(d), for such Additional Shares of Common Stock. (e) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 6(d), then, in each such case for the purpose of this Section 6(e), the holders of the Series II Preferred Stock shall be entitled to a share of any such distribution in accordance with Section 3 as though they were the holders of the number of shares of Common Stock into which their shares of Series II Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock entitled to receive such distribution. (f) Recapitalizations. If any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision provided for elsewhere in this Section 6 or a combination or merger or sale of assets transaction for which the Corporation is not obligated to pay the Special Liquidation Payment pursuant to Section 4) provision shall be made so that the holders of the Series II Preferred Stock shall thereafter be entitled to receive upon conversion of the Series II Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the holders of the Series II Preferred Stock after the recapitalization to the end that the provisions of this Section 6 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Series II Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. (g) No Impairment. The Corporation will not, by amendment of the Certificate or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series II Preferred Stock against impairment. (h) No Fractional Shares and Certificate as to Adjustments. (i) No fractional shares shall be issued upon the conversion of any share or shares of the Series II Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share (with one-half being rounded upward) determined on the basis of the total number of shares of Series II Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (ii) Within fifteen (15) days following the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series II Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series II Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price at the time in effect, and (C) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the conversion of a share of Series II Preferred Stock. (i) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Series II Preferred Stock, at least fifteen (15) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (j) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series II Preferred Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series II Preferred Stock; provided that, if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series II Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series II Preferred Stock, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in its best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate; and provided, further that if at any time after the first anniversary of the date of initial issuance of the Series II Preferred Stock (i) the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series II Preferred Stock or (ii) the Corporation fails for any other reason to honor the request of a holder of Series II Preferred Stock to convert shares of Series II Preferred Stock into shares of Common Stock pursuant to Section 6, in addition to such other remedies as shall be available to the holder of such Series II Preferred Stock, the Corporation shall pay to the holder of such Series II Preferred Stock liquidated damages in cash in an amount equal to three percent (3%) of the then current Special Liquidation Payment for each thirty (30) day period or portion thereof that such condition continues. (i) Notices. Any notice required or permitted by the provisions of this Section 6 to be given to the holders of shares of Series II Preferred Stock shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (i) three (3) days after deposit with the U.S. postal service or other applicable postal service, if delivered by first class mail, postage prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day after the day of deposit with Federal Express or similar overnight courier, freight prepaid, if delivered by overnight courier or (iv) one (1) business day after the day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed to each holder of record at such holder's address appearing on the books of the Corporation. 7. Voting Rights. (a) General. The holder of each share of Series II Preferred Stock shall have the right to one (1) vote for each share of Common Stock into which such holder's shares of Series II Preferred Stock could then be converted, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders' meeting in accordance with the bylaws of the Corporation, and shall be entitled to vote together as a single class with the holders of Common Stock (and any other series of Preferred Stock entitled to vote together as a single class with the holders of Common Stock) with respect to any question upon which holders of Common Stock have the right to vote. Except as provided in Sections 7(b) and 7(c) or as required by applicable law, the Series II Preferred Stock shall not vote as a separate class on any matter submitted to a stockholder vote. Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). (b) Director. Notwithstanding any provision of Section 7(a) to the contrary, so long as 1,000 shares of Series II Preferred Stock are outstanding, the holders of the outstanding shares of Series II Preferred Stock, voting separately as a single series, in person or by proxy, shall be entitled to elect one member of the Board (or at the option of the Majority Preferred Stockholders, to appoint one observer to the Board, such observer to receive all notices, information and other materials as if such observer was a member of the Board) and, subject to the provisions of the Certificate and of any other certificate of designations relating to any other series of preferred stock, the holders of the Common Stock, the Series II Preferred Stock and any other series of preferred stock entitled to vote as a single class with the holders of Common Stock, voting together as a single class, shall be entitled to elect the remaining members of the Board. (c) Series II Preferred Stock Vote Required. Notwithstanding any provision of Section 7(a) to the contrary, so long as any shares of Series II Preferred Stock are outstanding without first obtaining Preferred Stock Approval, the Corporation shall not: (i) amend, alter or repeal the Certificate, Bylaws, and this Designation, in a manner adverse to the holders of Series II Preferred Stock, including, without limitation, any increase in the total number of authorized shares of Series II Preferred Stock. (ii) create, incur, assume or suffer to exist any Indebtedness in excess of $5,000,000; (iii) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible or exercisable for an equity security, on parity with or senior to the Series II Preferred Stock as to dividend rights, liquidation preferences, voting rights, redemption or conversion rights; (iv) purchase, redeem, or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of the Corporation's equity securities, other than redemptions of shares of Series II Preferred Stock pursuant to Section 5; (v) declare or pay any dividend or other distribution, direct or indirect (or set apart any sum for such purpose) whether in cash, indebtedness or other assets or securities, upon the Corporation's equity securities other than a dividend or distribution on the Series II Preferred Stock; (vi) enter in to an agreement to effect any sale, lease, assignment, transfer or other conveyance of any material assets of the Corporation, or any merger, material acquisition, reorganization, or recapitalization involving the Corporation other than the ordinary course of business consistent with past practice; (vii) enter into a single transaction or series of transactions with an Affiliate of the Corporation the aggregate value of which exceeds $100,000 in any fiscal year. (viii) enter into a line of business that is unrelated to the Company's line of business as it existed on the Purchase Date or otherwise substantially change or modify the Corporation's line of business as it existed on the Purchase Date; (ix) purchase, lease or otherwise acquire assets or make other capital expenditures in a single transaction or series of transactions with an aggregate fair market value in excess of $750,000 in any fiscal year; (x) increase the salary, wages or other compensation of any officer, employee or consultant of the Corporation, establish or modify the salary ranges, guidelines or similar provisions in respect of any benefit plan, employment-related contract or other employee compensation arrangement; (xi) make any payments or otherwise provide compensation to any Affiliates, directors, officers or employees under management, consulting, advisory, severance, employment or similar agreements or other arrangements if the aggregate amount of such payments and other compensation paid or payable thereunder during or for any fiscal year of the Company exceeds $ in any such fiscal year; (xii) directly or indirectly, pay or make a commitment to pay any severance or termination pay to any officer, employee or agent who is directly or indirectly a stockholder of the Corporation other than as required by contracts or agreements existing on the Purchase Date or in the event such amounts do not exceed $ in any such fiscal year; (xiii) make or permit to remain outstanding any Investments exceeding $ in any fiscal year other than loans, advances or other extensions of credit in the nature of deposits with or advance payments to subcontractors, suppliers and other made in the ordinary course of business consistent with past practice; (xiv) make any Investment in an Affiliate, transfer any assets or property to an Affiliate, merge into or consolidate with or purchase or acquire assets or property from an Affiliate, guarantee or assume any Indebtedness or other obligation of an Affiliate, enter into any other transaction, directly or indirectly, with or for the benefit of an Affiliate, unless such transaction or series of related transactions are (i) between the Company and a wholly-owned subsidiary or two wholly-owned subsidiaries of the Company, or (ii) on arms-length terms and do not exceed $ in the aggregate in any fiscal year; (xv) effect any liquidation, dissolution or winding up of the Corporation; and (xvi) authorize or issue, or obligate itself to issue, any equity security (including options, warrants and other similar rights) other than pursuant to the Corporation's [Stock Option Plan] as such plan is in effect on the date hereof or pursuant to the conversion of the Preferred Stock or the exercise of warrants outstanding on the Purchase Date, or authorize or issue shares of the Common Stock pursuant to such stock option/stock issuance plan in an aggregate amount in excess of 1,000,000 shares of Common Stock. 8. Status of Converted Stock. In the event any shares of Series II Preferred Stock shall be converted pursuant to Section 6, the shares so converted shall be cancelled and shall not be issuable by the Corporation. The Certificate shall be appropriately amended to effect the corresponding reduction in the Corporation's authorized capital stock. 9. Definitions. "Additional Shares of Common Stock" shall have the meaning set forth in Section 6(d)(v). "Affiliate" means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with the Corporation. "Board" shall mean the Corporation's Board of Directors. "Certificate" shall mean the Corporation's articles of incorporation, as from time to time in effect. "Change of Control" means the occurrence of one or more of the following events:(i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation; (ii) any other person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing greater than 50% of the aggregate ordinary voting power for the election of directors of the Corporation; or (iii) during any two-year period the directors who constituted the Board at the beginning of such period, (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Corporation was approved by a vote of at least a majority of the directors of the Corporation then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office. "Common Stock Equivalents" shall mean Options and Convertible Securities. "Conversion Effective Date" shall mean, with respect to each share of Series II Preferred Stock, the date so elected by the holder of such share of Series II Preferred Stock pursuant to Section 6. "Conversion Price" means initially $1.70 per share of Common Stock; provided, however, that the Conversion Price shall be subject to adjustment as provided in Section 6; and provided further, that on the first anniversary of the Purchase Date the Conversion Price shall be reset to the lower of (x) the Conversion Price per share of Common Stock, as adjusted pursuant to Section 6, on the first anniversary of the Purchase Date and (y) the average of the closing prices of the Common Stock for the ten-day period ending on the first anniversary of the Purchase Date. "Conversion Rights" shall have the meaning set forth in Section 6. "Convertible Securities" means securities convertible into or exchangeable for Common Stock. "Corporation" means Meridian USA Holdings, Inc., a Florida corporation. A "Designated Event" means (i) the acquisition of the Corporation by Another entity (including, without limitation, any reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation), (ii) a sale, lease, exchange or other transfer of all or substantially all of the assets of the Corporation, (iii) a sale of [all or substantially all] of the outstanding equity securities of the Corporation (whether pursuant to a merger, consolidation, recapitalization, share purchase or otherwise), or (iv) any other transaction or series of related transactions resulting in a Change of Control of the Corporation. "Effective Price" shall have the meaning set forth in Section 6(d)(vi). "Indebtedness" means all liabilities, contingent, fixed or otherwise, (a) for borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments or representing the deferred portion of the purchase price of any property, (c) secured by a lien, encumbrance or security interest upon property owned by the Corporation or its subsidiaries, or (d) relating to a capitalized lease obligation. "Investment" means all investments in any Person (including Affiliates) in the form of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances, capital contributions, transfers of assets outside the ordinary course of business consistent with past practice, purchases or other acquisitions for consideration of Indebtedness, equity interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Liquidation Value" shall mean, as to each share of Series II Preferred Stock, the Original Series II Issue Price, as adjusted for any stock split, Combination or subdivision. "Majority Preferred Stockholders" means holders of more than 50% of the outstanding Series II Preferred Stock. "Options" means any grant, issue or sale by the Corporation of any warrants, options or other rights to subscribe for or to purchase Common Stock or Convertible Securities. "Original Series II Issue Price" shall have the meaning set forth in Section 4(a). "Permitted Holders" means Alan Posner, Mark Streisfeld and their respective Affiliates. "Preferred Stock" means the Series I Preferred Stock and the Series II Preferred Stock. "Preferred Stock Approval" means an affirmative vote, at a meeting or by written consent, of the holders of more than 50% of the outstanding Series II Preferred Stock. "Purchase Date" means the date upon which shares of Series II Preferred Stock are first issued. "Redemption Date" means the date 45 days after the date of any Redemption Notice. "Redemption Notice" means a written notice by one or more holders of the Series II Preferred Stock to the Corporation stating their intention to exercise the Redemption Right and the number of each such holder's shares of the Series II Preferred Stock to be redeemed. "Redemption Price" means the per share Special Liquidation Payment calculated as of the Redemption Date. "Redemption Right" shall have the meaning set forth in Section 5. "Redemption Trigger Date" shall have the meaning set forth in Section 5. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder, or any similar United States federal statute. "Series I Preferred Stock" means the Series I Convertible Preferred Stock, $1.00 par value per share, of the Corporation. "Series II Preferred Stock Purchase Agreement" means that certain Series II Convertible Preferred Stock Purchase Agreement dated as of June 16, 2000, by and among the Corporation and those certain purchasers signatory thereto. "Series II Preferred Stock" shall have the meaning set forth in Section 1. "Stockholders Agreement" means that certain Stockholders Agreement dated as of June 16, 2000, by and among the Corporation, certain holders of Common Stock signatory thereto, certain holders of Series I Preferred Stock signatory thereto, and each purchaser of Series II Preferred Stock pursuant to the Series II Preferred Stock Purchase Agreement. "Special Liquidation Payment" shall have the meaning set forth in Section 4(a). *** IN WITNESS WHEREOF, the undersigned have executed this Certificate of Designations on June 16, 2000, and hereby certify under penalties of perjury that the Certificate of Designations is the act and deed of the Corporation, and that the statements therein are true. /s/ Mark Streisfeld --------------------- Mark Streisfeld President /s/ Alan Posner ------------------- Alan Posner Secretary EX-4.1 3 0003.txt MERIDIAN USA HOLDINGS, INC. SERIES A CONVERTIBLE NOTE DUE 2010 NO. 1 $8,000,000 Meridian USA Holdings, Inc., a Florida corporation (hereinafter called the "Corporation," which term includes any successors), for value received, hereby promises to pay to U.S. Bancorp Investments, Inc., or registered assigns, the principal sum of EIGHT MILLION DOLLARS ($8,000,000) on June 16, 2010. THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION 1. Interest. (a) General. Meridian USA Holdings, Inc., a Florida corporation (hereinafter called the "Corporation," which term includes any successors), promises to pay interest on the principal amount of this Note at the rate of 5.0% per annum. To the extent it is lawful, the Corporation promises to pay interest on any interest payment due but unpaid on such principal amount at a rate of 5.0% per annum compounded quarterly. The Corporation will pay interest quarterly on March 15, June 15, September 15 and December 15 of each year (each, an "Interest Payment Date"), commencing September 15, 2000. Interest on the Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid on the Securities, from June 16, 2000 to and including the earliest of (i) the date on which this Note is converted into Series II Preferred Stock in accordance with Section 6, or (ii) the date on which this Note is redeemed in accordance with Section 5. Accrued and unpaid interest from June 16, 2000 shall be paid in cash concurrently with the consummation of (i) a public offering of equity securities by the Corporation (other than equity securities registered pursuant to registration statements on Form S-4 or S-8 or any successor or similar forms), or (ii) a Designated Event. This Note shall entitle the holder thereof to receive interest prior and in preference to any dividend with respect to all shares of preferred stock and Common Stock. No dividend shall be paid on any series of preferred stock or the Common Stock unless and until all accrued and unpaid interest from the Purchase Date provided for in this Section 1(a) shall have been paid or all Notes shall have been redeemed or converted in accordance with Sections 5 or 6, respectively. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. (b) Special Interest. After all accrued and unpaid interest on this Note shall have been paid in cash as provided for in Section 1(a) and all preferential dividends on all series of Preferred Stock shall have been paid or declared and a sum sufficient for the payment thereof set apart, then the Corporation may (when, as and if declared by the Board) declare and distribute in such year dividends on the Common Stock; provided, however, that from and after such time as the holders of the Common Stock have received dividends on the Common Stock in an amount equal on a per share basis to the per annum interest paid pursuant to Section 1(a) (determined on an as-converted basis), no subsequent dividend on the shares of Common Stock shall be declared or paid unless and until interest of an equal amount per share is concurrently paid to the holders of the Notes (determined on an as-converted basis). (c) Termination. The Corporation's obligation to pay interest, including accrued and unpaid interest, with respect to this Note shall be extinguished on the Conversion Effective Date or the Redemption Date. 2. Method of Payment. The Corporation shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Corporation shall pay principal and interest in cash or, at the Corporation's election, such accrued interest may be added to the principal amount of this Note and shall accrue interest thereafter. 3. Paying Agent and Registrar. Initially, the Corporation will act as Paying Agent and Registrar. The Corporation may change the Paying Agent, Registrar or co-Registrar without notice to the Holders. The Corporation or any of its Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar or co-Registrar. 4. Liquidation Payments. (a) Special Liquidation Payment. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of this Note shall be entitled to receive, prior to any distribution of any of the assets of the Corporation to the holders of any series of preferred stock and the holders of Common Stock by reason of their ownership thereof, cash in an amount per $1,000 in principal amount of this Note equal to the sum of (i) $1,000.00 (the "Original Issue Price"), and (ii) an amount equal to all accrued but unpaid interest, if any, in respect of such principal amount (the "Accrued Interest" and together with the Original Issue Price, the "Special Liquidation Payment"). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Notes shall be insufficient to permit the payment to such holders of the full aforesaid amounts, then the entire assets and funds of the Corporation available for distribution shall be distributed ratably among the holders of the Notes. (b) Distributions after Special Liquidation Payment. Upon the completion of the distribution required by Section 4(a) and any preferential distribution to the Series I Preferred Stock, Series II Preferred Stock or any other series of preferred stock, the remaining assets of the Corporation available for distribution to stockholders shall be distributed ratably among the holders of the Notes, Series II Preferred Stock and the holders of the Common Stock according to the number of shares of Common Stock (1) then held, with respect to holders of the Common Stock, and (2) into which the then outstanding Notes and shares of Series II Preferred Stock are then convertible, with respect to holders of the Notes and Series II Preferred Stock. 5. Redemption. (a) Mandatory Redemption. If there remains outstanding any Note on or after the occurrence of a Designated Event (such date, the "Redemption Trigger Date"), each of the holders of the then outstanding Notes shall have the right to require the Corporation to redeem all or any of such holder's Notes in accordance with this Section 5 for cash in an amount per share equal to the Redemption Price, such right being referred to as the "Redemption Right". The Corporation shall give each holder of record of Notes written notice of such impending transaction not later than twenty (20) days prior to the stockholders' meeting called to approve such transaction, or twenty (20) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 5, and the Corporation shall thereafter give such holders prompt notice of any material change. The transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than fifteen (15) days after the Corporation has given notice of any material change provided for herein; provided, however, that such periods may be shortened upon the written consent of the Majority Noteholders. Within ten (10) days after the Redemption Trigger Date, the Corporation shall notify all holders of Notes that the Redemption Right may be exercised, and each holder of Notes shall have the right, exercisable by delivery of a Redemption Notice to the Corporation within thirty (30) days after receipt of such notice from the Corporation, to request that all or a portion of such holder's Notes be redeemed on the Redemption Date. The Corporation shall be obligated to redeem the total principal amount of Notes requested to be redeemed in accordance herewith on the Redemption Date. In the event that the Corporation does not have sufficient funds available for redemption of the Notes in accordance with this Section 5(a), the Corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 5(a) may be complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Notes shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 5(a). (b) Procedure. Each holder of Notes shall surrender the certificate or certificates representing such Notes to the Corporation, duly endorsed, at the office of the Corporation or any Paying Agent or Registrar for the Notes, and on the Redemption Date the full Redemption Price for such Notes so surrendered shall be payable in cash to the Person whose name appears on such certificate or certificates as the owner thereof. (c) Reissuance of Certificate. In case less than all of the principal amount of Notes represented by any certificate is redeemed in any installment, a new certificate representing the unredeemed principal amount of such of Note will be issued to the holder thereof without cost to such holder promptly after surrender of the certificate representing the redeemed principal amount of such Note. (d) Termination. The rights of the Corporation and the holders of the Notes under this Section 5 shall terminate and be of no effect upon the conversion of all Notes into shares of Series II Preferred Stock. 6. Conversion. The holders of the Notes shall have conversion rights as follows (the "Conversion Rights"): (a) Mandatory Conversion. Each $1,000 principal amount of Notes shall be automatically converted on June 16, 2001 at the office of the Corporation or any Paying Agent or Registrar for the Notes, into such number of fully paid and nonassessable shares of Series II Preferred Stock as is determined by dividing (x) the Special Liquidation Payment by (y) the Conversion Price, as adjusted from time to time in accordance with Sections 6(e), (f), (g), (h) and (i), in effect on the date the certificate is surrendered for conversion. (b) Right to Convert at the Option of the Holder. Each $1,000 principal amount of Notes shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such Note at the office of the Corporation or any Paying Agent or Registrar for the Notes, into such number of fully paid and nonassessable shares of Series II Preferred Stock as is determined by dividing (x) the Special Liquidation Payment by (y) the Conversion Price, as adjusted from time to time in accordance with Sections 6(e), (f), (g),(h) and (i), in effect on the date the certificate is surrendered for conversion; provided that notwithstanding any right of conversion of Notes provided for in this Section 6(b), provided that the Holder is a bank holding company or an Affiliate of a bank holding company, and has the authority to hold Series II Preferred Stock pursuant to Section 1843(k)(H) of the Bank Holding Company Act of 1956, as amended (the "BHCA") The occurrence of a Designated Event or the existence of a Redemption Right shall in no way limit the ability of a holder to convert Notes into shares of Series II Preferred Stock. (c) Right to Convert at the Option of the Corporation. Each $1,000 principal amount of Notes shall be convertible, at the option of the Corporation, at any time after the date of issuance of such Note, at the office of the Corporation or any Paying Agent or Registrar for the Notes, into such number of fully paid and nonassessable shares of Series II Preferred Stock as is determined by dividing (x) the Special Liquidation Payment by (y) the Conversion Price, as adjusted from time to time in accordance with Sections 6(e), (f), (g), (h) and (i), in effect on the date the certificate is surrendered for conversion; provided that the Holder is a bank holding company or an Affiliate of a bank holding company, and has the authority to hold Series II Preferred Stock pursuant to Section 1843(k)(H) of the BHCA. Mechanics of Conversion. Before any holder of Notes shall be entitled to convert the same into shares of Series II Preferred Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any Paying Agent or Registrar for the Notes, and shall give written notice to the Corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Series II Preferred Stock are to be issued. The Corporation shall, as soon as practicable thereafter, but in no event later than three (3) business days thereafter, issue and deliver at such office to such holder of Notes, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Series II Preferred Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Notes to be converted (except as otherwise provided in the immediately following sentence), and the person or persons entitled to receive the shares of Series II Preferred Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Series II Preferred Stock as of such date. If the conversion is (i) in connection with an underwritten offering of securities registered pursuant to the Securities Act, or (ii) in anticipation of a Designated Event, such conversion may, at the option of any holder tendering Notes for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering or the consummation of such Designated Event, as the case may be, in which event the person(s) entitled to receive the Series II Preferred Stock upon conversion of the Notes shall not be deemed to have converted such Notes until the closing of such sale of securities or consummation of such Designated Event. (d) Conversion Price Adjustments of Notes for Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the Notes shall be subject to adjustment from time to time as follows: (i) In the event the Corporation should at any time or from time to time after the Purchase Date fix a record date for the effectuation of a split or subdivision of the outstanding shares of Series II Preferred Stock or the determination of holders of Series II Preferred Stock entitled to receive a dividend or other distribution payable in additional shares of Series II Preferred Stock or Common Stock Equivalents without payment of any consideration by such holder for the additional shares of Series II Preferred Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise of Series II Preferred Stock), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price shall be appropriately decreased so that the number of shares of Series II Preferred Stock issuable on conversion of each Note shall be increased in proportion to such increase in the aggregate number of shares of Series II Preferred Stock outstanding and issuable with respect to such Common Stock Equivalents. (ii) If the number of shares of Series II Preferred Stock outstanding at any time after the Purchase Date is decreased by a combination of the outstanding shares of Series II Preferred Stock, then, following the record date of such combination, the Conversion Price shall be appropriately increased so that the number of shares of Series II Preferred Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in outstanding shares. (e) Conversion Price Adjustments for Sale of Shares Below Conversion Price. (i) If at any time or from time to time after the Purchase Date hereof, the Corporation issues or sells, or is deemed by the express provisions of this Section 6(f) to have issued or sold, Additional Shares of Series II Preferred Stock (as defined in clause (v) below)), other than upon a subdivision or combination of, or as a dividend or other distribution on, the Series II Preferred Stock as provided in Section 6(e), for an Effective Price less than the then existing Conversion Price, then the Conversion Price shall independently be reduced, as of the opening of business on the date of such issue or sale, to the price determined by multiplying the then existing Conversion Price by a fraction (A) the numerator of which shall be (1) the number of shares of Series II Preferred Stock outstanding immediately preceding the date of such issue or sale, plus (2) the number of shares of Series II Preferred Stock that the aggregate consideration received (or by the express provisions hereof deemed to have been received) by the Corporation for the total number of Additional Shares of Series II Preferred Stock so issued would purchase at the applicable existing Conversion Price, and (B) the denominator of which shall be the number of shares of Series II Preferred Stock outstanding at the close of business on the date of such issue after giving effect to such issue of Additional Shares of Series II Preferred Stock. (ii) For the purpose of making any adjustment required under this Section 6(f), the consideration received by the Corporation for any issue or sale of securities shall (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Corporation before deducting any expenses payable by the Corporation and any underwriting or similar commissions, compensation, or concessions paid or allowed by the Corporation in connection with such issue or sale, (B) to the extent it consists of property, be computed as determined in good faith by the Board and the Majority Noteholders, and (C) if Additional Shares of Series II Preferred Stock, Convertible Securities or rights or options to purchase either Additional Shares of Series II Preferred Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Corporation for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Series II Preferred Stock,Convertible Securities or rights or options, as the case may be. (iii) For the purpose of the adjustment required under this Section 6(f), if the Corporation issues or sells any Options to purchase Series II Preferred Stock or any Convertible Securities and if the Effective Price of the Additional Shares of Series II Preferred Stock underlying such Options or Convertible Securities is less than the Conversion Price then in effect, the Corporation shall be deemed to have issued at the time of the issuance of such Options or Convertible Securities the maximum number of Additional Shares of Series II Preferred Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Corporation for the issuance of such Options or Convertible Securities, plus, in the case of such Options, the minimum amount of consideration, if any, payable to the Corporation upon the exercise of such Options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion thereof. No further adjustment of the Conversion Price, adjusted upon the issuance of such Options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Series II Preferred Stock on the exercise of any such Options or the conversion of any such Convertible Securities. If the purchase price provided for in any Option or the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Series II Preferred Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted immediately to the Conversion Price that would have been in effect at such time had such Option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(f), if the terms of any Option or Convertible Security that was outstanding as of the Purchase Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Series II Preferred Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided,however, that no such change shall at any time cause the Conversion Price thereunder to be increased. If any such Options issued after the Purchase Date or the conversion privilege represented by any such Convertible Securities issued after the Purchase Date shall expire without having been exercised, the Conversion Price, adjusted upon the issuance of such Options or Convertible Securities issued after the Purchase Date shall be readjusted to the Conversion Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Series II Preferred Stock so issued were the Additional Shares of Series II Preferred Stock, if any, actually issued or sold on the exercise of such Options or rights of conversion of such Convertible Securities, and such Additional Shares of Series II Preferred Stock, if any, were issued or sold for the consideration actually received by the Corporation upon such exercise, plus the consideration, if any, actually received by the Corporation for the granting of all such Options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities. (iv) For the purpose of the adjustment required under this Section 6(f), if the Corporation issues or sells any Options for the purchase of Convertible Securities and if the Effective Price of the Additional Shares of Series II Preferred Stock underlying such Convertible Securities is less than the Conversion Price in effect, the Corporation shall be deemed to have issued at the time of the issuance of such Options the maximum number of Additional Shares of Series II Preferred Stock issuable upon conversion of the total amount of Convertible Securities covered by such Options and to have received as consideration for the issuance of such Additional Shares of Series II Preferred Stock an amount equal to the amount of consideration, if any, received by the Corporation for the issuance of such Options, plus the minimum amounts of consideration, if any, payable to the Corporation upon the exercise of such Options and plus the minimum amount of consideration, if any, payable to the Corporation (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion of such Convertible Securities. No further adjustment of the Conversion Price, adjusted upon the issuance of such Options, shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such Options or upon the actual issuance of Additional Shares of Series II Preferred Stock upon the conversion of such Convertible Securities. If the purchase price provided for in any Option or the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Series II Preferred Stock changes at any time, the Conversion Price in effect at the time of such change shall be adjusted immediately to the Conversion Price that would have been in effect at such time had such option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 6(f), if the terms of any Option or Convertible Security that was outstanding as of the Purchase Date are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Series II Preferred Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided that no such change shall at any time cause the Conversion Price thereunder to be increased. The provisions of clause (iii) above for the readjustment of the Conversion Price upon the expiration of Options or the rights of conversion of Convertible Securities shall apply, the necessary changes having been made, to the Options and Convertible Securities referred to in this subpart (iv). (v) "Additional Shares of Series II Preferred Stock" shall mean all shares of Series II Preferred Stock issued by the Corporation after the Purchase Date , whether or not subsequently reacquired or retired by the Corporation. (vi) The "Effective Price" of Additional Shares of Series II Preferred Stock shall mean the quotient determined by dividing the total number of Additional Shares of Series II Preferred Stock issued or sold, or deemed to have been issued or sold by the Corporation under this Section 6(f), into the aggregate consideration received, or deemed to have been received by the Corporation for such issue under this Section 6(f), for such Additional Shares of Series II Preferred Stock. (f) Other Distributions. In the event the Corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 6(f), then, in each such case for the purpose of this Section 6(g), the holders of the Notes shall be entitled to a share of any such distribution in accordance with Section 1 as though they were the holders of the number of shares of Common Stock into which the Notes and the shares of Series II Preferred Stock are convertible as of the record date fixed for the determination of the holders of Series II Preferred Stock entitled to receive such distribution. (g) Recapitalizations. If any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 6 or Section 4) provision shall be made so that the holders of the Notes and the Series II Preferred Stock shall thereafter be entitled to receive upon conversion of the Notes and the Series II Preferred Stock the number of shares of stock or other securities or property of the Corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 6 with respect to the rights of the holders of the Notes and the Series II Preferred Stock after the recapitalization to the end that the provisions of this Section 6 (including adjustment of the Conversion Price then in effect and the number of shares purchasable upon conversion of the Notes and the Series II Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable. (h) No Impairment. The Corporation will not, by amendment of the Certificate or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Notes and the Series II Preferred Stock against impairment. (i) Certificate as to Adjustments. (i) Within fifteen (15) days following the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Notes a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Notes, furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Conversion Price at the time in effect, and (C) the number of shares of Series II Preferred Stock and the amount, if any, of other property that at the time would be received upon the conversion of the Notes. (j) Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Corporation shall mail to each holder of Notes, at least fifteen (15) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (k) Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Series II Preferred Stock and Common Stock, solely for the purpose of effecting the conversion of the Notes and the Series II Preferred Stock, such number of its shares of Series II Preferred Stock and Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Notes and shares of Series II Preferred Stock; provided that, if at any time the number of authorized but unissued shares of Series II Preferred Stock or Common Stock shall not be sufficient to effect the conversion of all then outstanding Notes or shares of Series II Preferred Stock, in addition to such other remedies as shall be available to the holder of such Notes or Series II Preferred Stock, as the case may be, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Series II Preferred Stock or Common Stock, as the case may be, to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in its best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate; and provided, further that if at any time after the first anniversary of the Purchase Date (i) the number of authorized but unissued shares of Series II Preferred Stock shall not be sufficient to effect the conversion of all then outstanding shares of Notes, (ii) the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all than authorized shares of Series II Preferred Stock, or (iii) the Corporation fails for any other reason to honor the request of a holder of Notes or Series II Preferred Stock to convert Notes into shares of Series II Preferred Stock pursuant to Section 6 or to convert shares of Series II Preferred Stock into shares of Common Stock pursuant to the terms of the Series II Preferred Stock, in addition to such other remedies as shall be available to the holder of such Notes or Series II Preferred Stock, the Corporation shall pay to the holder of such Notes or Series II Preferred Stock liquidated damages in cash in an amount equal to three percent (3%) of the then current Special Liquidation Payment for each thirty (30) day period or portion thereof that such condition continues. (l) Notices. Any notice required or permitted by the provisions of this Section 6 to be given to the holders of Notes shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (i) three (3) days after deposit with the U.S. postal service or other applicable postal service, if delivered by first class mail, postage prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day after the day of deposit with Federal Express or similar overnight courier, freight prepaid, if delivered by overnight courier or (iv) one (1) business day after the day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed to each holder of record at such holder's address appearing on the books of the Corporation. 7. Consent of Noteholders Required. So long as any Notes are outstanding without first obtaining the approval of the Majority Noteholders, the Corporation shall not: (i) amend, alter or repeal the Certificate, Bylaws, or the Series II Designation, in a manner adverse to the holders of the Notes or Series II Preferred Stock, including, without limitation, any increase in the total number of authorized shares of Series II Preferred Stock. (ii) create, incur, assume or suffer to exist any Indebtedness in excess of $5,000,000; (iii) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible or exercisable for an equity security, on parity with or senior to the Series II Preferred Stock in any respect, including without limitation, as to dividend rights, liquidation preferences, voting rights, redemption or conversion rights; (iv) purchase, redeem, or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any shares of the Corporation's equity securities, other than redemptions of shares of Series II Preferred Stock pursuant to Section 5 of the Series II Designation; (v) declare or pay any dividend or other distribution, direct or indirect (or set apart any sum for such purpose) whether in cash, indebtedness or other assets or securities, upon the Corporation's equity securities other than a dividend or distribution on the Series II Preferred Stock; (vi) enter in to an agreement to effect any sale, lease, assignment, transfer or other conveyance of any material assets of the Corporation, or any merger, material acquisition, reorganization, or recapitalization involving the Corporation other than inventory in the ordinary course of business consistent with past practice; (vii) enter into a single transaction or series of transactions with or for the benefit of an Affiliate of the Corporation other than the employment agreements between the Corporation and each of Messrs. Posner and Streisfeld as in effect on the Purchase Date; (viii) enter into a line of business that is unrelated to the food and beverage business or otherwise substantially change or modify the Corporation's line of business as it existed on the Purchase Date; (ix) purchase, lease or otherwise acquire assets (other than inventory) or make other capital expenditures in a single transaction or series of transactions over the course of a fiscal year with an aggregate fair market value in excess of $750,000 in any such fiscal year; (x) increase the salary, wages or other compensation of any director,officer, employee or consultant of the Corporation, establish or modify the salary ranges, guidelines or similar provisions in respect of any benefit plan, employment-related contract or other employee compensation arrangement or pay discretionary bonuses or other compensation, other than (i) any increase in the salary, wages or other compensation of officers, employees or consultants of the Corporation (other than Messrs. Posner and Streisfeld and their respective family members) in the ordinary course of business consistent with past practice, (ii) any increase in the salary, wages, or other compensation of Messrs. Posner or Streisfeld to reflect increases in the Consumer Price Index for the Miami metropolitan area, or (iii) annual bonuses paid pursuant to an annual bonus plan established by the Board to pay officers or employees of the Corporation (which may include Messrs. Posner and Streisfeld and their respective family members) in an aggregate amount not to exceed seven and one-half percent (7.5%) of EBITDA for such fiscal year; (xi) make any payments or otherwise provide compensation to any Affiliates, directors, officers or employees under management, consulting, advisory, severance, employment or similar agreements or other arrangements other than as required by contracts or agreements existing on the Purchase Date or permitted by Section 7(x) above; (xii) directly or indirectly, pay or make a commitment to pay any severance or termination pay to any officer, employee or agent who is directly or indirectly a stockholder of the Corporation other than as required by contracts or agreements existing on the Purchase Date; (xiii) make or permit to remain outstanding any Investments (other than Permitted Investments) exceeding $50,000 in any fiscal year other than loans, advances or other extensions of credit in the nature of deposits with or advance payments to subcontractors and suppliers made in the ordinary course of business consistent with past practice; (xiv) make any Investment in an Affiliate, transfer any assets or property to an Affiliate, merge into or consolidate with or purchase or acquire assets or property from an Affiliate, guarantee or assume any Indebtedness or other obligation of an Affiliate, enter into any other transaction, directly or indirectly, with or for the benefit of an Affiliate, unless such transaction or series of related transactions are between the Company and a wholly-owned subsidiary or two wholly-owned subsidiaries of the Company; (xv) effect any liquidation, dissolution or winding up of the Corporation; and (xvi) authorize or issue, or obligate itself to issue, any equity security (including options, warrants and other similar rights) other than pursuant to the Corporation's 1999 Stock Incentive Plan as such plan is in effect on the Purchase Date and amended thereafter to increase the maximum aggregate shares included in such plan to not more than 1,000,000 shares of Common Stock or pursuant to the conversion of the Preferred Stock or the exercise of warrants or options outstanding on the Purchase Date, or authorize or issue shares of the Common Stock pursuant to such stock option/stock issuance plan in an aggregate amount in excess of 1,000,000 shares of Common Stock. 8. Definitions. "Additional Shares of Series II Preferred Stock" shall have the meaning set forth in Section 6(d)(v). "Affiliate" means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with the Corporation. "Board" shall mean the Corporation's Board of Directors. "Certificate" shall mean the Corporation's articles of incorporation, as from time to time in effect. "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation; (ii) any other person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing greater than 50% ofthe aggregate ordinary voting power for the election of directors of the Corporation; or (iii) during any two-year period the directors who constituted the Board at the beginning of such period, (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Corporation was approved by a vote of at least a majority of the directors of the Corporation then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office. "Common Stock Equivalents" shall mean Options and Convertible Securities. "Consolidated Net Income" means with respect to any period, the net income of the Corporation for such period determined on a consolidated basis in accordance with GAAP, adjusted by excluding, (a) all extraordinary gains (but not losses) for such period, (b) all gains (but not losses) from sales or other dispositions of assets out of the ordinary course of business (net of taxes, fees and expenses relating to the transaction giving rise thereto) for such period, (c) that portion of such net income derived from or in respect of investments, except to the extent actually received in cash by the Corporation, and (d) the net income (or loss) or any other entity combined with the Corporation on a "pooling of interests" basis attributable to any period prior to the date of combination. "Conversion Effective Date" shall mean, with respect to each Note, the date so elected by the holder of such Note pursuant to Section 6. "Conversion Price" means initially $1,000 per share of Series II Preferred Stock; provided, however, that the Conversion Price shall be subject to adjustment as provided in Section 6. "Conversion Rights" shall have the meaning set forth in Section 6. "Convertible Securities" means securities convertible into or exchangeable for Series II Preferred Stock. "Corporation" means Meridian USA Holdings, Inc., a Florida corporation. A "Designated Event" means (i) the acquisition of the Corporation by another entity (including, without limitation, any reorganization, merger or consolidation, but excluding any merger effected exclusively for the purpose of changing the domicile of the Corporation), (ii) a sale, lease, exchange or other transfer of all or substantially all of the assets of the Corporation, (iii) a sale of all or substantially all of the outstanding equity securities of the Corporation (whether pursuant to a merger, consolidation, recapitalization, share purchase or otherwise), or (iv) any other transaction or series of related transactions resulting in a Change of Control of the Corporation. "EBITDA" means the sum of, without duplication, (i) Consolidated Net Income for such period, plus (ii) consolidated interest expense for such period, determined in accordance with GAAP, plus (iii) all cash dividend payments on any series of preferred stock or Series II Preferred Stock of the Corporation for such period, determined in accordance with GAAP, plus (iv) provision for taxes based on income or profits for such period, determined in accordance with GAAP, plus (v) consolidated depreciation, amortization and other non-cash charges of the Corporation and its subsidiaries required to be reflected as expenses on the books and records of the Corporation for such period, determined in accordance with GAAP, minus (vi) cash payments made in such period with respect to any recurring non-cash charges previously added back pursuant to clause (iv). "Effective Price" shall have the meaning set forth in Section 6(d)(vi). "GAAP" means generally accepted accounting principles consistently applied. "Indebtedness" means all liabilities, contingent, fixed or otherwise, (a) for borrowed money, (b) evidenced by bonds, notes, debentures or similar instruments or representing the deferred portion of the purchase price of any property, (c) secured by a lien, encumbrance or security interest upon property owned by the Corporation or its subsidiaries, or (d) relating to a capitalized lease obligation. "Investment" means all investments in any Person (including Affiliates) in the form of direct or indirect loans (including guarantees of Indebtedness or other obligations),advances, capital contributions, transfers of assets outside the ordinary course of business consistent with past practice, purchases or other acquisitions for consideration of Indebtedness, equity interests or other securities and all other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Majority Noteholders" means holders of more than 50% of the outstanding Notes. "Notes" means the Series A Convertible Notes of the Corporation due 2010. "Options" means any grant, issue or sale by the Corporation of any warrants, options or other rights to subscribe for or to purchase Series II Preferred Stock or Convertible Securities. "Original Issue Price" shall have the meaning set forth in Section 4(a). "Permitted Holders" means Alan Posner, Mark Streisfeld and their respective Affiliates. "Permitted Investments" means (a) U.S. dollar denominated time deposits or certificates of deposit or (b) interests in regulated money market mutual funds which invest solely in (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) or (ii) assets described in clause (a) above. "Preferred Stock" means the Series I Preferred Stock and the Series II Preferred Stock. "Purchase Agreement" means that certain Securities Purchase Agreement dated as of June 16, 2000, by and among the Corporation and those certain purchasers signatory thereto. "Purchase Date" means June 16, 2000. "Redemption Date" means the date 45 days after the date of any Redemption Notice. "Redemption Notice" means a written notice by one or more holders of Notes to the Corporation stating their intention to exercise the Redemption Right and the principal amount of each such holder's Notes to be redeemed. "Redemption Price" means the per share Special Liquidation Payment calculated as of the Redemption Date. "Redemption Right" shall have the meaning set forth in Section 5. "Redemption Trigger Date" shall have the meaning set forth in Section 5. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder, or any similar United States federal statute. "Securityholders Agreement" means that certain Securityholders Agreement dated as of June 16, 2000, by and among the Corporation, certain holders of Series II Preferred Stock signatory thereto, certain holders of Series I Preferred Stock signatory thereto, and each purchaser of Notes pursuant to the Purchase Agreement. "Series I Preferred Stock" means the Series I Convertible Preferred Stock, $1.00 par value per share, of the Corporation. "Series II Preferred Stock" means the Series II Convertible Preferred Stock,$.01 par value per share, of the Corporation. "Special Liquidation Payment" shall have the meaning set forth in Section 4(a). IN WITNESS WHEREOF, the Corporation has caused this Instrument to be duly executed. MERIDIAN USA HOLDINGS, INC. /s/ Mark Streisfeld - ------------------------ Mark Streisfeld President Attest: /s/ Alan Posner - ------------------- Alan Posner Secretary EX-4.2 4 0004.txt WARRANT THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 6 OF THIS WARRANT. MERIDIAN USA HOLDINGS, INC. WARRANT TO PURCHASE 698,947 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE (this "Warrant") Warrant No. __ MERIDIAN USA HOLDINGS, INC, a Florida corporation (the "Company"), hereby certifies that, for value received, U.S. Bancorp Investments, Inc. (the "Holder"), or registered assigns, is the registered holder of a warrant (the "Warrant") to subscribe for and purchase 698,947 shares of the fully paid and nonassessable Common Stock, par value $.001 per share (as adjusted pursuant to Section 4 hereof, the "Warrant Shares") of the Company, at the price of $1.75 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term "Common Stock" shall mean the Company's presently authorized Common Stock, par value $.001 per share, and any stock into or for which such Common Stock may hereafter be converted or exchanged in a transaction described in paragraph (d) of Section 4, (b) the term "Date of Grant" shall mean June 16, 2000, and (c) the term "Other Warrants" shall mean any warrant issued upon transfer or partial exercise of this Warrant. The term "Warrant" as used herein shall be deemed to include Other Warrants unless the context hereof or thereof clearly requires otherwise. The term "Securityholder(s)" as used herein means the Holder and the other entity(ies) or person(s) purchasing securities of the Company in connection with the transaction pursuant to which Holder has purchased this Warrant, if any. 1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through and including the close of business on the seventh anniversary of the Date of Grant (the "Expiration Date"). 2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, 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 Exhibit A duly executed) to the Company at its address listed on the signature page hereto,along with (i) the delivery of cash, or a certified or official bank check in the amount of such Warrant Price, (ii) by an instruction to the Company to withhold a number of Warrant Shares then issuable upon exercise of the particular Warrant pursuant to Section 8.2 below (the "Net Exercise Option"), (iii) the surrender to the Company of shares of Common Stock previously acquired by the Holder with an aggregate Fair Market Value (as defined in Section 4(i)) equal to such Warrant Price, or (iv) any combination of the foregoing. In the event of any withholding of Warrant Shares or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Fair Market Value is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded down to the nearest whole share; provided that the Holder is (i) not subject to the Bank Holding Company Act of 1956, as amended (the "BHCA") or (ii) a bank holding company or an Affiliate (as defined below) of a bank holding company and has the authority to hold Capital Stock pursuant to Section 1843(k)(H) of the BHCA. The person or persons in whose name(s) any certificate(s) representing shares of Common Stock shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within three (3) business days after such exercise and, unless this Warrant has been fully exercised, a new Warrant representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such three (3) business day period. The term "Affiliate" means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such Holder. 3. Stock Fully Paid; Reservation of Shares. All Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes (other than any taxes determined with respect to, or based upon, the income of the person to whom such shares are issued), liens and charges (other than liens or charges created by actions of the holder of this Warrant or the person to whom such shares are issued), and preemptive rights with respect to the issue thereof. The Company shall pay all transfer taxes, if any, attributable to the issuance of the Warrant Shares upon the exercise of this Warrant. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Warrant Price and Number of Shares. 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. Warrant Price Adjustments of Common Stock for Certain Dilutive Issuances, Splits and Combinations. The Warrant Price of the Common Stock shall be subject to adjustment from time to time as follows: i. In the event the Company should at any time or from time to time after the Date of Grant fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of (i) Common Stock, (ii) warrants, options or other rights to subscribe for or to purchase Common Stock or Convertible Securities ("Options"), or (iii) securities convertible into or exchangeable for Common Stock. ("Convertible Securities," and together with Options, "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the Warrant Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon the exercise of this Warrant shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding and issuable with respect to such Common Stock Equivalents. ii. If the number of shares of Common Stock outstanding at any time after the Date of Grant is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Warrant Price shall be appropriately increased so that the number of shares of Common Stock issuable upon the exercise of this Warrant shall be decreased in proportion to such decrease in outstanding shares. b. Warrant Price Adjustments for Sale of Shares Below Conversion Price. i. If at any time or from time to time after the Date of Grant, the Company issues or sells, or is deemed by the express provisions of this Section 4(b) to have issued or sold, Additional Shares of Common Stock (as defined in clause v below)), other than upon a subdivision or combination of, or as a dividend or other distribution on, the Common Stock as provided in Section 4(b), for an Effective Price less than the then existing Conversion Price, then the Warrant Price shall independently be reduced, as of the opening of business on the date of such issue or sale, to the price determined by multiplying the then existing Warrant Price by a fraction (A) the numerator of which shall be (1) the number of shares of Common Stock outstanding immediately preceding the date of such issue or sale, plus (2) the number of shares of Common Stock that the aggregate consideration received (or by the express provisions hereof deemed to have been received) by the Company for the total number of Additional Shares of Common Stock so issued would purchase at the applicable existing Conversion Price, and (B) the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the date of such issue after giving effect to such issue of Additional Shares of Common Stock; provided, however, that for the purposes of this clause (i), all shares of Common Stock that would be issuable upon the exercise in full of this Warrant shall be deemed to be outstanding. ii. For the purpose of making any adjustment required under this Section 4(b), the consideration received by the Company for any issue or sale of securities shall (A) to the extent it consists of cash, be computed at the gross amount of cash received by the Company before deducting any expenses payable by the Company and any underwriting or similar commissions, compensation, or concessions paid or allowed by the Company in connection with such issue or sale, (B) to the extent it consists of property, be computed as determined in good faith by the Board and (C) if Additional Shares of Common Stock, Convertible Securities or rights or options to purchase either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities or other assets of the Company for a consideration that covers both, be computed as the portion of the consideration so received that may be reasonably determined in good faith by the Board to be allocable to such Additional Shares of Common Stock, Convertible Securities or rights or options, as the case may be. iii. For the purpose of the adjustment required under this Section 4(b),if the Company issues or sells any Options to purchase Common Stock or any Convertible Securities and if the Effective Price of the Additional Shares of Common Stock underlying such Options or Convertible Securities is less than the Warrant Price then in effect, the Company shall be deemed to have issued at the time of the issuance of such Options or Convertible Securities the maximum number of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for the issuance of such shares an amount equal to the total amount of the consideration, if any, received by the Company for the issuance of such Options or Convertible Securities, plus, in the case of such Options, the minimum amount of consideration, if any, payable to the Company upon the exercise of such Options, plus, in the case of Convertible Securities, the minimum amounts of consideration, if any, payable to the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion thereof. No further adjustment of the Conversion Price, adjusted upon the issuance of such Options or Convertible Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such Options or the conversion of any such Convertible Securities. If the purchase price provided for in any Option or the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Warrant Price in effect at the time of such change shall be adjusted immediately to the Warrant Price that would have been in effect at such time had such Option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 4(b), if the terms of any Option or Convertible Security that was outstanding as of the Date of Grant are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided, however, that no such change shall at any time cause the Warrant Price thereunder to be increased. If any such Options issued after the Date of Grant or the conversion privilege represented by any such Convertible Securities issued after the Date of Grant shall expire without having been exercised, the Conversion Price, adjusted upon the issuance of such Options or Convertible Securities issued after the Date of Grant shall be readjusted to the Warrant Price that would have been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if any, actually issued or sold on the exercise of such Options or rights of conversion of such Convertible Securities, and such Additional Shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the consideration, if any, actually received by the Company for the granting of all such Options, whether or not exercised, plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration, if any, actually received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on the conversion of such Convertible Securities. iv. For the purpose of the adjustment required under this Section 4(b), if the Company issues or sells any Options for the purchase of Convertible Securities and if the Effective Price of the Additional Shares of Common Stock underlying such Convertible Securities is less than the Warrant Price in effect, the Company shall be deemed to have issued at the time of the issuance of such Options the maximum number of Additional Shares of Common Stock issuable upon conversion of the total amount of Convertible Securities covered by such Options and to have received as consideration for the issuance of such Additional Shares of Common Stock an amount equal to the amount of consideration, if any, received by the Company for the issuance of such Options, plus the minimum amounts of consideration, if any, payable to the Company upon the exercise of such Options and plus the minimum amount of consideration, if any, payable to the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) upon the conversion of such Convertible Securities. No further adjustment of the Warrant Price, adjusted upon the issuance of such Options, shall be made as a result of the actual issuance of the Convertible Securities upon the exercise of such Options or upon the actual issuance of Additional Shares of Common Stock upon the conversion of such Convertible Securities. If the purchase price provided for in any Option or the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Securities or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Warrant Price in effect at the time of such change shall be adjusted immediately to the Warrant Price that would have been in effect at such time had such option or Convertible Security originally provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 4(b), if the terms of any Option or Convertible Security that was outstanding as of the Date of Grant are changed in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change; provided that no such change shall at any time cause the Warrant Price thereunder to be increased. The provisions of clause (iii) above for the readjustment of the Warrant Price upon the expiration of Options or the rights of conversion of Convertible Securities shall apply, the necessary changes having been made, to the Options and Convertible Securities referred to in this subpart (iv). v. "Additional Shares of Common Stock" shall mean all shares of Common Stock issued by the Company after the Date of Grant ,whether or not subsequently reacquired or retired by the Company, other than shares of Common Stock issued (A) upon conversion of the Company's Preferred Stock; (B) to officers, employees or directors of, or consultants, contractors and advisors to, the Company or any subsidiary (other than Messrs. Galant, Posner and Streisfeld and their respective family members) pursuant to any stock purchase or stock option plans or other awards, contracts or arrangements that are approved by the Company's Board of Directors, which when added together with all such other plans, awards, contracts, or arrangements, if not to exceed 250,000 shares of Common Stock in the aggregate (other than Options, warrants or shares described in clause (D)); (C) a stock split or stock dividend; or (D) pursuant to Options, warrants, notes or other rights, if any, to acquire securities of the Company, that are in existence on, or required by the terms of contracts or agreements existing on, the Date of Grant. vi. The "Effective Price" of Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of Common Stock issued or sold, or deemed to have been issued or sold by the Company under this Section 4(b)), into the aggregate consideration received, or deemed to have been received by the Company for such issue under this Section 4(b), for such Additional Shares of Common Stock. c. Other Distributions. In the event the Company shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in Section 4(b), then, in each such case for the purpose of this Section 4(c), the Holder shall be entitled to a share of any such distribution as though they were the holders of the number of shares of Common Stock for which this Warrant is exercisable, as of the record date fixed for the determination of the holders of Common Stock entitled to receive such distribution. d. Recapitalizations. If any time or from time to time there shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere herein) provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant the number of shares of stock or other securities or property of the Company or otherwise, to which a holder of Common Stock deliverable upon such exercise would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the Holder after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Warrant Price then in effect and the number of shares for which this Warrant can be exercised) shall be applicable after that event as nearly equivalent as may be practicable. e. No Impairment. The Company will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. f. No Fractional Shares and Certificate as to Adjustments. No fractional shares shall be issued upon the exercise of this Warrant; in lieu of such fractional shares the Company shall make a cash payment therefor based on the Fair Market Value of a share of Common Stock on the date of exercise. g. Reservation of Stock Issuable Upon Exercise. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of this Warrant, such number of its shares of Common Stock as shall from time to time be sufficient to effect the exercise in full of this Warrant; provided that, if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise in full of this Warrant, in addition to such other remedies as shall be available to the Holder, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in its best efforts to obtain the requisite stockholder approval of any necessary amendment to its Articles of Incorporation. h. Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, 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 in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter calculated to five decimal places. i. Determination of Fair Market Value. For purposes of this Warrant, "Fair Market Value" of a share of Common Stock as of a particular date (the "Determination Date") shall mean (i) if shares of Common Stock are traded on a national securities exchange (an "Exchange"), the weighted average of the closing prices of a share of the Common Stock of the Company on the last five (5) trading days prior to the Determination Date reported on such Exchange as reported in The Wall Street Journal (weighted with respect to the trading volume with respect to each such day), (ii) if shares of Common Stock are not traded on an Exchange but trade in the over-the-counter market and such shares are quoted on the NASDAQ National Market ("NASDAQ"), (A) the average of the last sale prices reported on NASDAQ or (B) if such shares are an issue for which last sale prices are not reported on NASDAQ, the average of the closing bid and ask prices, in each case on the last five (5) trading days (or if the relevant price or quotation did not exist on any of such days, the relevant price or quotation on the next preceding business day on which there was such a price or quotation) prior to the Determination Date as reported in The Wall Street Journal, or (iii) if no price can be determined on the basis of the above methods of valuation, then the judgment of valuation shall be determined in good faith by the Board of Directors of the Company, which determination shall be described in a duly adopted board resolution certified by the Company's Secretary or Assistant Secretary. If the Board of Directors of the Company is unable to determine any Valuation (as defined below), or if the holders of at least fifty-one percent (51%) of all of the Warrant Shares then issuable hereunder (collectively, the "Requesting Holders") disagree with the Board's determination of any Valuation by written notice delivered to the Company within ten (10) business days after the determination thereof by the Board of Directors of the Company is communicated to holders of the Warrants affected thereby, which notice specifies a majority-in-interest of the Requesting Holders' determination of such Valuation, then the Company and a majority-in-interest of the Requesting Holders shall select a mutually acceptable investment banking firm of national reputation which has not had a material relationship with the Company or any officer of the Company within the preceding two (2) years, which shall determine such Valuation. Such investment banking firm's determination of such Valuation shall be final, binding and conclusive on the Company and the holders of all of the Warrants issued hereunder and then outstanding. If the Board of Directors of the Company was unable to determine such Valuation, all costs and fees of such investment banking firm shall be borne by the Company. If the Requesting Holders disagreed with the Board's determination of such Valuation, the party whose determination of such Valuation differed from the Valuation determined by such investment banking firm by the greatest amount shall bear all costs and fees of such investment banking firm. For purposes of this Section 4(j), the term "Valuation" shall mean the determination, to be made initially by the Board of Directors of the Company, of the Fair Market Value per share of Common Stock pursuant to clause (iii) above. j. If, at any time after any adjustment of the Warrant Price shall have been made hereunder as the result of any issuance, sale or grant of any rights, options, warrants or convertible or exchangeable securities, any of such rights, options or warrants or the rights of conversion or exchange associated with such convertible or exchangeable securities shall expire by their terms or any of such rights, options, warrants or convertible or exchangeable securities shall be repurchased by the Company or a subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such rights, options, warrants or convertible or exchangeable securities, the Warrant Price then in effect shall forthwith be increased to the Warrant Price that would have been in effect if such expiring right, option or warrant or rights of conversion or exchange or such repurchased rights, options, warrants or convertible or exchangeable securities had never been issued. Similarly, if at any time after any such adjustment of the Warrant Price shall have been made pursuant to subparagraph (c) above (i) any additional aggregate consideration is received or becomes receivable by the Company in connection with the issuance of exercise of such rights, options, warrants or convertible or exchangeable securities or (ii) there is a reduction in the conversion or exchange ratio applicable to such convertible or exchangeable securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such rights, options or warrants, the Warrant Price then in effect shall be forthwith readjusted to the Warrant Price that would have been in effect had such changes taken place at the time that such rights, options, warrants or convertible or exchangeable securities were initially issued, granted or sold. In no event shall any readjustment under this subparagraph (i) affect the validity of any Warrant Shares issued upon any exercise of this Warrant prior to such readjustment. 5. Required Notices. 5.1 Notice of Adjustments. Whenever the Warrant Price or the number of Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall promptly deliver to the holder of this Warrant a certificate signed by its chief financial 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. The Company shall, upon the written request at any time of the Holder, furnish or cause to be furnished to the Holder a like certificate setting forth (A) the Warrant Price at the time in effect, and (B) the number of shares of Common Stock and the amount, if any, of other property that at the time would be received upon the exercise of this Warrant. 5.2 Other Notices. If at any time prior to Expiration Date: (a) the Company shall declare any dividend payable in any securities or make any distribution to its shareholders; (b) the Company shall offer to its shareholders any additional shares of Common Stock or securities convertible into Common Stock or any right to subscribe for, purchase or otherwise acquire Common Stock, securities convertible or exchangeable into Common Stock or other securities or property; or (c) a dissolution or winding up of the company (other than in connection with a consolidation, merger or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed; then in any one or more of such events, the Company shall give notice in writing of such event to the Holder at least 15 days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution or subscription rights, or for the determination of shareholders entitled to vote on such proposed dissolution, liquidation or winding up. Such notice shall specify such record date or date of the closing of the transfer books, as the case may be. 6. Compliance with Securities Act; Disposition of Warrant or Warrant Shares. a. Compliance with Securities Act. The holder of this Warrant, 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 Securities Act of 1933, as amended (the "Act"). Upon exercise of this Warrant, the holder hereof shall confirm in writing, by executing the form 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. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 6 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED DIRECTLY OR INDIRECTLY." In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows: i. The holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant 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 Act. ii. The holder understands that this Warrant and the Warrant Shares 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 holder's investment intent as expressed herein. In this connection, the holder understands that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if the holder's representation was predicated solely upon a present intention to hold the Warrant and the Warrant Shares for the minimum capital gains period specified under applicable tax laws, for a peferred sale, for or until an increase or decrease in the market price of the Warrant and the Warrant Shares, or for a period of one (1) year or any other fixed period in the future. iii. The holder further understands that this Warrant and the Warrant Shares must be held indefinitely unless subsequently registered under the Act and any applicable state securities laws, or unless exemptions from registration are otherwise available. iv. The holder 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) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated therein. v. The holder further understands that at the time it wishes to sell this Warrant and the Warrant Shares 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 holder may be precluded from selling this Warrant and the Warrant Shares under Rule 144 and 144A even if the one (1)-year minimum holding period had been satisfied. vi. The holder 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 and 144A 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 and 144A will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. b. Disposition of Warrant or Warrant Shares. With respect to any offer, sale or other disposition of this Warrant, or any Warrant Shares acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or Warrant Shares, the holder hereof and each subsequent holder of this Warrant agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, if reasonably requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state law then in effect) of this Warrant or such Warrant Shares and indicating whether or not under the Act certificates for this Warrant or such Warrant Shares to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with applicable law. Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such Warrant Shares, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this subsection (b) that the opinion of counsel for the holder is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly after such determination has been made and neither this Warrant nor any Warrant shall be sold or otherwise disposed of until such disagreement has been resolved. The foregoing notwithstanding, this Warrant or such Warrant Shares may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 and 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 and 144A have been satisfied. Each certificate representing this Warrant or the Warrant Shares thus transferred (except a transfer pursuant to Rule 144) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent or, if acting as its own transfer agent, the Company may stop transfer on its corporate books, in connection with such restrictions. 7. Rights as Stockholders; Information. No holder of this Warrant, 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 of this Warrant, 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 and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the stockholders. 8. Additional Rights. 8.1 Mergers. In the event that the Company undertakes to (i) sell, lease, exchange, convey or otherwise dispose of all or substantially all of its property or business, or (ii) merge into or consolidate with any other corporation (other than a wholly-owned subsidiary of the Company), or effect any transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of, the Company will use its best efforts to provide at least thirty (30) days notice of the terms and conditions of the proposed transaction. 8.2 Right to Convert Warrant into Common Stock; Net Issuance. a. Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the "Conversion Right") into shares of Common Stock as provided in this Section 8.2 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) that number of shares of fully paid and nonassessable Common Stock equal to the quotient obtained by dividing (i) the value of this Warrant (or the specified portion hereof) on the Conversion Date (as defined in subsection (b) hereof), which value shall be equal to (A) the aggregate Fair Market Value of the Converted Warrant Shares issuable upon exercise of this Warrant (or the specified portion hereof) on the Conversion Date less (B) the aggregate Warrant Price of the Converted Warrant Shares immediately prior to the exercise of the Conversion Right by (ii) the Fair Market Value of one (1) share of Common Stock on the Conversion Date. Expressed as a formula, such conversion shall be computed as follows: X = A - B ------- Y Where: X = the number of shares of Common Stock that may be issued to holder Y = the Fair Market Value (FMV) of one (1) share of Common Stock A = the aggregate FMV (i.e., FMV x Converted Warrant Shares) B = the aggregate Warrant Price (i.e., Converted Warrant Shares x Warrant Price) No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the Fair Market Value of the resulting fractional share on the Conversion Date. For purposes of Section 8 of this Warrant, shares issued pursuant to the Conversion Right shall be treated as if they were issued upon the exercise of this Warrant. b. Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in subsection (a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"). Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date. 9. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows: a. This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors; b. The Warrant Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; c. The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and the holders thereof are as set forth in the certificate of incorporation of the Company, as amended to the Date of Grant (as so amended, the "Charter"), a true and complete copy of which has been delivered to the original holder of this Warrant; d. The execution and delivery of this Warrant are not, and the issuance of the Warrant Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Charter or by-laws of the Company, do not and will not contravene, in any material respect, any governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby and except for such conflicts and contraventions as will not, individually or in the aggregate, have or reasonably be expected to have, a material adverse effect on the Warrant Shares so issued or the Company's ability to perform its obligations hereunder; e. There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Company to perform its obligations under this Warrant; f. The authorized capital stock of the Company consists of the following: i. 20,000,000 shares of Common Stock, 6,191,399 of which are issued and outstanding as of the Date of Grant. ii. 1,000,000 shares of Preferred Stock, $1.00 par value (the "Preferred Stock"), 3,500 of which have been designated Series I Preferred Stock (the "Series I Preferred") (3,500 of which are issued and outstanding as of the Date of Grant); and 8,500 of which as of the Date of Grant will have been designated Series II Preferred Stock (the "Series II Preferred") (none of which shall be issued and outstanding at the Date of Grant.) g. Other than as set forth in Schedule 9, there are no subscriptions, warrants, options, convertible securities, and other rights (contingent or otherwise) to purchase or otherwise acquire (directly or indirectly) equity securities of the Company (the "Other Securities"). Schedule 9 includes the number of shares of equity securities underlying such Other Securities, the exercise or conversion price of such Other Securities, the date such Other Securities were issued, the date such Other Securities are exercisable or convertible and any expiration date with respect thereto. The Company has reserved 2,063,030 shares of Common Stock for issuance upon conversion of the currently outstanding shares of Preferred Stock and exercise or conversion of the Other Securities. h. The Company has reserved 492,500 shares of Common Stock for issuance of options and restricted stock to directors, employees or consultants pursuant to stock plans or other compensatory arrangements approved by the Board of Directors of the Corporation, of which shares 392,500 have been issued and are outstanding as of the date hereof. Except (i) as set forth above in this Section g, (ii) for the rights granted in this Warrant, the $8,000,000 aggregate principal amount of Series A Convertible Notes of the Company due 2010, and the Series II Preferred, and (iii) for the rights granted to holders of Series I Preferred pursuant to the Series I Designation, as of the date hereof there are outstanding no subscriptions, options, calls, warrants, conversion privileges, preemptive rights, rights of first refusal or other similar commitments or rights to which the Company is a party or by which the Company is bound, with respect to the purchase or other acquisition of any of the authorized but unissued capital stock of the Company. All of the outstanding securities of the Company were issued in compliance with all applicable Federal and state securities laws. i. The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Common Stock or any security convertible into or exchangeable for any of its Common Stock. 10. 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 party against which enforcement of the same is sought. 11. Notices. Unless otherwise specifically provided herein, all communications under this Warrant shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent by facsimile transmission to the number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, (iii) on the day after delivery to Federal Express or similar overnight courier, or (iv) 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 11 by giving the other party written notice of the new address in the manner set forth herein. 12. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. The Company will, at the time of the exercise or conversion of this Warrant, in whole or in part, upon request of the holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the holder hereof in respect of any rights to which the holder hereof shall continue to be entitled after such exercise or conversion in accordance with this Warrant; provided, that the failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the holder hereof in respect of such rights. 13. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any loss, theft or destruction, upon receipt of an executed lost securities bond or indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 14. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. 15. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York, without giving effect to conflict of law principles. 16. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) and the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative. 17. Remedies. In case any one (1) or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant. 18. Acceptance. Receipt of this Warrant by the holder hereof shall constitute acceptance of and agreement to the foregoing terms and conditions. 19. No Impairment of Rights. The Company will not, by amendment of its Articles 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 impairment. [Signature page follows.] Signature Page 1 of 1 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on its behalf by one of its officers thereunto duly authorized. MERIDIAN USA HOLDINGS, INC. By: /s/ Mark Streisfeld Name: Mark Streisfeld Title: President Address:3350 2nd Avenue Suite A-28 Boca Raton, FL 33431 Dated: as of June 16, 2000 EXHIBIT A NOTICE OF EXERCISE To: MERIDIAN USA HOLDINGS, INC. 1. The undersigned hereby elects to purchase shares of Common Stock of Meridian USA Holdings, Inc. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. 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) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. In support thereof, the undersigned has executed an Investment Representation Statement attached hereto as Schedule 1. __________________________________ (Signature) _____________________ (Date) SCHEDULE 1 INVESTMENT REPRESENTATION STATEMENT Purchaser: Company: Meridian USA Holdings, 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) 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. Purchaser:__________________________ Date:__________________ EX-10.1 5 0005.txt MERIDIAN USA HOLDINGS, INC. SECURITIES PURCHASE AGREEMENT JUNE 16, 2000 MERIDIAN USA HOLDINGS, INC. SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (the "Agreement") is made as of June 16, 2000, by and among Meridian USA Holdings, Inc., a Florida corporation (the "Corporation", and together with its Subsidiaries (as defined below), the "Company"), and each of the persons identified as a "Purchaser" on the signature pages hereto (each such person, a "Purchaser," and collectively, the "Purchasers"). SECTION 1 AUTHORIZATION AND SALE OF CONVERTIBLE NOTES 1.1 Authorization. The Corporation has authorized the issuance of up to $8,000,000 aggregate principal amount of the Corporation's Series A Convertible Notes (the "Notes"), having the rights and privileges set forth in the form of Note attached hereto as Exhibit A. 1.2 Sale of Convertible Notes. Subject to the terms and conditions hereof, each of the Purchasers, severally and not jointly, agrees to purchase from the Corporation, and the Corporation agrees to issue and sell to each Purchaser, Notes in the aggregate principal amount set forth under each Purchaser's name on the signature pages hereto, at a purchase price of $1,000.00 per $1,000.00 principal amount, for an aggregate purchase price of $8,000,000.00. SECTION 2 CLOSING DATE; DELIVERY 2.1 Closing Date. The closing of the purchase and sale of the Notes hereunder (the "Closing") shall be held at the offices of Sidley & Austin, 555 West Fifth Street, 40th Floor, Los Angeles, California 90013 on June 16, 2000, or at such other time and place as may be agreed upon by the Corporation and the Purchasers who have subscribed for a majority of the Notes. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date". 2.2 Delivery. At the Closing, the Corporation shall deliver to each Purchaser a certificate or certificates, registered in such Purchaser's name, representing the aggregate principal amount of Notes set forth under such Purchaser's name on the signature pages hereto, against payment of the purchase price therefor by check payable to the Corporation or by wire transfer per the Corporation's instructions. SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth on the Schedule of Exceptions attached hereto as Exhibit B (the "Schedule of Exceptions"), the Corporation represents and warrants to each Purchaser as follows: 3.1 Organization and Standing; Certificate and Bylaws. The Corporation and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Corporation and each of its Subsidiaries has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as presently conducted and as proposed to be conducted. The Corporation and each of its Subsidiaries is qualified to do business as a foreign corporation in each jurisdiction where failure to be so qualified would have a material adverse effect on the Company's business as presently conducted and as proposed to be conducted. The Company has furnished to the Purchasers' legal counsel copies of the Articles of Incorporation of the Corporation (the "Certificate") and each of its subsidiaries, in each case as amended through the date hereof and the Bylaws of the Corporation (the "Bylaws") and each of its subsidiaries. These copies are true, correct and complete and give effect to all amendments to such documents through the date hereof. 3.2 Corporate Power. The Corporation has all requisite corporate power and authority to execute and deliver this Agreement, the Notes, the Registration Rights Agreement, the Securityholders Agreement and the Investor Rights Agreement (each as defined in Section 5.5 hereof) (collectively, the "Other Agreements"), to adopt the Certificate of Designation in the form attached hereto as Exhibit C (the "Series II Designation") of the Corporation's Series II Convertible Preferred Stock, par value $.01 per share (the "Series II Preferred") to issue and sell the Notes hereunder, to issue the Series II Preferred issuable upon conversion of the Notes, to issue the Common Stock issuable upon conversion of the Series II Preferred (the "Conversion Stock"), and to carry out and perform the Corporation's obligations under the terms of this Agreement and the Other Agreements. 3.3 Subsidiaries. The Schedule of Exceptions set forth a list, as of the date hereof, of all direct or indirect entities in which the Corporation has an equity interest (the "Subsidiaries"). Except as set forth in the Schedule of Exceptions, the Corporation owns, either directly or indirectly, all of the outstanding capital stock of the Subsidiaries free and clear of any claim, lien or encumbrance. All of the issued and outstanding shares of capital stock of the Subsidiaries are validly issued, fully paid and non-assessable. Except as set forth in the Schedule of Exceptions, there are outstanding no securities convertible into, exchangeable for, or carrying the right to acquire, equity securities of any of the Subsidiaries, or subscriptions, warrants, options, rights or other arrangements or commitments obligating any Subsidiary to issue or acquire any of its equity securities or any ownership interest therein. 3.4 Capitalization. The authorized capital stock of the Corporation consists of the following: (a) 20,000,000 shares of Common Stock, $0.001 par value per share (the "Common Stock"), 6,191,399 of which are issued and outstanding as of the date hereof. (b) 1,000,000 shares of Preferred Stock, $1.00 par value (the "Preferred Stock"), 3,500 of which have been designated Series I Preferred Stock (the "Series I Preferred") (3,500 of which are issued and outstanding as of the date hereof); and 8,500 of which as of the Closing will have been designated Series II Preferred (none of which shall be issued and outstanding at the Closing). The Series II Preferred, when issued upon conversion of the Notes in accordance with the terms thereof will be validly issued, fully paid and non-assessable shares of Series II Preferred with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Corporation except as set forth in the Certificate, the Bylaws, the Registration Rights Agreement and the Securityholders Agreement. The Conversion Shares, when so issued, will be validly issued, fully paid and non-assessable shares of Common Stock with no personal liability attaching to the ownership thereof and will be free and clear of all liens, charges, restrictions, claims and encumbrances imposed by or through the Corporation except as set forth in the Certificate, the Bylaws, the Registration Rights Agreement and the Securityholders Agreement. The issuance, sale or delivery of the Notes, the Series II Preferred Stock or the Conversion Shares is not subject to any preemptive right of stockholders of the Corporation or to any right of first refusal or other right in favor of any person. (c) The Schedule of Exceptions sets forth a list, as of the date hereof, of all holders of subscriptions, warrants, options, convertible securities, and other rights (contingent or otherwise) to purchase or otherwise acquire (directly or indirectly) equity securities of the Corporation (the "Other Securities"), along with the number of shares of equity securities underlying such Other Securities, the exercise or conversion price of such Other Securities, the date such Other Securities were issued, the date such Other Securities are exercisable or convertible and any expiration date with respect thereto. The Corporation has reserved 2,063,030 shares of Common Stock for issuance upon conversion of the currently outstanding shares of Preferred Stock and exercise or conversion of the Other Securities. Each of the Series I Preferred, and Series II Preferred as of the Closing will have the rights, preferences, privileges and restrictions set forth in the Certificate, the Certificate of Designation of Series I Preferred Stock (the "Series I Designation"), and the Series II Designation. (d) The Corporation has reserved 492,500 shares of Common Stock for issuance of options and restricted stock to directors, employees or consultants pursuant to stock plans or other compensatory arrangements approved by the Board of Directors of the Corporation, of which shares 392,500 have been issued and are outstanding as of the date hereof. Except (i) as set forth above in this Section 3.4, (ii) for the rights granted in this Agreement, the Notes, the Series II Preferred and in the Other Agreements, and (iii) for the rights granted to holders of Series I Preferred pursuant to the Series I Designation, as of the date hereof there are outstanding no subscriptions, options, calls, warrants, conversion privileges, preemptive rights, rights of first refusal or other similar commitments or rights to which the Corporation is a party or by which the Corporation is bound, with respect to the purchase or other acquisition of any of the authorized but unissued capital stock of the Corporation. All of the outstanding securities of the Corporation were issued in compliance with all applicable Federal and state securities laws. 3.5 Authorization; No Breach. The execution, delivery and performance of this Agreement, the Notes and the Other Agreements by the Corporation and the consummation by the Corporation of all transactions contemplated hereby or thereby, including but not limited to the offering, issuance and sale of the Notes pursuant to this Agreement, have been duly authorized by all required corporate actions of the Corporation and its stockholders. This Agreement constitutes, and this Agreement, the Notes and the Other Agreements as of the Closing will constitute, valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions in the Registration Rights Agreement may be limited by applicable federal or state securities laws. The execution and delivery by the Corporation of this Agreement, the Notes and the Other Agreements, and the consummation by the Corporation of the transactions contemplated hereby and thereby, including but not limited to the offering, issuance and sale of the Notes pursuant to this Agreement, do not and will not (with or without due notice, lapse of time, or both) (i) conflict with or result in a breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the capital stock or assets of the Corporation or any of its Subsidiaries pursuant to, (iv) give any third party the right to accelerate any obligation under, or terminate any right of the Company under, (v) result in a violation of, or (vi) require any authorization, consent, qualification, approval, exemption, filing or other action by or notice to any court or administrative or governmental body or any other person or entity (other than (A) the filing of the Series II Designation with the Secretary of State of the State of Florida and (B) filings pursuant to Section 25102.1(d) of the California Corporate Securities Law of 1968, as amended, and the rules thereunder, other applicable state securities laws and Regulation D of the Securities Act) pursuant to, any of (x) the Certificate or Bylaws of the Corporation, (y) any law, statute, rule, regulation, instrument, order, judgment or decree to which the Company, or any of its properties is subject, or (z) any contract, evidence of indebtedness, permit, license, agreement or instrument to which the Company is a party or to which any of the Company's properties is subject. 3.6 Financial Information. Attached hereto as Exhibit D are the Company's (i) unaudited consolidated balance sheet (the "Balance Sheet") at March 31, 2000 (the "Balance Sheet Date") and unaudited consolidated statement of operations, statement of stockholders' equity and statement of cashflows, each for the period from December 31, 1999 to the Balance Sheet Date (collectively with the Balance Sheet, the "Unaudited Financial Statements"), and (ii) audited consolidated balance sheet as of December 31, 1999 and 1998 and the audited consolidated statement of operations, statement of stockholders' equity and statement of cashflows for the twelve-month periods then ended, including the footnotes thereto (the "Annual Financial Statement" and together with the Unaudited Financial Statements, the "Financial Statements"). The Financial Statements (a) are in accordance with the books and records of the Company, (b) present fairly the financial condition and operating results of the Company at the specified dates and for the periods then ended as indicated therein, and (c) were prepared in accordance with generally accepted accounting principles ("GAAP"), consistently applied subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited statements. The Corporation and each of the Subsidiaries has maintained their respective books and records in a manner sufficient to permit the preparation of financial statements in accordance with GAAP, such books and records fairly reflect, in all material respects, the income, expenses, assets and liabilities of the Corporation and each of the Subsidiaries and the books and records provided a fair and accurate basis for the preparation of the Financial Statements. The financial condition and results of operations of each Subsidiary are, and for all periods referred to in this Section 3.6 have been, consolidated with those of the Corporation. 3.7 Absence of Certain Changes. Since December 31, 1999 there has not been any event or condition of any character that has had, or is likely to have, individually or together with any other such events or conditions, a material adverse effect on the Company's business, operations, prospects, liabilities, capitalization or financial condition or the Company's ability to perform its obligations under this Agreement, the Notes or the Other Agreements (herein generically referred to as a "Material Adverse Effect"). Without limiting the generality of the foregoing: (a) The Company is not subject to any liability determined in accordance with GAAP (whether secured or unsecured and whether accrued, absolute, contingent, direct, indirect or otherwise) that is not shown or that is in excess of the amounts shown or reserved for in the Balance Sheet, other than liabilities of the same nature as those set forth in the Balance Sheet and the notes thereto and which are not material in amount and have been incurred in the ordinary course of business after the Balance Sheet Date; (b) There has been no damage, destruction or loss of any of the properties or assets of the Company (whether or not covered by insurance) materially and adversely affecting the properties or business of the Company; (c) The Company has not declared, set aside, paid or otherwise made any distribution in respect of any of the Company's capital stock, or redeemed, purchased or otherwise acquired any of such stock; (d) Except for the leases encumbering the equipment and furniture of the Company as listed on the Schedule of Exceptions, the Company has not granted or made any mortgage, pledge, security interest or lien with respect to any of the Company' material properties or assets, except liens for taxes not yet due or payable; (e) There has been no increase in the salary, wages or other compensation of any officer, employee or consultant of the Company, or any establishment or modification of salary ranges, guidelines or similar provisions in respect of any benefit plan, employment-related contract or other employee compensation arrangement; (f) There has been no material change in (x) any pricing, accounting, financial reporting, inventory, credit, allowance or tax practice or policy of the Company, or (y) any method of calculating any bad debt, contingency or other reserve of the Company for accounting, financial reporting or tax purposes, or any change in the fiscal year of the Company; (g) Any write-off or write-down of or any determination to write off or write down any of the assets of the Company; (h) Any acquisition or disposition of, or incurrence of a lien or encumbrance on, any assets of the Company, other than in the ordinary course of business consistent with past practice; (i) Any capital expenditures or commitments for additions to property, plant or equipment of the Company constituting capital assets in an aggregate amount exceeding $100,000; (j) Any transaction by the Company with any officer, director, or affiliate (other than any Subsidiary) other than pursuant to any contract in effect on the date of the Audited Financial Statements and disclosed pursuant to the Schedule of Exceptions; or (k) Any entering into of a contract, agreement or understanding to do or engage in any of the foregoing. 3.8 Material Contracts and Other Commitments. (a) The Schedule of Exceptions sets forth a list, as of the date hereof, of: (i) any contract for the purchase or sale of goods or services that involved the payment of more than $25,000 in 1999, and any contract for the purchase or sale of goods or services that the Company reasonably anticipates will involve the payment of more than $25,000 in 2000 or that extends beyond December 31, 2000 and cannot be terminated by the Company on not more than 60 days' notice and without cost or liability to the Company; (ii) any contract for the purchase, licensing or development of Intellectual Property (as defined below); (iii) any guarantee of the obligations of customers, officers, directors, employees, affiliates or others; (iv) any agreement that provides for, or relates to, the incurring by the Company of debt for borrowed money; (v) any contract not made in the ordinary course of the Company's business as previously conducted; (vi) any contracts providing for a commitment of employment or consultation services for a specified or unspecified term or otherwise relating to employment or the termination of employment, or any written or unwritten representations, commitments, promises, communications or courses of conduct involving an obligation of the Company to make payments in any year, to any employee exceeding $25,000 or any group of employees exceeding $100,000 in the aggregate; (vii) any contracts containing any pro-vision or covenant prohibiting or limiting the ability of the Company to engage in any business activity or compete with any person or entity; (viii) any partnership, joint venture, shareholders' or other similar contracts; (ix) any contracts with distributors, dealers, manufacturer's representatives, sales agencies or franchisees; (x) any contracts relating to (A) the future disposition or acquisition of any assets, other than dispositions or acquisitions in the ordinary course of business consistent with past practice, and (B) any merger or other business combination; or (xi) any other contract, commitment, understanding or instrument that is material to the Company. (b) Except as set forth in the Schedule of Exceptions, all of the Commitments referred to in the preceding paragraph (a) and listed in the Schedule of Exceptions are valid, binding, in full force and effect and enforceable in accordance with their terms against the Company, and to the knowledge of the Company, against the respective counterparties to such Commitments. Complete copies (or, if oral, full written descriptions) of all Commitments required to be so listed, including all amendments thereto, and complete copies of all standard form Commitments used in the conduct of the Company's business, have been made available to Purchasers. Except as set forth in the Schedule of Exceptions, (i) there is no breach, violation or default and no event which, with notice or lapse of time or both, would constitute a breach, violation or default, or give rise to any lien or encumbrance or right of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration under, any Commitment listed in the Schedule of Exceptions, except for breaches, violations and defaults, or lien or encumbrances or rights of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration which, individually or in the aggregate, are not material and (ii) neither the Company nor, to the knowledge of the Company, any other party to any of the Commitments listed in the Schedule of Exceptions is in material arrears in respect of the performance or satisfaction of the terms and conditions on its part to be performed or satisfied under any of such Commitments and no material waiver or material indulgence has been granted by any of the parties thereto. 3.9 Stockholders, Directors and Officers; Certain Transactions. Except for those transactions listed on the Schedule of Exceptions, the Company is not indebted to, has not guaranteed the indebtedness of, and has not engaged in any business transaction with (either directly or indirectly), any stockholder, officer or director, or to any of their respective spouses or children, of any amount whatsoever, other than as provided in such person's employment agreement with the Company, if any, and other than any travel, relocation, and other expenses that are advanced and reimbursed in the ordinary course of business. No officer, director or stockholder of the Company (nor any person in the immediate family of any such officer, director or stockholder) nor any significant employee of the Company (nor any person in the immediate family of any such significant employee) is indebted to the Company or to the knowledge of the Company has any material direct or indirect ownership interest in any firm with which the Company is affiliated, with which the Company has a business relationship that is material to the Company or with which the Company competes. 3.10 Litigation, etc. There is no action, suit, proceeding or investigation pending or, to the Company's knowledge, threatened to which the Company or any of its directors or officers, as such, is a party except as disclosed on the Schedule of Exceptions, none of which is likely to have a Material Adverse Effect, result in a material adverse change in the business, operations, prospects, liabilities, capitalization or financial condition of the Company or that questions the validity as against the Company of this Agreement or the Other Agreements or any action taken by the Company or to be taken in connection herewith or therewith. 3.11 Title to Properties; Liens and Encumbrances. The Company has good and marketable title to its properties and assets and, with respect to the property and assets leased by the Company, holds valid leasehold interests therein, in each case subject to no mortgage, pledge, lien, security interest, conditional sale agreement, encumbrance or charge, except (a) tax, materialmen's or like liens for obligations not yet due or payable or being contested in good faith by appropriate proceedings, as set forth on the Schedule of Exceptions, or (b) liens or encumbrances that do not individually or in the aggregate materially impair the Company's use thereof or materially detract from the value of the Company and that have arisen in the ordinary course of business. To the Company's knowledge, there exists no default or other occurrence or condition that could result in termination of any of the leases under which material properties and assets are leased by the Company. 3.12 Intellectual Property. (a) Each item of Company Intellectual Property (as defined below) is set forth on the Schedule of Exceptions. (b) Except as set forth on the Schedule of Exceptions: (i) each item of Company Intellectual Property will be owned or available for use by the Company on identical terms and conditions immediately subsequent to the Closing as they were by the Company immediately prior to the Closing; (ii) all registered patents, trademarks, service marks and copyrights listed on the Schedule of Exceptions are valid and subsisting and in full force and effect and are not subject to any taxes or other fees except for annual filing and maintenance fees; (iii) there has been no notice, claim or assertion that any item of Company Intellectual Property is invalid, and there are no facts that would cause a reasonable person to conclude that any item of Company Intellectual Property is invalid; (iv) the Company has the right to use all of the Company Intellectual Property in all jurisdictions in which its business is conducted or proposed to be conducted, and the consummation of the transactions contemplated hereby will not alter or impair any such rights; (v) the Company Intellectual Property is all the Intellectual Property that is necessary for the Company to own or license to carry on its business as presently conducted and as proposed to be conducted; and (vi) the Company has taken all necessary and desirable action to maintain and protect each item of Company Intellectual Property. (c) Other than as set forth on the Schedule of Exceptions, the Company has not interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of third parties, and the Company has not received any charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation or violation (including any claim that the Company must license or refrain from using any Intellectual Property rights of any third party). Other than as set forth on the Schedule of Exceptions, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Company Intellectual Property. (d) With respect to each item of Company Intellectual Property, except as set forth on the Schedule of Exceptions: (i) the Company possesses all right, title and interest in and to the item, free and clear of any lien or encumbrance, license or other restriction; (ii) the item is not subject to any outstanding order, decree, ruling or charge; (iii) no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Company's knowledge, threatened, which challenges the legality, validity, enforceability, use or ownership of the item; (iv) the Company has never agreed to indemnify any person for or against any interference, infringement, misappropriation or other conflict with respect to the item; (v) each license, sublicense, agreement or permission covering the item is, and immediately after the Closing will be, legal, valid, binding, enforceable and in full force and effect; (vi) no party to any license, sublicense, agreement or permission is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default or permit termination, modification or acceleration thereunder; (vii) no party to any license, sublicense, agreement or permission has repudiated any provision thereof; (viii) with respect to any sublicense, the representations and warranties set forth in subsections (i) through (vii) above are true and correct with respect to the underlying license; (ix) with respect to each license, sublicense, agreement or permission, the underlying item of Company Intellectual Property is not subject to any outstanding injunction, judgment, order, decree, ruling or charge; (x) with respect to each license, sublicense, agreement or permission, no action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or is threatened which challenges the legality, validity or enforceability of the underlying item of Company Intellectual Property; and (xi) with respect to each license, sublicense, agreement or permission, the Stockholders have not granted any sublicense or similar right with respect to the license, sublicense, agreement or permission. (e) To the Company's knowledge, there are no new products, inventions, procedures or methods of processing that any competitors or other third parties have developed or marketed which reasonably could be expected to supercede or make obsolete any product or process of the Company. (f) The continued operation of the Company's business as presently conducted and as presently proposed to be conducted will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any Intellectual Property rights of third parties. (g) None of the Company's employees (x) are obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or (y) are subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of the Company's business as presently conducted or proposed to be conducted. (h) The Company's business, as currently conducted and as proposed to be conducted, does not and will not need to utilize any inventions of any of its employees, former employees, directors, shareholders or persons it currently intends to hire, the rights to which have not been fully assigned to the Company. (i) As used herein: "Intellectual Property" shall mean (A) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereon, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in part, revisions, extensions and reexaminations thereof, (B) all trademarks, service marks, trade dress, logos, trade names, domain names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (C) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith, (D) all mask works and all applications, registrations and renewals in connection therewith, (E) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (F) all computer software (including data and related documentation) other than commercial off-the-shelf software (including, without limitation, any software licensed under a "shrink-wrap," "click-through," "break-the-seal" or other agreement or purported agreement not signed by the parties thereto, (G) all other proprietary rights, (H) all copies and tangible embodiments of the foregoing (in whatever form or medium) and (I) all licenses or agreements in connection with the foregoing. "Company Intellectual Property" shall mean all Intellectual Property that is material to the operation of the Business. 3.13 Employee Violations; Proprietary Information Agreement. To the best of the Company's knowledge, no employee of the Company is in violation of any term of any employment contract, disclosure agreement or any other agreement, order or decree relating to the relationship of such employee with the Company or any other party because of the nature of the business conducted or to be conducted by the Company. To the best of the Company's knowledge, none of its employees has any obligation under any agreement, judgment or otherwise that would interfere with such employee exercising his or her best efforts to promote the interests of the Company or that would conflict with the Company's business as currently proposed. 3.14 Taxes. Other than as set forth on the Schedule of Exceptions, the Company has not requested any extensions and has timely filed and as of the Closing will have filed all tax returns required to be filed with appropriate federal, state, county and local governmental agencies or instrumentalities. The Company has paid or established adequate reserves on the Financial Statements for all income, franchise and other taxes, assessments, governmental charges, penalties, interest due and payable by the Company. There is no pending dispute with any taxing authority relating to any of the Company's tax returns, and the Company has no knowledge of any proposed liability for any tax to be imposed upon the properties or assets of the Company for which there is not an adequate reserve reflected on the Balance Sheet. 3.15 Compliance with Other Instruments. The Company is not in violation of (i) any provision of the Corporation's Certificate or Bylaws, (ii) any term or provision of any material agreement or commitment to which the Company is a party, nor (iii) in any material respect of any order, statute, rule or regulation applicable to the Company, including without limitation any applicable statute, law, or regulation relating to the environment or occupational health and safety. 3.16 Brokers or Finders. The Company has not incurred, and will not incur, directly or indirectly, as a result of any agreement entered into or action taken by the Company, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement, other than to U.S. Bancorp Libra, a division of U.S. Bancorp Investments, Inc. pursuant to the engagement agreement dated as of May 2, 2000. 3.17 Minute Books. The minute books and stock record books of the Company provided to counsel for the Purchasers contain, in all material respects, a complete and accurate summary of all meetings and actions taken by the Company's Board and its stockholders. 3.18 Indebtedness. Each outstanding loan to the Company and outstanding indebtedness of the Company to any person in excess of $25,000 is set forth on the Schedule of Exceptions (or in the case of affiliated parties in any amount), together with the name of the creditor, all amounts owing, including principal and interest, and when such indebtedness is due and payable. For purposes hereof, "indebtedness" includes all obligations (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases or (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above. The Company is not in default of any of its obligations to such creditors. 3.19 Stockholder Agreements. Except as required by this Agreement, the Notes, the Other Agreements or as set forth in the Schedule of Exceptions, there is no agreement or arrangement between the Corporation and any of the Corporation's stockholders, or to the best of the Corporation's knowledge, between or among any of the Corporation's stockholders, that grant to any person any special rights with respect to any shares of the Corporation's capital stock or that in any way affect any stockholder's ability or right freely to alienate or vote such shares. 3.20 Offering. Subject to the truth and accuracy of each Purchaser's representations in Section 4 hereof, the offer, issuance and sale of the Notes are exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws. 3.21 Use or Proceeds. The Company shall use the proceeds from the sale of the Notes, for marketing, product development, working capital and other corporate uses. 3.22 Ownership of Securities. Upon issuance and delivery of the Notes (and upon issuance and delivery of the Series II Preferred upon conversion of the Notes in accordance with the terms thereof and the issuance and delivery of the Conversion Stock upon conversion of the Series II Preferred in accordance with the terms thereof) to each Purchaser pursuant to this Agreement in consideration of the Purchasers' payments therefor, the Notes, shares of Series II Preferred and Conversion Stock will be duly and validly issued, fully paid and nonassessable, free and clear of any lien, charge or encumbrance other than (a) restrictions on transfer under federal or state securities laws or as set forth herein and in the Other Agreements, and (b) any liens, charges or encumbrances created by the Purchaser holding such shares. 3.23 Registration Rights. Upon the Closing, except as set forth in the Registration Rights Agreement, the Company will not be under any contractual obligation to register, sell or otherwise transfer or cause the registration, sale or other transfer any of the Company's securities then outstanding or that thereafter may be issued. 3.24 Disclosure. (a) None of the representations or warranties of the Company contained in this Agreement or any of the Other Agreements is false or misleading in any material respect or omits to state a material fact necessary to make the statements contained herein or therein not misleading in any material respect, nor is there any fact known to the Company that has not been disclosed to the Purchasers that would make such statements misleading or that would indicate that a material adverse effect is reasonably possible. (b) All forms, reports and documents filed with the Securities and Exchange Commission (the "Commission"), by the Corporation, did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. 3.25 Products. Except as set forth on the Schedule of Exceptions, there are no statements, citations or decisions by any governmental or regulatory authority stating that any product or service manufactured, sold, designed, distributed or marketed at any time by the Company ("Products") is defective or unsafe or fails to meet any standards promulgated by any governmental authority, except as would not have a Material Adverse Effect. Except as set forth on the Schedule of Exceptions, there is no (i) fact relating to any Product that, may impose upon the Company a duty to recall a Product or a duty to warn customers of a defect in any Product, (ii) material latent or overt design, manufacturing or other defect in any Product or (iii) material liability for warranty claims or returns with respect to any Product. 3.26 Insurance. All of the material assets of the Company and all aspects of its business that are of insurable character are covered by insurance with reputable insurers against risks of liability, casualty and fire and other losses and liabilities as set forth on the Schedule of Exceptions. The Company is not in default with respect to its obligations under any material insurance policy maintained by it. The Schedule of Exceptions sets forth a list of all insurance coverage carried by the Company, the carrier and the terms and amount of coverage, the period which such policy has been in effect and will expire, and whether it is a "claims made" or an "occurrence" policy. All such policies and other instruments are in full force and effect and all premiums due on or before the date hereof with respect thereto have been paid. The Company has not failed to give any notice or present any claim under any such insurance policy in due and timely fashion or as required by any of such insurance policies, and the Company has not otherwise, through any act, omission or non-disclosure, jeopardized or impaired full recovery of any claim under such policies, and there are no claims by the Company under any of such policies to which any insurance company is denying liability or defending under a reservation of rights or similar clause. The Company has not received notice of any pending or threatened termination of any such policies or any premium increases for the current policy period with respect to any of such policies and the consummation of the transactions contemplated by this Agreement, the Notes and the Other Agreements will not result in any such termination or premium increase. 3.27 Compliance with Law. The Company is not in violation of any term of its Certificate or Bylaws or of the provisions of any mortgage, indenture, contract, agreement, instrument, judgment, decree, order, statute, rule or regulation to which it is subject and a violation of which could create a material adverse effect. The Company has all franchises, permits, licenses and approvals, necessary to conduct its business as presently conducted. The Company has no knowledge of or reason to expect any change to any law, statute, rule or regulation which could adversely affect the ability of the Company to conduct its business as presently conducted or as proposed to be conducted. 3.28 No Insolvency. No insolvency proceeding of any character, including without limitation bankruptcy, receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Company or any of its assets or properties is pending or threatened. The Company has not taken any action in contemplation of, or that would constitute the basis for, the institution of any such insolvency proceedings. 3.29 Substantial Customers and Suppliers. The Schedule of Exceptions lists the ten (10) largest customers of the Company, on the basis of revenues for goods sold for the most recently-completed fiscal year and the ten (10) largest suppliers of the Company, on the basis of cost of goods purchased for the most recently-completed fiscal year. Except as disclosed in the Schedule of Exceptions, no such customer or supplier has ceased or materially reduced its purchases from, sales to or provision of services to the Company since the date of the Audited Financial Statements, or to the knowledge of Company, has threatened to cease or materially reduce such purchases, use, sales or provision of services after the date hereof. To the knowledge of the Company, no such customer or supplier is threatened with bankruptcy or insolvency. SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby severally and not jointly represents and warrants to the Corporation with respect to the purchase of the Notes as follows: 4.1 Information Received. Such Purchaser has received and reviewed, in addition to the Financial Statements, such information as it deemed appropriate in connection with an investment in the Notes. Such Purchaser also has had a full opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Notes, has had full access to the Company's officers and has received such other information concerning the Company as such Purchaser has requested. The foregoing, however, does not limit or modify the representations and warranties of the Corporation set forth in Section 3 of this Agreement or the right of each Purchaser to rely thereon. 4.2 Accredited Investor. Such Purchaser is an "accredited investor" as such term is defined in Rule 501(a) of Regulation D of the Securities Act. 4.3 Experience. Such Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Corporation so that such Purchaser is capable of evaluating the merits and risks of its investment in the Corporation and has the capacity to protect its own interests. 4.4 Economic Risk. Such Purchaser is able to bear the economic risk of its investment in the Notes for an indefinite period of time, including the risk of a complete loss of such Purchaser's investment in such securities. Such Purchaser acknowledges that the Notes have not been registered under the Securities Act or registered or qualified under any state securities law and, therefore, cannot be sold or otherwise transferred or disposed of unless subsequently registered under the Securities Act and registered or qualified under applicable state securities laws or unless an exemption from such registration or qualification is available. The foregoing does not, however, limit or modify the representations, warranties, or covenants of the Corporation set forth in this Agreement or any of the Other Agreements or the right to the Purchasers to rely thereon. 4.5 Investment. Such Purchaser is acquiring the Notes, and the shares of the Series II Preferred and Conversion Stock for investment for such Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof in violation of the Securities Act. Such Purchaser understands that the Notes to be purchased have not been, and will not be, registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the accuracy of such Purchaser's representations as expressed herein. 4.6 Execution, Delivery and Performance. Such Purchaser has full right, power and authority to execute and deliver this Agreement and the Other Agreements and to perform its obligations hereunder and thereunder. At or before the Closing, such Purchaser shall execute and deliver to the Company the Other Agreements, and the Purchaser acknowledges and agrees that the Notes purchased will be subject to the terms and provisions of the Other Agreements, the Series II Designation and the Corporation's Certificate and Bylaws. This Agreement is, and each of the Other Agreements when so executed and delivered by the Purchaser will constitute, a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with such agreement's terms, except as the indemnification provisions of the Registration Rights Agreement may be limited by principles of public policy, and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. No consent, approval, authorization, order, filing, registration or qualification of or with any court, governmental authority or third person is required to be obtained by the Purchaser in connection with the execution and delivery of this Agreement or the Other Agreements or the performance of the Purchaser's obligations hereunder or thereunder. 4.7 Brokers or Finders. Such Purchaser has not incurred and will not incur, directly or indirectly, as a result of any action taken by such Purchaser, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement (other than the agreement dated May 2, 2000 between U.S. Bancorp Libra and Marty Klein). SECTION 5 CONDITIONS TO CLOSING OF PURCHASERS The Purchasers' obligations to purchase the Notes at the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions: 5.1 Representations and Warranties Correct. The representations and warranties made by the Corporation in Section 3 hereof shall be true and correct as of the Closing Date with the same force and effect as if made on such date. 5.2 Covenants. All covenants and agreements contained in this Agreement to be performed or complied with by the Company on or prior to the Closing Date shall have been performed or complied with. 5.3 Governmental Authorizations, etc. All material governmental authorizations, consents or approvals required to be obtained, and all governmental filings to be made, including state securities or "Blue Sky" laws, by the Company in connection with the issuance and sale of the Notes pursuant to this Agreement (other than any such filing as shall be permitted by applicable law to be made post-Closing) shall have been obtained or made and shall be in full force and effect. 5.4 Series II Designation. The Corporation shall have filed with the Secretary of State of the State of Florida the Series II Designation and the same shall be effective. 5.5 Good Standing Certificates. The Company shall have delivered to the Purchasers certificates dated as of the most recent practicable date prior to the Closing Date issued by the Secretaries of State of the States of Florida to the effect that the Corporation and each of its Subsidiaries is legally existing and in good standing in such State and each other state in which the Corporation or its Subsidiaries is qualified or required to be qualified to do business. 5.6 Secretary's Certificate. The Corporation shall have delivered to the Purchasers a certificate executed by the Secretary of the Corporation dated as of the Closing Date, certifying as to the following matters: (a) resolutions adopted by the Board of Directors of the Corporation approving the transactions contemplated by this Agreement, the Notes and the Other Agreements, (b) the Series II Designation and (c) the Bylaws. 5.7 Opinion of Counsel. The Company shall have delivered to the Purchasers an opinion of Aronauer, Goldfarb, Sills & Re, LLP, counsel to the Corporation, in form reasonable satisfactory to the Purchasers and their counsel to the substantive effect as set forth in Exhibit E hereto. 5.8 Other Agreements. Each of (a) a Registration Rights Agreement substantially in the form of Exhibit F (the "Registration Rights Agreement"), (b) a Securityholders Agreement substantially in the form of Exhibit G (the "Securityholders Agreement"), and (c) an Investor Rights Agreement substantially in the form of Exhibit H (the "Investor Rights Agreement") shall have been executed and delivered by the Corporation and the Purchasers party thereto and all other parties thereto, and each such agreement shall be in full force and effect as of the Closing. 5.9 Board of Directors. The directors and stockholders of the Corporation shall have taken all such actions as shall be necessary to cause an individual designated by the Purchasers to be appointed to the Board of Directors in accordance with the terms of the Securityholders Agreement immediately after the Closing. 5.10 Compliance Certificate. The Corporation shall have delivered to the Purchasers a certificate of the Corporation executed by the President or a Vice President of the Corporation, dated the Closing Date, and certifying as to the fulfillment of the conditions specified in Sections 5.1, 5.2, 5.3 and 5.9 of this Agreement. 5.11 Due Diligence. The Purchasers and their respective advisers, including legal counsel, shall have completed their due diligence review of the Company and its business with results satisfactory to the Purchasers, in their sole discretion, and, in the Purchasers' sole opinion, no Material Adverse Effect has occurred with regard to the Company prior to such Closing. 5.12 Third Party Consents. All necessary third party consents to the transactions described herein shall have been received in form and substance satisfactory to the Purchasers. SECTION 6 CONDITIONS TO CLOSING OF COMPANY The Corporation's obligation to sell and issue the Notes at the Closing is, at the option of the Corporation, subject to the fulfillment as of the Closing Date of the following conditions: 6.1 Representations. The representations and warranties made by the Purchasers in Section 4 hereof shall be true and correct as of the Closing Date with the same force and effect as if made on that date. 6.2 Covenants. All covenants and agreements contained in this Agreement to be performed or complied with by the Purchasers on or prior to the Closing Date shall have been performed or complied with. 6.3 Governmental Authorizations, etc. All material governmental - authorizations, consents or approvals required to be obtained, and all governmental filings to be made, by the Company in connection with the issuance and sale of the Notes pursuant to this Agreement (other than any such filing as shall be permitted by applicable law to be made post-Closing) shall have been obtained or made and shall be in full force and effect. 6.4 Other Agreements. Each of (a) the Registration Rights Agreement, (b) the Securityholders Agreement, and (c) the Investor Rights Agreements shall have been executed and delivered by the Purchasers and each such agreement shall be in full force and effect as of the Closing. SECTION 7 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT 7.1 Restrictions on Transferability. The Notes are, and the shares of the Series II Preferred and Conversion Stock and all other securities issued in respect of the Notes, Series II Preferred or the Conversion Stock upon any stock split or stock dividend, or in any recapitalization, reorganization, merger, consolidation or similar event not registered under the Securities Act (the Notes, Shares, the Conversion Stock and such other securities, if any, collectively, the "Restricted Securities") when issued will be, "restricted securities" as defined by Rule 144 under the Securities Act ("Rule 144") and may not be Transferred (as hereinafter defined) except upon the conditions specified in this Article 7 or Rule 144, which are intended to ensure compliance with the provisions of the Securities Act. Each Purchaser shall cause any proposed Transferee (as hereinafter defined) of the Restricted Securities held by such Purchaser to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Article 7 and the Other Agreements as applicable. As used in this Article 7, the term "Transfer" means and includes any sale, exchange, assignment, pledge or other transfer or encumbrance of the Restricted Securities, and the term "Transferee" means any Person who acquires any Restricted Securities in a Transfer not registered under the Securities Act. 7.2 Restrictive Legends. Each certificate representing Restricted Securities shall be stamped or otherwise imprinted with legends in the following form (in addition to any legend required under applicable state securities laws). (a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND ARE RESTRICTED SECURITIES. THESE SECURITIES HAVE BEEN ACQUIRED FOR HOLDER'S OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR EXEMPTION FROM SUCH REGISTRATION UNDER THE ACT ." (b) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER THAT ARE CONTAINED IN A REGISTRATION RIGHTS AGREEMENT AND A SECURITYHOLDERS AGREEMENT, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION." Each Purchaser consents to the Corporation making a notation on its records and giving instructions to any paying agent or registrar of the Notes or any transfer agent of the Series II Preferred or the Conversion Stock in order to implement the restrictions on Transfer established in this Article 7. 7.3 Notice of Proposed Transfers. The holder of each certificate representing Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of this Section 7.3. Prior to or in connection with any proposed Transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed Transfer, the transferor shall deliver, if requested by the Corporation, a written opinion of legal counsel, addressed to the Corporation, to the effect that the proposed Transfer of the Restricted Securities may be effected without registration under the Securities Act. Each certificate evidencing the Restricted Securities Transferred as above provided shall bear, except if such Transfer is made pursuant to Rule 144, the appropriate restrictive legend set forth in Section 7.2 above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for such holder and the Company such legend is not required in order to establish compliance with any provision of the Securities Act or applicable state securities laws. SECTION 8 MISCELLANEOUS 8.1 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New York as applied to agreements among New York residents, made and to be performed entirely within the State of New York. 8.2 Survival. The representations and warranties made herein shall survive any investigation made by the Purchasers and the closing of the transactions contemplated hereby. 8.3 Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of such parties (including any subsequent holders of the Notes, the Series II Preferred or the Conversion Stock) whether so expressed or not. In addition, if an express assignment has been made (except as otherwise expressly provided herein), the provisions of this Agreement that are for any Purchaser's benefit as the purchaser or holder of Notes (or the Series II Preferred or Conversion Stock) are also for the benefit of and enforceable by any subsequent holder of Notes (or Series II Preferred or Conversion Stock). The Company may not assign any of its obligations hereunder without the prior written consent of the Purchasers. None of the Purchasers may assign any of its obligations hereunder prior to the Closing without the prior written consent of the Corporation. After the Closing, the Purchasers may assign their rights and obligations hereunder (subject to Section 7 hereof) without the prior written consent of the Corporation. 8.4 Entire Agreement; Amendment. This Agreement and the other documents delivered pursuant hereto at the Closing constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that holders of a majority of the Notes (including for this purpose the Series II Preferred and the Conversion Stock) may, with the Corporation's prior written consent, waive, modify or amend, on behalf of all such holders, any provision hereof other than the conditions set forth in Section 5. 8.5 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing (or in the form of a telecopy (confirmed in writing) to be given only during the recipient's normal business hours unless arrangements have otherwise been made to receive such notice by telecopy outside of normal business hours) and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telecopy (as provided above) addressed (a) if to a Purchaser, at the address for such Purchaser set forth beneath its signature or at such other address as such Purchaser shall have furnished to the Corporation in writing or (b) if to any other holder of Notes, Series II Preferred or Conversion Stock, at such address as such holder shall have furnished the Corporation in writing or (c) if to the Corporation, to its principal executive offices and addressed to the attention of the Corporate Secretary, or at such other address as the Corporation shall have furnished in writing to the Purchasers. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or seventy-two (72) hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if by telecopy pursuant to the above, when received. 8.6 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any holder of any Notes, Series II Preferred or Conversion Stock, upon any breach or default of the Corporation under this Agreement, shall impair any such right, power or remedy of such holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any holder of any breach or default under this Agreement, or any waiver on the part of any holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and not alternative. 8.7 Stamp Taxes. The Corporation shall pay, or reimburse the Purchasers and hold them harmless against liability for the payment of, all stamp and other similar such taxes which may be payable in respect to the execution and delivery of this Agreement or the issuance, delivery and acquisition of any Notes (or Series II Preferred or Conversion Stock issued in the name of the holder of the converted Notes or Series II Preferred, respectively) hereunder. 8.8 Expenses; Attorneys' Fees. Regardless of whether the Closing occurs, the Company shall pay all of it's own expenses and the Company shall pay all of the Purchaser's out of pocket expenses (including without limitation, reasonable attorneys' fees and expenses), in each case, incurred in connection with this Agreement, the Notes, the Other Agreements and the transactions contemplated hereby and thereby. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 8.9 Remedies. The holders of the Notes and Series II Preferred will have all of the rights and remedies set forth in this Agreement, the Other Agreements and the Series II Designation, all of the rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights and remedies which such holders have under any law. Any Purchaser having any rights under any provision of this Agreement, the Notes or the Other Agreements will be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement, the Notes or the Other Agreements and to exercise all other rights granted by law. 8.10 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, invalid, unenforceable or void, this Agreement shall continue in full force and effect without said provision. In such event, the parties shall negotiate, in good faith, a legal, valid and enforceable substitute provision which most nearly effects the intent of the parties in entering into this Agreement. 8.11 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement. 8.12 Facsimile Signatures. Any signature page delivered by a telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party which requests it. 8.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "CORPORATION": MERIDIAN USA HOLDINGS, INC. a Florida corporation By: /s/ Mark Streisfeld --------------------- Name: Mark Streisfeld Title: President Address: 3350 N.W. 2nd Avenue Boca Raton, FL 33431 Facsimile: 561-417-6888 "PURCHASERS": U.S. BANCORP INVESTMENTS, INC. By: /s/Jess M. Ravich ------------------- Name: Jess M. Ravich Title: Chairman Purchase Price: $8,000,000 Aggregate Principal Amount of Notes: $8,000,000 Address: 11766 Wilshire Boulevard Suite 870 Los Angeles, CA 90025 Attn: General Counsel Fax: (310) 312-5640 EXHIBITS -------- A - Form of Note B - Schedule of Exceptions C - Series II Designation D - Financial Statements E - Opinion of Aronauer, Goldfarb, Sills & Re, LLP F - Registration Rights Agreement G - Shareholders Agreement H Investor Rights Agreement SCHEDULES SCHEDULE OF EXCEPTIONS SCHEDULE B: FINANCIAL INFORMATION EX-10.2 6 0006.txt REGISTRATION RIGHTS AGREEMENT by and between MERIDIAN USA HOLDINGS, INC. and THE INVESTOR PARTIES HERETO Dated as of June 16, 2000 REGISTRATION RIGHTS AGREEMENT ----------------------------- REGISTRATION RIGHTS AGREEMENT, dated as of June 16, 2000 (this "Agreement"), by and among MERIDIAN USA HOLDINGS, INC., a Florida corporation (the "Company"), and U.S. BANCORP INVESTMENTS, INC. (each of the foregoing, individually with its Affiliates, an "Investor," and, collectively, the "Investors"). W I T N E S S E T H: ------------------- WHEREAS, the Company and the Investors have entered into that certain Securities Purchase Agreement dated June , 2000 (the "Purchase Agreement") providing for, among other things, the sale by the Company and the purchase by the Investors of $8,000,000 aggregate principal amount of the Company's Series A Convertible Notes due 2010 (the "Convertible Notes"); WHEREAS, in connection with the transactions contemplated by the Purchase Agreement, the Company agreed to issue a warrant (the "Libra Warrant") to purchase 698,947 shares of the Company's common stock, par value $.001 per share, to U.S. Bancorp Investments, Inc.; and WHEREAS, in connection with the Company and the Investors entering into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. ACCORDINGLY, the parties hereto agree as follows: 1. Certain Definitions. (a) As used in this Agreement, the following terms shall have the meanings assigned to them below: 1.1 "Affiliate" shall mean with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. 1.2 "Commission" shall mean the United States Securities and Exchange Commission. 1.3 "Common Stock" shall mean the common stock, $.001 par value per share of the Company. 1.4 "Common Stock Equivalents" means and includes all shares of the Company's Common Stock issued and outstanding at the relevant time plus (a) all shares of Common Stock that may be issued upon exercise of any options, warrants, including without limitation the Libra Warrant, and other rights of any kind that are then exercisable, and (b) all shares of Common Stock that may be issued upon conversion or exchange of (i) any convertible securities, including without limitation the Series I Preferred, Series II Preferred and all other preferred stock and debt securities then outstanding, which are by their terms then convertible into or exchangeable for Common Stock, or (ii) any such convertible securities issuable upon exercise of options, warrants or other rights, in each case that are then exercisable. 1.5 "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended. 1.6 "Holder" means the Investor and any assignees or transferees acquiring Convertible Notes, shares of Series II Preferred or Registrable Securities. 1.7 "NASD" shall have the meaning ascribed to such term in Section 2.3(g) hereof. 1.8 "Person" shall mean any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity. 1.9 "Registrable Securities" shall mean (i) any shares of Common Stock held as of the date hereof by any Investor or hereafter acquired by any Investor or Holder; (ii) any shares of Common Stock issued or issuable upon the conversion, exercise or exchange of any other Common Stock Equivalents held as of the date hereof by any Investor or hereafter acquired by any Investor or Holder; or (iii) any shares issued or issuable, directly or indirectly, upon any subdivision, combination, reclassification or redesignation of such shares or share dividend in respect of the Common Stock referenced in clauses (i) and (ii) above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have been declared effective under the applicable Securities Laws and such securities shall have been disposed of in accordance with such registration statement or (ii) such securities shall have been sold (other than in a privately negotiated sale) pursuant to Rule 144 (or any successor or comparable provision) under the U.S. Securities Act and in compliance with the requirements of Rule 144. (a) Capitalized terms used but not otherwise defined herein shall have the meaning assigned to such terms in the Purchase Agreement. 2. Registration Rights. 2.1 Shelf Registration. (a) The Company shall use its best efforts to prepare and file with the Commission pursuant to Rule 415 under the Securities Act a shelf registration statement on Form S-1, S-3 or other appropriate form (the "Shelf Registration Statement") covering the resale of the Registrable Securities by the Holders and shall cause the Shelf Registration Statement to become effective under the Securities Act no later than December 31, 2000. Such registration statement shall comply in all material respects with the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith. The Company shall use best efforts to keep the Shelf Registration Statement continuously effective, subject to Section 2.1(d) hereof, until such time as all of the Registrable Securities have been resold pursuant to the Shelf Registration Statement or are no longer Registrable Securities. (the "Effectiveness Period"). Prior to filing the Shelf Registration Statement or any amendment or supplement thereto, the Company shall provide a copy thereof to the Holders and their counsel and afford them a reasonable time to comment thereon and the Company shall not file any registration statement or amendment thereto or any prospectus or supplement thereto to which any Holder or the underwriters, if any, shall reasonably object in writing. (b) Notwithstanding the foregoing, the Company shall have the ability to suspend the filing, effectiveness or use of such Shelf Registration Statement for up to one 30-consecutive-day period during any consecutive 365-day period if: (i) an event or circumstance occurs and is continuing as a result of which the registration statement, any related prospectus or any document incorporated therein by reference, as then amended or supplemented or proposed to be filed, would, in the good faith determination of the Board, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and (ii) (i) the Board determines in good faith that the disclosure of such an event at such time would have a material adverse effect on the business, operations or prospects of the Company or (ii) the disclosure otherwise relates to a material business transaction which has not yet been publicly disclosed. The Company shall provide written notice of any such determination to each Holder at the address set forth on the signature page hereto or such other address as may hereafter be designated in writing by such Holder to the Company. 2.2 Piggyback Rights. (a) If the Company proposes to file a registration statement with the Commission respecting an offering of any Common Stock (or other securities) purchasable upon exercise of the Series II Preferred (other than (x) an offering that could be registered solely on Form S-4 or S-8, or any successor form thereto, and (y) securities offered or issued pursuant to any employment or benefit plan or arrangement to any employee, director, partner, trustee or consultant or advisor of or to the Company or any subsidiary of the Company), the Company shall give prompt written notice to all the Holders of Series II Preferred and Registrable Securities at least 30 days prior to the initial filing of the registration statement relating to such offering (the "Registration Statement"). Each such Holder shall have the right, within 20 days after delivery of such notice, to request in writing that the Company include all or a portion of such of the Registrable Securities in such Registration Statement ("Piggyback Registration Rights"). The Company shall include in the public offering all of the Registrable Securities that a Holder has requested be included, unless the underwriter for the public offering or the underwriter managing the public offering (in either case, the "managing underwriter") delivers a notice (a "Cutback Notice") pursuant to Section 2.2(b) or 2.2(c) hereof. The managing underwriter may deliver one or more Cutback Notices at any time prior to the execution of the underwriting agreement for the public offering. (b) If a proposed public offering includes both securities to be offered for the account of the Company ("Company Shares") and shares to be sold by shareholders, the provisions of this Section 2.2(b) shall be applicable if the managing underwriter delivers a Cutback Notice stating that, in its opinion, the number of shares of Common Stock that selling shareholders propose to sell therein, whether or not such selling shareholders have the right to include shares therein (the "Other Shares"), plus the number of Registrable Securities that the Holders have requested to be sold therein, plus the Company Shares, exceeds the maximum number of shares specified by the managing underwriter in such Cutback Notice that may be distributed without materially and adversely affecting the price, timing or distribution of the Company Shares. Such maximum number of shares that may be so sold, excluding the Company Shares, are referred to as the "Includible Shares." If the managing underwriter delivers such Cutback Notice, the Company shall be entitled to include all of the Company Shares in the public offering and each requesting Holder (or beneficiary) exercising its registration rights (or privileges) under this Agreement, shall be entitled to include in the public offering up to its pro rata portion of the Includible Shares and in priority to the inclusion of any Other Shares that are proposed to be sold in such public offering. No shareholder that proposes to sell Other Shares in such public offering may sell any such shares therein unless all Registrable Securities requested by the Holders to be sold therein are so included. (c) If a proposed public offering is entirely a secondary offering, the provisions of this Section 2.2(c) shall be applicable if the managing underwriter delivers a Cutback Notice stating that, in its opinion, the aggregate number of Registrable Securities and Other Shares proposed to be sold therein exceeds the maximum number of shares (the "Includible Secondary Shares") specified by the managing underwriter in such Cutback Notice that may be distributed without materially and adversely affecting the price, timing or distribution of the Common Stock being distributed. If the managing underwriter delivers such Cutback Notice, each requesting Holder shall be entitled to include up to its pro rata portion of the Includible Secondary Shares and in priority to the inclusion of any Other Shares that are proposed to be sold in such public offering. No shareholder that proposes to sell Other Shares in the proposed public offering may sell any such shares therein unless all Registrable Securities requested by the Holders to be sold therein are so included. (d) The underwriting agreement for such public offering shall provide that each requesting Holder shall have the right to sell its Registrable Securities to the underwriters and that the underwriters shall purchase the Registrable Securities at the price paid by the underwriters for the Common Stock sold by the Company and/or selling shareholders, as the case may be. 2.3 Registration Procedures. (a) In connection with a registration pursuant to Section 2.1 or 2.2, the Company agrees to: (i) make available for inspection by a representative of the Holders, the managing underwriter participating in any disposition pursuant to such Shelf Registration Statement and one firm of attorneys designated by the Holders (upon execution of customary confidentiality agreements reasonably satisfactory to the Company and its counsel), at reasonable times and in a reasonable manner, financial and other records, documents and properties of the Company that are pertinent to the conduct of due diligence customary for an underwritten offering, and cause the officers, directors and employees of the Company to supply all information reasonably requested by any such representative, underwriter or attorney in connection with a Shelf Registration Statement as shall be necessary to enable such persons to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act of 1933, as amended from time to time; (ii) use its best efforts to cause all Registrable Securities sold under a Shelf Registration Statement to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company are then listed; (iii) provide, without charge, to Holders that are selling Registrable Securities pursuant to such Shelf Registration Statement a reasonable number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits) and the prospectus included in such Shelf Registration Statement (including each Preliminary Prospectus) and other documents such Holders may reasonably request; (iv) use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or "blue sky" laws of such jurisdictions a Holder of Registrable Securities or any managing underwriter, if any, shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such sellers or underwriter, if any, to consummate the disposition of the Registrable Securities in such jurisdictions, except that in no event shall the Company be required to qualify to do business as a foreign corporation in any jurisdiction where it would not, but for the requirements of this paragraph (d), be required to be so qualified, to subject itself to taxation in any such jurisdiction or to consent to general service of process in any such jurisdiction; (v) cause to be provided to the Holders that are selling Registrable Securities pursuant to such Shelf Registration Statement and to the managing underwriter if any disposition pursuant to such Shelf Registration Statement is an underwritten offering, upon the effectiveness of such Shelf Registration Statement, a customary "10b-5" opinion of independent counsel (an "Opinion") and a customary "cold comfort" letter of independent auditors (a "Comfort Letter") in each case addressed to such Holders and managing underwriter, if any; (vi) cause to be provided to the Holders that are selling Registrable Securities pursuant to such Shelf Registration Statement and to the managing underwriter if any disposition pursuant to such Shelf Registration Statement is an underwritten offering, an Opinion and Comfort Letter with respect to each document, including any amendments thereto, that is incorporated by reference in such Shelf Registration Statement; in each case addressed to such Holders and managing underwriter, if any; (vii) notify in writing the Holders that are selling Registrable Securities pursuant to such Shelf Registration Statement and any managing underwriter if any disposition pursuant to such Shelf Registration Statement is an underwritten offering, (A) when the Shelf Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (B) of any request by the Commission or any state securities authority for amendments and supplements to the Shelf Registration Statement or of any material request by the Commission or any state securities authority for additional information after the Shelf Registration Statement has become effective, (C) of the issuance by the Commission or any state securities authority of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose, (D) if, between the effective date of the Shelf Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, including this Agreement, relating to disclosure cease to be true and correct in all material respects or if the Company receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (E) of the happening of any event during the period the Shelf Registration Statement is effective such that such Shelf Registration Statement or the related prospectus contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make statements therein not misleading (in the case of a prospectus, in light of circumstances under which they were made) and (F) of any determination by the Company that a post-effective amendment to the Shelf Registration Statement would be appropriate. The Holders hereby agree to suspend, and to cause any managing underwriter to suspend, use of the prospectus contained in a Shelf Registration Statement upon receipt of such notice under clause (C), (E) or (F) above until, in the case of clause (C), such stop order is removed or rescinded or, in the case of clauses (E) and (F), the Company has amended or supplemented such prospectus to correct such misstatement or omission or otherwise. If the notification relates to an event described in clauses (E) or (F), the Company shall promptly prepare and furnish to such seller and each underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (viii) comply with all applicable rules and regulations of the Commission and make generally available to its security holders, as soon as reasonably practicable after the effective date of the registration statement (and in any event within 15 months thereafter), an earnings statement (which need not be audited) covering the period of at least twelve consecutive months beginning with the first day of the Company's first calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (ix) provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement; (x) enter into such customary agreements (including, if applicable, an underwriting agreement) and take such other actions as the Holders shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities. The Holders of the Registrable Securities which are to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that the Company, and in such case the Company will, make to, and for the benefit of, the Holders the representations, warranties and covenants of the Company which are being made to, and for the benefit of, such underwriters and which are of the type customarily provided to institutional investors in secondary offerings; (xi) deliver promptly to each Holder participating in the offering and each underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission and its staff with respect to the registration statement, other than those portions of any such correspondence and memoranda which contain information subject to attorney-client privilege with respect to the Company, and, upon receipt of such confidentiality agreements as the Company may reasonably request, make reasonably available for inspection by any Holder of such Registrable Securities covered by such registration statement, by any underwriter, if any, participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such Holder or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney, accountant or agent in connection with such registration statement; (xii) use its best efforts to obtain the withdrawal of any order suspending the effectiveness of the registration statement; (xiii) provide a CUSIP number for all Registrable Securities not later than the effective date of the registration statement; (xiv) make reasonably available its employees and personnel and otherwise provide reasonable assistance to the underwriters in the marketing of Registrable Securities in any underwritten offering; (xv) promptly prior to the filing of any document which is to be incorporated by reference into the registration statement or the prospectus (after the initial filing of such registration statement) provide copies of such document to counsel to the seller of Registrable Securities and to the managing underwriter, if any, and make the Company's representatives reasonably available for discussion of such document and make such changes in such document concerning such sellers prior to the filing thereof as counsel for such sellers or underwriters may reasonably request; (xvi) cooperate with the sellers of Registrable Securities and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates not bearing any restrictive legends representing the Registrable Securities to be sold, and cause such Registrable Securities to be issued in such denominations and registered in such names in accordance with the underwriting agreement prior to any sale of Registrable Securities to the underwriters or, if not an underwritten offering, in accordance with the instructions of the sellers of Registrable Securities at least three business days prior to any sale of Registrable Securities; and (xvii) take all such other commercially reasonable actions as are necessary or advisable in order to expedite or facilitate the disposition of such Registrable Securities. (b) Each Holder of Registrable Securities sold pursuant to a registration statement, by requesting that such securities be included such registration statement, hereby (i) agrees to provide the Company with information with respect to such Holder that the Company reasonably requests in connection with such registration statement. (c) If any such registration statement or comparable statement under "blue sky" laws refers to any Holder by name or otherwise as the Holder of any securities of the Company, then such Holder shall have the right to require, acting reasonably, (i) the insertion therein of language, in form and substance satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the Company's securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not in the judgment of the Company, as advised by counsel, required by the Securities Act or any similar federal statute or any state "blue sky" or United States securities law then in force, the deletion of the reference to such Holder. 2.4 Registration Expenses. 2.4.1 "Expenses" shall mean any and all fees and expenses incident to the Company's performance of or compliance with this Article 2, including, without limitation: (i) Commission, stock exchange or NASD registration and filing fees and all listing fees and fees with respect to the inclusion of securities in the Nasdaq National Market; (ii) fees and expenses of compliance with Securities Laws or "blue sky" laws and in connection with the preparation of a "blue sky" survey, including, without limitation, reasonable fees and expenses of blue sky counsel; (iii) printing and copying expenses; (iv) messenger and delivery expenses; (v) expenses incurred in connection with any road show; (vi) fees and disbursements of counsel for the Company; (vii) fees and disbursements of all independent public accountants (including the expenses of any audit and/or "cold comfort" letter) and fees and expenses of other persons, including special experts, retained by the Company; and (viii) any other reasonable fees and disbursements of underwriters, if any, customarily paid by issuers. 2.4.2 The Company shall pay all Expenses with respect to any Shelf Registration Statement affected pursuant to Section 2.1 whether or not such Shelf Registration Statement becomes effective or does not remain effective for the period contemplated by Section 2.1(a). The Company shall pay all Expenses of the Holders with respect to any registration effected under Section 2.2. 2.4.3 Notwithstanding the foregoing, (i) the provisions of this Section 2.4 shall be deemed amended to the extent necessary to cause these expense provisions to comply with United States "blue sky" laws of each state or the Securities Laws of any other jurisdiction in which the offering is made; (ii) in connection with any registration hereunder, each Holder of Registrable Securities being registered shall pay all underwriting discounts and commissions and any transfer taxes, if any, attributable to the Registrable Securities, pro rata with respect to payments of discounts and commissions in accordance with the number of shares included in the offering by such Holder; and (iii) the Company shall be responsible for all of its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties). 2.5 Liquidated Damages. If (i) a registration statement or registration statements including all of the Registrable Securities has not been declared effective by the Commission on or prior to the first anniversary of the date of the initial issuance of the Series II Preferred, or (ii) a Shelf Registration Statement is declared effective but prior to the end of the Effective Period (A) shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Shelf Registration Statement that cures such failure and that is itself declared effective immediately thereafter or (B) the use of such Shelf Registration Statement is suspended by the Company for one or more periods exceeding 60 days in the aggregate (each event referred to in clause (i) and (ii), a "Registration Default"), then in addition to such other remedies as shall be available to the Holder of such Registrable Securities, the Company shall pay to each Holder of Registrable Securities affected thereby liquidated damages in cash in an amount equal to three percent (3%) of the then current Special Liquidation Payment (as defined in the Series II Designation) for each thirty (30) day period or portion thereof that such Registration Default continues; provided that in no event shall the Company be required to pay liquidated damages pursuant to this Section 2.5 (i) in excess of three percent (3%) of the then current Special Liquidation Payment for any such thirty (30) day period or (ii) for any such thirty (30) day period if the Company is required to pay liquidated damages pursuant to Section 6(j) of the Series II Designation for such thirty (30) day period. All accrued and liquidated damages shall be paid to the Holders entitled thereto, monthly in arrears. Notwithstanding the fact that any securities for which liquidated damages are due cease to be Registrable Securities, all obligations of the Company to pay liquidated damages with respect to securities shall survive until such time as such obligations with respect to such securities shall have been satisfied in full. 2.6 Certain Limitations on Registration Rights. In the case of any registration under Section 2.1 pursuant to an underwritten offering, or in the case of registration under Section 2.2 if the Company has determined to enter into an underwriting agreement in connection therewith, all securities to be included in such registration shall be subject to an underwriting agreement and no Person may participate in such registration unless such Person agrees to sell such Person's securities on the basis provided therein and completes and/or executes all questionnaires and other documents which must be executed in connection therewith, and provides such other information to the Company or the underwriter as may be necessary to register such Person's securities. 2.7 No Required Sale. Nothing in this Agreement shall be deemed to create an independent obligation on the part of any Holder to sell any Registrable Securities pursuant to any effective registration statement. 3. Indemnification. 3.1 In the event of any registration of any securities of the Company under the Securities Act pursuant to Article 2, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, the Holder of any Registrable Securities, its directors, officers, fiduciaries, employees and shareholders or general and limited partners (and the directors, officers, employees and shareholders thereof), each other Person who participates as an underwriter, if any, in the offering or sale of such securities, each officer, director, employee, shareholder or partner of such underwriter, and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act, against any and all losses, claims, damages or liabilities, joint or several, actions or proceedings (whether commenced or threatened) in respect thereof and expenses (including reasonable fees of counsel and any amounts paid in any settlement effected with the Company's consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act or otherwise ("Claims"), insofar as such Claims arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (iii) any violation by the Company of any federal, state, or common law rule or regulation applicable to the Company and relating to action required or inaction of the Company in connection with any such registration, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim arises solely out of any untrue statement or alleged untrue statement of a material fact or omission or alleged omission of a material fact made in such registration statement or amendment thereof or supplement thereto or in any such prospectus or any preliminary, final or summary prospectus in reliance upon, and in conformity with, written information furnished to the Company by, or on behalf of, such indemnified party specifically for use therein. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by, or on behalf of, such indemnified party and shall survive the transfer of such securities by such seller. 3.2 Each Holder of Registrable Securities that are included in the securities as to which any registration under Section 2.1 or 2.2 is being effected shall, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 3.1) to the extent permitted by law, the Company, its officers, directors, fiduciaries, employees and shareholders or general and limited partners (and the directors, officers, employees, and shareholders thereof), each Person controlling the Company within the meaning of the Securities Act with respect to any untrue statement or alleged untrue statement of any material fact in, or omission or alleged omission of any material fact from, such registration statement, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon, and in conformity with, written information furnished to the Company or its representatives by, or on behalf of, such Holder specifically for use therein and shall reimburse such indemnified party for any legal or other expenses reasonably incurred in connection with investigating or defending any such Claim as such expenses are incurred; provided, however, that the aggregate amount which any such Holder shall be required to pay pursuant to this Section 3.2 and Sections 3.3 and 3.5 shall in no case be greater than the amount of the net proceeds received by such Holder upon the sale of the Registrable Securities pursuant to the registration statement giving rise to such Claim. Such indemnity and reimbursement of expenses shall remain in full force and effect regardless of any investigation made by, or on behalf of, such indemnified party and shall survive the transfer of such securities by such Holder. 3.3 Indemnification similar to that specified in the preceding Sections 3.1 and 3.2 (with appropriate modifications) shall be given by the Company and the seller of Registrable Securities with respect to any required registration or other qualification of securities under any state securities and "blue sky" laws. 3.4 Any person entitled to indemnification under this Agreement shall promptly notify the indemnifying party in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Article 3, but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under this Article 3, except to the extent the indemnifying party is materially prejudiced thereby and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Article 3. In case any action or proceeding is brought against an indemnified party, it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such Claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the written consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within 20 days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; (ii) if such indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have concluded that there may be legal defenses available to such party or parties which are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any expenses therefor (including, without limitation, any such counsel's fees). No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or Claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (B) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by, or on behalf of, any indemnified party. 3.5 If for any reason the foregoing indemnity is unavailable or is insufficient to hold harmless an indemnified party under Sections 3.1, 3.2 or 3.3, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and the indemnified party, on the other hand, with respect to such offering of securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. If, however, the allocation provided in the second preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative faults, but also any other relevant equitable considerations. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 3.5 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the preceding sentences of this Section 3.5. The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the U.S. Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 3.5 to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 3.5 to contribute any amount in excess of the net proceeds received by such indemnifying party from the sale of Registrable Securities in the offering to which the losses, claims, damages or liabilities of the indemnified parties relate, less the amount of any indemnification payment made pursuant to Sections 3.2 and 3.3. 3.6 The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by, or on behalf of, any indemnified party and shall survive the transfer of the Registrable Securities by any such party. 3.7 The indemnification and contribution required by this Article 3 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. 4. Underwritten Offerings 4.1 Requested Underwritten Offerings If requested by the underwriters for any underwritten offering by the Holders pursuant to a registration under Section 2.1, the Company shall enter into a customary underwriting agreement with the underwriters. Such underwriting agreement shall be satisfactory in form and substance to the Company and the Holders that own a majority of the Registrable Securities included by the Holders in such offering acting reasonably and shall contain such representations and warranties by, and such other agreements on the part of, the Company and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnities and contribution agreements. Any Holder participating in the offering shall be a party to such underwriting agreement and may, at its option, require that any or all of the representations and warranties made by, and the other agreements on the part of, the Company to, and for the benefit of, such underwriters shall also be made to, and for the benefit of, such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder; provided, however, that the Company shall not be required to make any representations or warranties with respect to information specifically provided by a selling Holder of Registrable Securities for inclusion in the registration statement. Such underwriting agreement shall also contain such representations and warranties by the participating Holders as are customary in agreements of that type. 4.2 Piggyback Underwritten Offerings. In the case of a registration pursuant to Section 2.2 hereof, if the Company shall have determined to enter into any underwriting agreements in connection therewith, all of the Holders' Registrable Securities to be included in such registration shall be subject to such underwriting agreement. Any Holder participating in such registration may, at it option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to, and for the benefit of, such underwriters shall also be made to, and for the benefit of, such Holder and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of such Holder. Such underwriting agreements shall also contain such representations and warranties by the participating Holders as are customary in agreements of that type. 4.3 Underwriting Services If a registration pursuant to Section 2.1 involves an underwritten offering, then Holders that own a majority of the Registrable Securities included by the Holders in such offering shall select the underwriter from underwriting firms of national reputation in the United States subject to the approval of the Company, such approval not to be unreasonably withheld. 5. General 5.1 Rule 144. The Company covenants that (a) so long as it remains subject to the reporting provisions of the Exchange Act, it will timely file the reports required to be filed by it under the Securities Act or the Exchange Act (including, without limitation, the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities Act), and (b) will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. 5.2 Nominees for Beneficial Owners If Registrable Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its option, be treated as the Holder of such Registrable Securities for purposes of any request or other action by any Holder of Registrable Securities pursuant to this Agreement (or any determination of any number or percentage of shares constituting Registrable Securities held by any Holder of Registrable Securities contemplated by this Agreement); provided, however, that the Company shall have received written assurances reasonably satisfactory to it of such beneficial ownership. 5.3 Amendments. The terms and provisions of this Agreement may be modified or amended, or any of the provisions hereof waived, temporarily or permanently, pursuant to the prior written consent of the Company and the party adversely affected by such modification or waiver. 5.4 Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by telecopy, nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties: (i) if to the Company, to: Meridian USA Holdings, Inc. 3350 N.W. 2nd Avenue Boca Raton, FL 33431 Attention: Alan J. Posner Facsimile (561) 417-6888 with copies to: Aronauer, Goldfarb, Sills & Re, LLP 444 Madison Avenue New York, NY 10022 Attention: Samuel Goldfarb, Esq. Facsimile: (212) 755-6006 (ii) if to a Holder, at address set forth on the signature page hereto or such other address as may hereafter be designated in writing by such Holder to the Company. Each Holder, by written notice given to the Company in accordance with this Section 5.4, may change the address to which such notice or other communications are to be sent to such Holder. All such notices, requests, consents and other communications shall be deemed to have been given when received. 5.5 Miscellaneous. 5.5.1 This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and the respective successors, personal representatives and assigns of the parties hereto, whether so expressed or not. No Person other than a Holder shall be entitled to any benefits under this Agreement, except as otherwise expressly provided herein. This Agreement and the rights of the parties hereunder may be assigned by any of the parties hereto to any transferee of Registrable Securities; provided that upon the consummation of, and as a condition to, any such assignment the transferee assumes the obligations of the assignor under, and agrees to be bound by the terms of, this Agreement. 5.5.2 This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior and contemplated arrangements and understandings with respect thereto. 5.5.3 This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the principles of conflicts of law thereof. 5.5.4 The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. 5.5.5 This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed an original instrument, but all such counterparts together shall constitute but one instrument. 5.5.6 Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid, but if any provision of this Agreement is held to be invalid or unenforceable in any respect, such invalidity or unenforceability shall not render invalid or unenforceable any other provision of this Agreement. If any provision shall be held to be invalid, such provision shall be deemed valid to the extent permitted by law. 5.5.7 It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved person will be irreparably damaged and will not have an adequate remedy at law. Any such person, therefore, shall be entitled to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond, and, if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law. 5.5.8 Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 5.5.9 Each of the parties hereto hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America, in each case located in the County of New York, for any action, proceeding or investigation in any court or before any governmental authority ("Litigation") arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any Litigation relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by registered mail to its respective address set forth in this Agreement shall be effective service of process for any Litigation brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York or the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 5.6 No Inconsistent Agreements. Without the prior written consent of Holders representing a majority of the Registrable Securities, the Company will not, on or after the date of this Agreement, enter into any agreement with respect to its securities which is inconsistent with the rights granted in this Agreement or otherwise conflicts with the provisions hereof, other than any lock-up agreement with the underwriters in connection with any registered offering effected hereunder, pursuant to which the Company shall agree not to register for sale, and the Company shall agree not to sell or otherwise dispose of, Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock for a specified period following the registered offering. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above. MERIDIAN USA HOLDINGS, INC. By: /s/ Mark Streisfeld ----------------------- Name: Mark Streisfeld Title: President U.S. BANCORP INVESTMENTS, INC. By: /s/ Jess M. Ravich Name: Jess M. Ravich Title:Chairman Address for Notice: 11766 Wilshire Boulevard, Suite 870 Los Angeles, CA 90025 Attention: General Counsel Facsimile: (310) 312-5640 EX-10.3 7 0007.txt INVESTOR RIGHTS AGREEMENT THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made as of June 16, 2000, by and among Meridian USA Holdings, Inc., a Florida corporation (the "Company"), and those certain purchasers of the Company's Convertible Notes (as defined below) signatory hereto (collectively the "Purchasers", and each individually, a "Purchaser"). RECITALS WHEREAS, the Company and the Purchasers have entered into that certain Securities Purchase Agreement dated as of June 2000 (the "Purchase Agreement"); WHEREAS, the Purchase Agreement provides for, among other things, the sale by the Company and the purchase by the Purchasers of $8,000,000 aggregate principal amount of the Company's Series A Convertible Notes due 2010 (the "Convertible Notes"); and WHEREAS, the sale of the Convertible Notes to the Purchasers is conditioned Upon the extension of the rights set forth herein, and the Company desires to extend such rights herein. NOW THEREFORE, in consideration of the foregoing, the parties agree as follows: 1. Definitions. 1.1 Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Affiliate" of any Person means any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. "Common Stock" means the Common Stock, $.001 par value per share, of the Company. "Common Stock Equivalents means the Common Stock, the Preferred Stock and all other shares, options, warrants and other rights exercisable or exchangeable for, or convertible into, shares of Common Stock. "Holders" means the Purchasers and any assignees or transferees acquiring Convertible Notes or shares of Series II Preferred. "Person" means an individual, corporation, partnership, limited liability company, business trust or other form of entity. "Preferred Stock" means the Preferred Stock, $1.00 par value per share, of the Company. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder, or any similar United States federal statute. "Series II Preferred" means the Series II Convertible Preferred Stock, $.01 par value per share, of the Company. "Series II Securities" means, as of any time, the shares of Common Stock theretofore issued or then issuable on conversion of the Convertible Notes and the Series II Preferred. 2. Information Rights. 2.1 Financial Information. So long as any Convertible Notes or shares of Series II Preferred remains outstanding, the Company will provide to each holder of such notes or shares the following information (unless such Holder requests in writing that the Company not provide such information): (a) within seventy-five (75) days after the end of each fiscal year of the Company, (i) an audited consolidated balance sheet of the Company as of the end of such fiscal year, together with audited consolidated statements of income and cash flows of the Company for such fiscal year, prepared in accordance with generally accepted accounting principles ("GAAP"), together with (ii) a report on such financial statements prepared by the Company's existing independent certified public accountants, a "Big Five" accounting firm or other accounting firm reasonably acceptable to the Holders; (b) within forty-five (45) days after the end of each fiscal quarter, an unaudited balance sheet of the Company as of the end of such fiscal quarter, and unaudited statements of income and cash flow of the Company for such fiscal year and the fiscal year to date, prepared in accordance with GAAP (other than for accompanying notes, and subject to changes resulting from year-end audit adjustments), all in reasonable detail and all certified by the Chief Financial Officer of the Company; (c) within thirty (30) days after the end of each fiscal month, an unaudited balance sheet of the Company as of the end of such fiscal month, and unaudited statements of income and cash flow of the Company for such fiscal month and the fiscal year to date, prepared in accordance with GAAP (other than for accompanying notes, and subject to changes resulting from year-end audit adjustments), all in reasonable detail and all certified by the Chief Financial Officer of the Company; (d) within three (3) business days after the end of each week, an unaudited consolidated statement of revenues for such week and the fiscal year to date, prepared in accordance with GAAP (other than for accompanying notes, and subject to changes resulting from year-end audit adjustments), all in reasonable detail and all certified by the Chief Financial Officer of the Company; (e) together with each of the financial statements described in paragraphs 2.1(a), 2.1(b) and 2.1(c), a corresponding narrative statement describing the Company's operations on (i) a division or operating unit basis and (ii) a consolidated basis and setting forth in comparative form such operations relative to (i) the comparable period or periods for the prior year and (ii) the budgeted figures for such period or periods; (f) at least thirty (30) days prior to the commencement of each fiscal year of the Company, a budget for such fiscal year, including a projected balance sheet as of the end of such year and projected statements of income and cash flow for such period; and (g) within thirty (30) days after the end of each calendar month, a letter from the Chief Executive Officer of the Company identifying key Company operational and financial events that occurred during such month. 2.2 Inspection; Additional Information. So long as any Convertible Notes or shares of Series II Preferred remains outstanding, the Company shall allow each Holder of Convertible Notes or Series II Preferred to visit and inspect any of the properties of the Company (upon reasonable advance notice, and during normal business hours) and shall deliver or provide to each such Holder with reasonable promptness such information and data, including access to books, records, officers and accountants, with respect to the Company and its subsidiaries as such Holder may from time to time reasonably request; provided, however, that the Company shall not be obligated to so provide any information that the Company considers in good faith to be a trade secret or to contain confidential information. 3. Termination. This Agreement shall terminate automatically upon the date on which neither Convertible Notes nor shares of Series II Preferred are issued and outstanding. 4. Miscellaneous. 4.1 Waivers and Amendments. With the written consent of the Company and the Holders who hold not less than one-half (1/2) of the Convertible Notes and Series II Preferred then held by all Holders, voting together on the basis of aggregate principal amount and liquidation value, the obligations of the Company and the rights of the Holders under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely), and with the same consent, the Company and the Holders may amend or otherwise modify, extend or terminate this Agreement or enter into a supplemental agreement for the purpose of adding any one or more provisions to this Agreement. Neither this Agreement nor any provision hereof may be changed, waived, or terminated orally, but only by a signed statement in writing. Any modification, waiver or supplementary agreement effected in accordance with this Section 4.1 shall be binding upon each Purchaser, each future Holder of any Convertible Notes or Series II Preferred and the Company. 4.2 Assignment of Rights; Right to Enforce Agreement. The rights to which a Holder is entitled hereunder may be assigned or otherwise transferred only to a Person who holds $1,000,000 aggregate principal amount of Convertible Notes, 1,000 shares of Series II Preferred or any combination thereof; provided, however,that with respect to each such assignment or other transfer, the Company shall be given written notice of the transfer, the transferee shall agree in writing to be bound by the provisions of this Agreement, and such transfer shall otherwise be effected in accordance with all applicable securities laws and all other applicable agreements, if any, between the Company and such Holder. 4.3 Notices. All notices and ther communications required or permitted hereunder shall be in writing (or in the form of a telecopy (confirmed in writing) to be given only during the recipient's normal business hours unless arrangements have otherwise been made to receive such notice by telecopy outside of normal business hours) and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telecopy (as provided above) addressed (a) if to any Purchaser, at the address for such Purchaser set forth on the signature pages hereto or at such other address as such Purchaser shall have furnished to the Company in writing, (b) if to any Holder, at the address for such Holder in the records of the Company or such other address as such Holder shall have furnished to the Company in writing, or (c) if to the Company, to 3350 N.W. 2nd Avenue, Boca Raton, Florida 33431, addressed to the attention of the Corporate Secretary (or at such other address as the Company shall have furnished in writing to the Purchasers and Holders). 4.4 Descriptive Headings. The descriptive headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof. 4.5 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New York as applied to agreements among New York residents, made and to be performed entirely within the State of New York. 4.6 Consent to Jurisdiction and Venue. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION") ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York or the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 4.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument, but only one of which need be produced. 4.8 Facsimile Signatures. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party that requires such delivery. 4.9 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 4.10 Successors and Assigns. Except as otherwise expressly provided in this Agreement, this Agreement shall benefit and bind the successors, permitted assigns, heirs, executors and administrators of the parties to this Agreement. 4.11 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter of this Agreement, and supersedes all prior understandings and agreements with respect to such subject matters. 4.12 Separability; Severability. Unless expressly provided in this Agreement, the rights of each Holder under this Agreement are several rights, not rights jointly held with any other Holder. Any invalidity, illegality or limitation on the enforceability of this Agreement with respect to any Holder shall not affect the validity, legality or enforceability of this Agreement with respect to the other Holder. If any provision of this Agreement is judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: MERIDIAN USA HOLDINGS, INC., a Florida corporation By: /s/ Mark Streisfeld ----------------------- Name: Mark Streisfeld Title: President PURCHASERS: U.S. BANCORP INVESTMENTS, INC. By: /s/ Jess M. Ravich Name: Jess M. Ravich Title: Chairman Address: 11766 Wilshire Boulevard Suite 870 Los Angeles, CA 90025 Attention: General Counsel Facsimile: (310) 312-5640 EX-10.4 8 0008.txt MERIDIAN USA HOLDINGS, INC. SECURITYHOLDERS AGREEMENT This Securityholders Agreement (this "Agreement") is made as of June 16, 2000 by and among Meridian USA Holdings, Inc., a Florida corporation (the "Company"), Alan Posner and Mark Streisfeld (each, a "Founder" and, collectively with their transferees, the "Founders"), Joel Flig, Paul M. Galant, Ronald Shapss (each an "Other Holder," collectively with their transferees, the "Other Holders" and together with the Founders, the "Management Holders") and the purchasers of the Company's Series A Convertible Notes due 2010 (the "Convertible Notes") listed on the signature pages hereto (each a "Purchaser" and, collectively with their transferees, the "Purchasers"). WHEREAS, the Management Holders currently own shares of Common Stock of the Company, $.001 par value per share (the "Common Stock") and shares of the Company's Series I Preferred Stock, $1.00 par value per share (the "Series I Preferred"); and WHEREAS, the Purchasers and the Company have entered into that certain Securities Purchase Agreement dated as of June 16, 2000 (the "Purchase Agreement"); and WHEREAS, the Purchase Agreement provides for, among other things, the sale By the Company and the purchase by the Purchasers of $8,000,000 aggregate Principal amount of the Company's Series A Convertible Notes (the "Convertible Notes"); and WHEREAS, the sale of the Convertible Notes to the Purchasers is conditioned Upon the extension of the rights set forth herein, and the Company and the Management Holders desire to extend such rights herein. NOW, THEREFORE, the parties agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings. 1.1 "Affiliate" of any person or entity shall mean any other person or entity which, directly or indirectly, controls, is controlled by or is under common control with such person or entity. 1.2 "Common Stock Equivalents" means and includes all shares of the Company's Common Stock issued and outstanding at the relevant time plus (a) all shares of Common Stock that may be issued upon exercise of any options, warrants and other rights of any kind that are then exercisable, and (b) all shares of Common Stock that may be issued upon conversion or exchange of (i) any convertible securities, including without limitation the Series I Preferred, Series II Preferred and all other preferred stock and debt securities then outstanding, which are by their terms then convertible into or exchangeable for Common Stock, or (ii) any such convertible securities issuable upon exercise of options, warrants or other rights, in each case that are then exercisable. 1.3 "Investment Return Date" means the first date on which the Purchasers who acquire Convertible Notes (or shares of Series II Preferred issuable upon conversion of Convertible Notes) prior to the date ninety (90) days after the Purchase Date have Transferred (other than to Affiliates) shares of Common Stock in transactions consummated after the date ninety (90) days after the Purchase Date and yielding aggregate proceeds to such Purchasers at least equal to the sum of (x) $8,000,000, plus (y) the amount necessary to provide an IRR on amounts invested equal to twelve percent (12%), compounded quarterly, through the date of such payment. 1.4 "IRR" means an annual internal rate of return, calculated on a daily basis, but compounded quarterly. 1.5 "Management Stock" means the Common Stock Equivalents currently owned or hereafter acquired by the Management Holders or their transferees who become parties to this Agreement. 1.6 "Purchase Date" means June 16, 2000. 1.7 "Purchaser Stock" means the Common Stock Equivalents currently owned or hereafter acquired by the Purchasers or their transferees who become parties to this Agreement. 1.8 "Series II Preferred" means the Series II Convertible Preferred Stock, $.01 par value per share, of the Company. 1.9 "Transfer" means (i) when used as a noun: any direct or indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition and (ii) when used as a verb: to directly or indirectly transfer, sell, assign, pledge, hypothecate, encumber, or otherwise dispose of. 2. Restrictions on Transfer. 2.1 Transfers in Accordance with this Agreement. Any attempt to Transfer, or purported Transfer of, any shares of Management Stock in violation of the terms of this Agreement shall be null and void and neither the Company nor any transfer agent shall register upon its books any such Transfer. A copy of this Agreement shall be filed with the Secretary of the Company and kept with the records of the Company. 2.2 Agreement to be bound. No Management Holder shall Transfer any shares of Management Stock (other than Transfers to the Company or Transfers in accordance with (i) Sections 2.3 and 2.4 or (ii) Section 3) unless (x) the certificates representing such shares of capital stock issued to the transferee bear the legend provided in Section 5, and (y) the transferee (if not already a party hereto) has executed and delivered to each other party hereto, as a condition precedent to such Transfer, an instrument or instruments, reasonably satisfactory to the Purchasers, confirming that the transferee agrees to be bound by the terms of this Agreement as a Founder or Other Holder in the same manner and capacity as such party's transferor and as if such transferee had executed this Agreement on the date hereof. 2.3 Notice of Proposed Transfer. Prior to the Investment Return Date no Management Holder may sell shares of Management Stock pursuant to Sections 2.3 and 2.4. After the Investment Return Date, if any Management Holder desires to sell (a "Selling Holder"), and has received a bona fide offer in writing from unaffiliated third parties to buy, shares of Management Stock, such Management Holder shall provide the Company and each of the Purchasers with a written notice (the "Sale Notice") of the proposed sale at least thirty (30) days prior to the proposed date thereof. The Sale Notice shall contain each and every term of the proposed sale, including, without limitation, a copy of the written offer received, the name and address of the prospective purchaser, the purchase price and terms of payment, the date and place of the proposed sale, and the number of shares of Management Stock proposed to be sold by such Management Holder. 2.4 Right of Co-Sale. (a) Upon receipt of the Sale Notice each Purchaser shall have the right exercisable upon written notice to the (a) Selling Holder within ten (10) days after receipt of the notice, to participate in such Transfer of shares of Management Stock. Each Purchaser may notify the Selling Holder of its desire to Transfer to the prospective purchaser (or at the Purchaser's option and demand, to the Selling Holder, who hereby agrees to purchase in the event that a direct sale from the Selling Holder to the prospective purchaser is consummated) all or any part of the shares of stock of the Company which the Purchaser then holds on the same terms as those on which the Selling Holder proposed to Transfer its Management Stock to the prospective purchaser. The maximum number of shares which a Purchaser shall be entitled to sell pursuant to this Section 2.4 with respect to any single sale by a Selling Holder shall be equal to that number obtained by multiplying (x) the total number of shares of Common Stock Equivalents proposed to be sold in such Transfer, times (y) a fraction the numerator of which is the total number of Common Stock Equivalents held by such Purchaser, and the denominator of which is the total number of shares of Common Stock Equivalents (including only the number of shares of Common Stock into which (i) the Convertible Notes (including the Series II Preferred issuable upon conversion of the Convertible Notes) and the shares of Series I Preferred have been converted or are then convertible and (ii) other Common Stock Equivalents held by such Selling Holder are then convertible). If the Purchaser elects to sell to the prospective purchaser, then the Selling Holder shall assign as much of its interest in the agreement of sale with the prospective purchaser as the Purchaser shall be entitled to and shall accept hereunder. (b) If, after expiration of the time periods described in Section 2.4(a), the Purchasers do not send notice pursuant to subparagraph (a) above, then the Selling Holder shall be free to sell the stock to such prospective purchaser, but only at the time and on the same terms and conditions as outlined in the Sale Notice sent to the Purchasers, and provided that in the event that the Transfer of such Shares is not closed within sixty (60) days of the date of the Sale Notice, they shall once again be subject to the right of co-sale provided herein. Any proposed sale or Transfer on terms and conditions more favorable than those described in the Sale Notice pursuant to Section 2.3, as well as any subsequent proposed Transfer of any shares of Management Stock by a Management Holder, shall again be subject to the co-sale rights of the Purchasers and shall require compliance by the Management Holder with the procedures described in this Section 2.4. (c) The exercise or non-exercise of the rights of the Purchasers hereunder to participate in one or more transfers by the Management Holders shall not adversely affect their rights to participate in subsequent transfers of shares of Management Stock subject to this Section 2.4 3. Transfers to Which Co-Sale Rights Do Not Apply. 3.1 Exception for Certain Family Gifts. Notwithstanding anything in this Agreement to the contrary, Transfers of Management Stock by gift or other transfer to immediate family members of such Management Holder or to trusts for the exclusive benefit of family members of such Management Holder, or transfers of Management Stock by will or intestate succession, shall be exempt from Section 2.4 of this Agreement, provided that each transferee agrees in writing to hold the Management Stock so transferred subject to all of the provisions of this Agreement so that such transferee is bound by all provisions of this Agreement and that there shall be no further transfer of such Management Stock, except in accordance with the terms of this Agreement. Any transferee or other recipient not so agreeing may not receive any shares of Management Stock. For purposes of this Section 3.1, the term "immediate family" shall mean the spouse, child, grandchild, father, mother, brother or sister of such Management Holder, the adopted child or adopted grandchild of such Management Holder, or the spouse of any child, adopted child, grandchild or adopted grandchild of such Management Holder. 3.2 Other Permitted Transfers. Notwithstanding anything in this Agreement to the contrary, Transfers of Management Stock pursuant to Rule 144 under the Securities Act of 1933, as amended (a "Rule 144 Transaction"), (i) by Other Holders at any time, and (ii) by Founders after the Investment Return Date, respectively, shall be exempt from Sections 2.2., 2.3 and 2.4 of this Agreement; provided that prior to engaging in a Rule 144 Transaction, such Management Holder shall provide the Purchasers with a written notice (the "Rule 144 Notice") of such proposed Rule 144 Transaction including the number of shares of Management Stock proposed to be sold in such Rule 144 Transaction and the then current market price for such shares. Upon receipt of the Rule 144 Notice, each Purchaser shall have the right exercisable upon written notice to such Management Holder within three (3) business days after receipt of the Rule 144 Notice, to purchase such shares at such market price. If after the end of such period, such Management Holder shall be free to sell such shares for which the Purchasers have not provided notice in a Rule 144 Transaction within ten (10) days of the Rule 144 Notice. 3.3 Reports. So that the Management Holders may comply with the terms of this Section 3, the Purchasers shall provide to the Company within five (5) business days after any Transfer (other than to Affiliates) of shares of Common Stock, a report setting forth the number of shares so Transferred, the consideration received therefor and a calculation of the IRR with respect to such shares. 4. Board of Directors. 4.1 Nomination Rights. So long as $1,000,000 aggregate principal amount of Convertible Notes remain outstanding, the Purchasers shall be entitled to nominate one person to serve as a director of the Company. Each such nominee shall hold his or her office as a director of the Company for such term as is provided in the Company's charter documents or until his or her death, resignation or removal from the board of directors of the Company or until his or her successor has been duly elected and qualified in accordance with the provisions of this Agreement, the Company's charter documents and applicable law. If such a nominee ceases to serve as a director of the Company for any reason during his or her term, a nominee for the vacancy resulting therefrom will be designated by the Purchasers. 4.2 Election of Nominees. So long as the Company is in compliance with this Section 4 and Section 7 of the Certificate of Designation of Series II Preferred, each of the parties hereto shall vote all Common Stock Equivalents then held by such party in favor of the individuals nominated by the Purchasers and individuals nominated by the Company for election to its Board of Directors at the two annual meetings of shareholders immediately after the Purchase Date. 5. Restrictive Legend and Stop-Transfer Orders. 5.1 Legend. Each Management Holder understands and agrees that the Company shall cause the legend set forth below, or a legend substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Management Stock. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH A SECURITYHOLDERS AGREEMENT DATED AS OF JUNE 16, 2000, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. Such legend shall be removed upon consummation of a Transfer in accordance with Section 2.4 or a Rule 144 Transaction. 5.2 Stop Transfer Instructions. Each Management Holder agrees, to insure compliance with the restrictions referred to herein, that the Company will issue appropriate "stop transfer" certificates or instructions and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its records. 6. Assignment of Rights. The rights to which a Purchaser is entitled hereunder may be assigned or otherwise transferred by that Purchaser to one or more "accredited investors" who hold Convertible Notes, shares of Series II Preferred and/or shares of Common Stock issued on conversion of the Series II Preferred; provided, however, that with respect to each such assignment or other transfer, the Company shall be given written notice of the transfer, the transferee shall agree in writing to be bound by the provisions of this Agreement, and such transfer shall otherwise be effected in accordance with all applicable securities laws and all other applicable agreements, if any, between the Company and such Purchaser. 7. Automatic Termination. If not earlier terminated pursuant to Article 8.4, this Agreement shall terminate automatically upon the third anniversary of the Investment Return Date or the redemption of all shares of Series II Preferred in accordance with their terms. 8. Miscellaneous Provisions. 8.1 Notices. All notices and other communications required or permitted hereunder shall be in writing (or in the form of a telecopy (confirmed in writing) to be given only during the recipient's normal business hours unless arrangements have otherwise been made to receive such notice by telecopy outside of normal business hours) and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telecopy (as provided above) addressed (a) if to a Purchaser or Management Holder, at the address for such Purchaser or Management Holder set forth on the signature pages hereto or at such other address as such Purchaser or Management Holder shall have furnished to the Company in writing, or (b) if to the Company, one copy should be sent to its principal executive offices and addressed to the attention of the Corporate Secretary or at such other address as the Company shall have furnished in writing to the Purchasers. 8.2 Binding on Successors and Assigns. This Agreement, and the rights and obligations of the parties hereunder, shall inure to the benefit of, and be binding upon, their respective successors, permitted assigns and legal representatives. 8.3 Severability. If one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and such invalid, illegal or unenforceable provision shall be enforced to the extent permissible. 8.4 Amendment. Any amendment, extension, modification or termination of this Agreement shall be effective only with the written consent of (i) the Company, (ii) Purchasers who hold not less than 50% of the Convertible Notes and Series II Preferred than held by all Purchasers, voting together on the basis of aggregate principal amount and liquidation preference and (iii) the holders of more than 50% of the Management Stock. Any waiver by a party of its rights hereunder shall be effective only if evidenced by a written instrument executed by a duly authorized representative of such party. No such waiver shall require consent of the Company, any Management Holder or any Purchaser, other than the person making the waiver. 8.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida as applied to agreements among Florida residents entered into and to be performed entirely within Florida. 8.6 Obligations of Company. The Company agrees to use its best efforts to enforce and abide by the terms of this Agreement, to inform each Purchaser of any breach hereof (to the extent the Company has knowledge thereof) and to assist each Purchaser in the exercise of its rights hereunder. 8.7 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 8.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 8.9 Facsimile Signatures. Any signature page delivered by a fax machine or telecopy machine shall be binding to the same extent as an original signature page, with regard to any agreement subject to the terms hereof or any amendment thereto. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party which requests it. 8.10 Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes any prior understandings and agreements with respect to such subject matter. 8.11 Consent to Jurisdiction and Venue. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION") ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any Litigation arising out of this Agreement or the transactions contemplated hereby in the courts of the State of New York or the United States of America, in each case located in the County of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Litigation brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. THE COMPANY: MERIDIAN USA HOLDINGS, INC. By: /s/ Mark Streisfeld ----------------------- Name: Mark Streisfeld Title: President FOUNDERS: /s/ Paul M. Galant ----------------------- Paul M. Galant Address: 470 N.E. 25th Terrace Boca Raton, FL 33431 /s/ Alan Posner ------------------- Alan Posner Address: 6786 Willow Wood Drive Boca Raton, FL 33431 /s/ Mark Streisfeld ----------------------- Mark Streisfeld Address: 15848 Laurel Oak Circle Delray Beach, FL 33484 OTHER HOLDERS: /s/ Joel Flig ----------------- Joel Flig Address: 425 Cedarhurst Avenue Cedarhurst, NY 11516 /s/ Ronald Shapss --------------------- Ronald Shapss Address: 75 Montebello Road Suffern, NY 10901 PURCHASERS: U.S. BANCORP INVESTMENTS, INC. By: /s/ Jess M. Ravich Name: Jess M. Ravich Title: Chairman Address: 11766 Wilshire Boulevard, Suite 870 Los Angeles, CA 90025 Attention: General Counsel Facsimile: (310) 312-5640 -----END PRIVACY-ENHANCED MESSAGE-----