EXHIBIT 10.5 ------------ EXCHANGE AGREEMENT ------------------ AGREEMENT, dated as of April 13, 2004, by and among NETWORK-1 SECURITY SOLUTIONS, INC. (the "Company"), a Delaware corporation with offices at 445 Park Avenue, Suite 1028, New York, New York 10022, and the holders of the Company's Series E Convertible Stock (the "Series E Preferred Stock") and the Series D Convertible Preferred Stock (the "Series D Preferred Stock") signatory hereto (collectively, the "Preferred Stockholders"). WHEREAS, as part of a recapitalization of the Company, the Board of Directors of the Company has determined that it is in the best interest of the Company to eliminate its outstanding shares of Preferred Stock (the "Preferred Stock") by exchanging such securities for shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock"), upon the terms and subject to the conditions set forth herein; WHEREAS, each of the Preferred Stockholders and the Company desire that the Preferred Stockholders exchange (i) 2,483,508 shares of Series E Preferred Stock which is convertible into 4,967,016 shares of Common Stock and (ii) 231,054 shares of Series D Preferred Stock which is convertible into 391,478 shares of Common Stock, for an aggregate of 6,698,118 shares of Common Stock, or 1.25 times the number of shares of Common Stock for each share of Common Stock that each Preferred Stockholder would have received upon conversion of their Preferred Stock, all upon the terms and subject to the conditions set forth therein. The Common Stock issuable in exchange for the shares of Preferred Stock are referred to herein as the "Shares." NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I Issuance of Shares for Preferred Stock -------------------------------------- 1.1 Exchange Agreement. At the Closing provided for in Section 1.2, the Company will issue to each Preferred Stockholder and, subject to the terms and conditions of this Agreement, each Preferred Stockholder will exchange the Preferred Stock for the number of Shares set forth in Exhibit A hereto (the "Exchange") in accordance with Schedule A hereto. 1.2 The Closing. The closing of the Exchange (the "Closing") shall take place at the offices of Olshan Grundman Frome Rosenzweig & Wolosky, LLP, Park Avenue Tower, 65 East 55th Street, New York, New York on the date that this Agreement is executed by the parties hereto (the time and date of the Closing being herein referred to as the "Closing Date"). On the Closing Date there will be delivered to the Preferred Stockholders the Shares on the Closing Date against delivery and cancellation of the original Preferred Stock in accordance with Schedule A hereto. 1 ARTICLE II Representations. Warranties. and Agreements of the Company ---------------------------------------------------------- The Company represents and warrants to the Preferred Stockholders as follows: 2.1 Corporate Organization and Qualification. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and is qualified to transact business as a foreign corporation in every jurisdiction in which its ownership, leasing, licensing, or use of property or assets or the conduct of its business makes such qualification necessary, except in such jurisdictions where the failure to be so qualified would not have a material adverse effect on the business, results of operations, financial condition, or prospects of the Company. The Company has all required power and authority to own its property and to carry on its business as now conducted and proposed to be conducted. 2.2 Validity of Transaction. The Company has all requisite power and authority to execute, deliver, and perform this Agreement, and to issue the Shares in exchange for the Preferred Stock as part of the Exchange. All necessary corporate proceedings of the Company have been duly taken to authorize the execution, delivery, and performance of this Agreement, and to authorize the issuance of the Shares for the Preferred Stock as part of the Exchange. This Agreement, has been duly authorized, executed, and delivered by the Company, and constitutes the legal, valid, and binding obligation of the Company, and is enforceable as to the Company in accordance with its respective terms, except as may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, or other similar laws or by legal or equitable principles relating to or limiting creditors' rights generally or as rights to indemnification may be limited by applicable securities laws. Except as to filings which may be required under applicable state securities regulations, no consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any Federal, state, local, or other governmental authority or of any court or other tribunal is required by the Company in connection with the transactions contemplated hereby. No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company is a party, or by which any of its properties or assets is bound, is required for the execution, delivery, or performance by the Company of this Agreement, and the execution, delivery, and performance of this Agreement, will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any such contract, agreement, instrument, lease, license, arrangement, or understanding, or violate or result in a breach of any term of the Certificate of Incorporation or By-laws of the Company, or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on the Company or to which any of its operations, business, properties, or assets is subject. The Shares issuable in exchange for the Shares are duly authorized, will be validly issued, fully paid, and nonassessable, will not have been issued in violation of any preemptive right of stockholders or rights of first refusal, and the Preferred Stockholders will have good title to the Shares, free and clear of all liens, security interests, pledges, charges, encumbrances, stockholders agreements and voting trusts (other than any created by the Preferred Stockholders). 2 2.3 Capitalization. The authorized capital stock of the Company consists of 40,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"), of which 1,250,000 shares have been designated Series D Convertible Preferred Stock and 3,500,000 shares have been designated Series E Convertible Preferred Stock, having the designations, dividend rights, voting powers, conversion and redemption rights, rights on liquidation or dissolution, and other preferences and relative, participating, optional, or other preferences and relative, participating, optional, or other special rights, and the qualifications, limitations or restrictions thereof, set forth in their respective Certificates of Designations. Immediately prior to the Closing, the Company shall have 8,314,458 shares of Common Stock, 2,483,508 shares of Series E Convertible Preferred Stock, and 231,054 shares of Series D Convertible Preferred Stock outstanding. All issued and outstanding shares of Common Stock and Preferred Stock have been validly issued and are fully paid and nonassessable and have not been issued in violation of any Federal or state securities laws. Except for (a) upon the exercise of the options and warrants which are currently outstanding to purchase 5,481,860 shares of Common Stock (including options to purchase 3,297,370 under the Company's Stock Option Plan), there are not, as of the date hereof, any outstanding or authorized subscriptions, options, warrants, calls, rights, commitments, or any other agreements obligating the Company to issue (i) any additional shares of its capital stock or (ii) any securities convertible into, or exercisable or exchangeable for, or evidencing the right to subscribe for, any shares of its capital stock. Other than the Company's Stock Option Plan, the Company has not adopted or authorized any plan for the benefit of its officers, employees, or directors which require or permit the issuance, sale, purchase, or grant of any shares of the Company's capital stock, any securities convertible into, or exercisable or exchangeable for, or evidencing the right to subscribe for any shares of the Company's capital stock, or any phantom shares or any stock appreciation rights. 2.4 SEC Filings. The Company has filed all forms, reports, statements and other documents required to be filed with (i) the SEC including, without limitation, (A) all Annual Reports on Form 10-KSB, (B) all Quarterly Reports on Form 10-QSB, (C) all Reports on Form 8-K, (D) all other reports or registration statements and (E) all amendments and supplements to all such reports and registration statements (collectively referred to as the "SEC Reports") and (ii) any other applicable state securities authorities (all such forms, reports, statements and other documents in (i) and (ii) of this Section 2.4 being referred to herein, collectively, as the "Reports"). The Reports (i) were prepared in all material respects in accordance with the requirements of applicable law (including, with respect to the SEC Reports, the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and the rules and regulations of the SEC thereunder applicable to such SEC Reports) and (ii) 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 therein, in the light of the circumstances under which they were made, not misleading. In addition, since the last quarterly report of the Company on Form 10-QSB filed with the SEC, there have been no material events that require disclosure under the Exchange Act. 3 ARTICLE III Representations and Warranties of the Preferred Stockholders ------------------------------------------------------------ Each of the Preferred Stockholders, severally and not jointly, represents and warrants to the Company as follows: 3.1 Organization. Such Preferred Stockholder (if not an individual) is duly organized under the laws of the state of its jurisdiction of organization and has full power and authority to enter into this Agreement and to consummate the transactions set forth herein. All necessary proceedings have been duly taken to authorize the execution, delivery, and performance of this Agreement by such Preferred Stockholder (if not an individual). 3.2 Accredited Investor; Access to Information. Such Preferred Stockholder and, to the knowledge of such Preferred Stockholder, each limited partner of such Preferred Stockholder in the case of a Preferred Stockholder which is a limited partnership, and each partner of such Preferred Stockholder in the case of a Preferred Stockholder which is a general partnership, is an "accredited investor," as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act. Such Preferred Stockholder, shareholders of the general partner of such Preferred Stockholder, if any, and each of the limited partners of such Preferred Stockholder, if any, has had substantial experience in private securities transactions like this one and has had a full opportunity to discuss the business, management, and financial affairs of the Company with the Company's management. Such Preferred Stockholder has received all requested documents from the Company and has had a full opportunity to ask questions of, and receive answers from, the officers of the Company. 3.3 Authorization. All actions on the part of such Preferred Stockholder necessary for the authorization, execution, delivery, and performance by such Preferred Stockholder of this Agreement have been taken. This Agreement has been duly authorized, executed, and delivered by such Preferred Stockholder, is the legal, valid, and binding obligation of such Preferred Stockholder, and are enforceable as to such Preferred Stockholder in accordance with their respective terms, except as may be limited by applicable bankruptcy, reorganization, insolvency, moratorium, or other similar laws or by legal or equitable principles relating to or limiting creditors' rights generally or as rights to indemnification may be limited by applicable securities laws. 3.4 Investment Intent. Such Preferred Stockholder is acquiring the Shares for its, his or her own account for investment and not with a view to, or for sale in connection with, any public distribution thereof in violation of the Securities Act. Such Preferred Stockholder understands that Shares have not been registered for sale under the Securities Act or qualified under applicable state securities laws and that the Shares are being offered and sold to such Preferred Stockholder pursuant to one or more exemptions. Such Preferred Stockholder understands that it, he or she must bear the economic risk of the investment in the Company for an indefinite period of time, as the Shares cannot be sold unless subsequently registered under the Securities Act and qualified under state securities laws, unless an exemption from such registration and qualification is available. 4 3.5 Transfer of Securities. Such Preferred Stockholder will not sell or otherwise dispose of the Shares unless (a) a registration statement with respect thereto has become effective under the Securities Act and such Shares have been qualified under applicable state securities laws or (b) there is presented to the Company notice of the proposed transfer and, if it so requests, a legal opinion reasonably satisfactory to the Company that such registration and qualification is not required; provided, however, that no such registration or qualification or opinion of counsel shall be necessary for a transfer by such Preferred Stockholder (i) to any entity controlled by, or under common control with, such Preferred Stockholder (ii) to a partner or officer of such Preferred Stockholder, (iii) to a partner or officer of the general partner of such Preferred Stockholder, or (iv) to the spouse, lineal descendants, estate, or a trust for the benefit of any of the foregoing, provided the transferee agrees in writing to be subject to the terms hereof to the same extent as if he were such Preferred Stockholder. Such Preferred Stockholder consents that any transfer agent of the Company may be instructed not to transfer any Shares unless it receives satisfactory evidence of compliance with the foregoing provisions, and that there may be endorsed upon any certificate representing such shares (and any certificates issued in substitution therefor) the following legend calling attention to the foregoing restrictions on transferability of such shares, stating in substance: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITIES EVIDENCED BY THIS CERTIFICATE, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER SUCH ACT AND APPLICABLE SECURITIES LAWS IS NOT REQUIRED." The Company shall, upon the request of any holder of a stock certificate bearing the foregoing legend and the surrender of such certificate, issue a new stock certificate without such legend if (A) the stock evidenced by such certificate has been effectively registered under the Securities Act and qualified under any applicable state securities law and sold by the holder thereof in accordance with such registration and qualification, or (B) such holder shall have delivered to the Company a legal opinion reasonably satisfactory to the Company to the effect that the restrictions set forth herein are no longer required or necessary under the Securities Act or any applicable state law. 5 ARTICLE IV Additional Provisions. ---------------------- 4.1 Indemnification. From and after the Closing, the Company, on the one hand, and the Preferred Stockholders (severally and not jointly), on the other hand, shall indemnify and save harmless the other (including officer, directors, employees, agents and representatives) against any loss, claim, liability, expense (including reasonable attorney's fees) or other damage caused by or arising out of (i) the breach of any representation or warranty made by any such party or (ii) the failure by the party against whom indemnification is sought to perform any of its covenants or agreements in this Agreement. 4.2 Communications. All notices or other communications hereunder shall be in writing and shall be given by registered or certified mail (postage prepaid and return receipt requested), by an overnight courier service which obtains a receipt to evidence delivery, or by telex or facsimile transmission (provided that written confirmation of receipt is provided), addressed as set forth below: If to the Company: Network- 1 Security Solutions, Inc. 445 Park Avenue, Suite 1028 New York, New York 10022 Attention: Corey M. Horowitz, Chairman and Chief Executive Officer With a copy to: Olshan Grundman Frome Rosenzweig & Wolosky, LLP Park Avenue Tower 65 East 55th Street New York, New York 10022 Attention: Sam Schwartz, Esq. If to the Preferred Stockholders, at their respective addresses as set forth on Exhibit A hereto, or such other address as any party may designate to the other in accordance with the aforesaid procedure. All notices and other communications sent by overnight courier service shall be deemed to have been given as of the next business day after delivery thereof to such courier service, those given by telex or facsimile transmission shall be deemed given when sent, and all notices and other communications sent by mail shall be deemed given as of the third business day after the date of deposit in the United States mail. 4.3 Successors and Assigns. The Company may not sell, assign, transfer, or otherwise convey any of its rights or delegate any of its duties under this Agreement, except to a corporation which has succeeded to substantially all of the business and assets of the Company and has assumed in writing its obligations under this Agreement, and this Agreement shall be 6 binding on the Company and such successor. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the Preferred Stockholders and their successors and assigns. 4.4 Amendments and Waivers. Neither this Agreement nor any term hereof may be changed or waived (either generally or in a particular instance and either retroactively or prospectively) absent the written consent each party hereto. 4.5 Survival of Representations. The representations, warranties, covenants, and agreements made herein or in any certificate or document executed in connection herewith shall survive the execution and delivery of this Agreement and the issuance and delivery of the Shares to the Preferred Stockholders. 4.6 Delays or Omissions; Waiver. No delay or omission to exercise any right, power, or remedy accruing to either the Company or the Preferred Stockholders upon any breach or default by the other under this Agreement shall impair any such right, power, or remedy no shall it be construed to be a waiver of any such breach or default, or any acquiescence therein 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. 4.7 Entire Agreement; Binding Effect. This Agreement (together with Schedule A attached hereto) contains the entire understanding of the parties with respect to their respective subject matter and all prior negotiations, discussions, commitments, and understandings heretofore had between them with respect thereto are merged herein and therein. This Agreement and the Exchange shall be binding on each Preferred Stockholder who executes this Agreement, provided, that, Preferred Stockholders holding at least 75% of the outstanding shares of Preferred Stock have executed this Agreement (the "Required Percentage"). The failure of any Preferred Stockholder named in Exhibit A to execute this Agreement shall not effect the Closing of the Exchange with respect to those Preferred Stockholders who have executed this Agreement so long as the Agreement has been signed by the Required Percentage. 4.8 Headings. All article and section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Agreement. 4.9 Counterparts; Governing Law. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to conflict of laws. 4.10 Further Actions. At any time and from time to time, each party agrees, without further consideration, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement. 7 IN WITNESS WHEREOF, this Agreement has been duly executed on the date hereinabove set forth. NETWORK-1 SECURITY SOLUTIONS, INC. s/Corey M. Horowitz ----------------------------------------- Name: Corey M. Horowitz Title: Chairman and Chief Executive Officer APPLEGREEN PARTNERS s/Seth Lieber ----------------------------------------- Name: Seth Lieber Title: Partner BROOKWOOD PARTNERS, L.P. s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: General Partner CASILLI REVOCABLE TRUST S/Gerald S. Casilli ----------------------------------------- Name: Gerald S. Casilli Title: Trustee CMH CAPITAL MANAGEMENT CORP. S/Corey M. Horowitz ----------------------------------------- Name: Corey M. Horowitz Title: President s/Andrew Fingerhut ----------------------------------------- Andrew Fingerhut 8 s/Barry Fingerhut ----------------------------------------- Barry Fingerhut s/Robert Gladstone ----------------------------------------- Robert Gladstone s/Amy Katz ----------------------------------------- Amy Katz s/Irwin Lieber ----------------------------------------- Irwin Lieber s/Jonathan Lieber ----------------------------------------- Jonathan Lieber s/Seth Lieber ----------------------------------------- Seth Lieber s/ David Nussbaum ----------------------------------------- David Nussbaum s/Jennifer Olsen ----------------------------------------- Jennifer Olsen s/Harvey Pollak ----------------------------------------- Harvey Pollak s/Barry Rubenstein ----------------------------------------- Barry Rubenstein s/Marilyn Rubenstein ----------------------------------------- Marilyn Rubenstein s/James Scibelli ----------------------------------------- James Scibelli 9 SENECA VENTURES By:s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: General Partner s/Donna Slavitt ----------------------------------------- Donna Slavitt s/John Slavitt ----------------------------------------- John Slavitt WHEATLEY PARTNERS, L.P. By:s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: CEO, WHEATLEY PARTNERS LLC General Partner WHEATLEY PARTNERS II, L.P. By:s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: General Partner WHEATLEY FOREIGN PARTNERS, L.P. By:s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: CEO, WHEATLEY PARTNERS LLC General Partner WOODLAND PARTNERS By:s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: General Partner 10 WOODLAND VENTURE FUND By:s/Barry Rubenstein ----------------------------------------- Name: Barry Rubenstein Title: General Partner s/Emauel Pearlman ----------------------------------------- Emanuel Pearlman SANDLER COMPANY INVESTMENT PARTNERS Sandler Co-Investment Partners, L.P. By: Sandler Capital Management, General Partner By: MJDM Corp., a General Partner s/Moira Mitchell ----------------------------------------- Name: Moira Mitchell Title: President 11 SCHEDULE A PREFERRED STOCKHOLDERS Series E Convertible Preferred Stock ------------------------------------
Number of Shares of Common Stock Number of Shares of Name and Address Number of Shares of Upon Conversion Common Stock Upon of Preferred Stockholder Preferred Stock of Preferred Stock Exchange ------------------------ ------------ ------------ ------------ Applegreen Partners 35,377 70,754 88,442 c/o Jonathan Lieber 271 Hamilton Road Chappaqua, NY 10514 Brookwood Partners, L.P. 117,924 235,848 294,810 68 Wheatley Road Brookville, NY 11545 Casilli Revocable Trust 47,169 94,338 117,922 2905 Woodside Road Woodside, CA 94062 Andrew Fingerhut 11,792 23,584 29,480 70 East 10th St. Apt. 11L New York, NY 10003 Barry Fingerhut 165,094 330,188 412,735 Wheatley Partners, L.P. 825 Third Avenue, 32th Floor New York, New York 10028-1170 Robert Gladstone 11,792 23,584 29,480 25 Evans Drive Brookville, NY 11545 CMH Capital Management Corp. 1,084,935 2,169,870 2,712,337 445 Park Avenue, Suite 1028 New York, NY 10022 Attn: Corey M. Horowitz, President Amy Katz 9,433 18,866 23,583 26 North Moore Street, Apt. 8W New York, NY 10013 Irwin Lieber 165,094 330,188 412,735 8 Applegreen Drive Old Westbury, NY 11568 Jonathan Lieber 11,792 23,584 29,480 271 Hamilton Road Chappaqua, NY 10514
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Number of Shares of Common Stock Number of Shares of Name and Address Number of Shares of Upon Conversion Common Stock Upon of Preferred Stockholder Preferred Stock of Preferred Stock Exchange ------------------------ ------------ ------------ ------------ Seth Lieber 11,792 23,584 29,480 103 Greene Street New York, NY 10012-3859 David Nussbaum 11,792 23,584 29,480 83 Village Road Roslyn Heights, NY 11577 Jennifer Olsen 11,792 23,584 29,480 c/o Lawrence S. Dolin 16111 Parkland Drive Shaker Heights, OH 44120 Harvey Pollak 11,792 23,584 29,480 14 Pine Drive North Roslyn, NY 11576 Barry Rubenstein 47,169 94,338 117,922 68 Wheatley Road Brookville, NY 11545 James Scibelli 23,584 47,168 58,960 Roberts & Greene, Inc. One Hollow Lane, Suite 208 Lake Success, NY 11040 Seneca Ventures 165,094 330,188 412,735 68 Wheatley Road Brookville, NY 11545 Donna Slavitt 35,377 70,754 88,442 1085 Park Avenue, Apt. 3B New York, NY 10028 John Slavitt 9,433 18,866 23,582 250 Baldwin Avenue, Apt. 801 San Mateo, CA 94401 Wheatley Partners, L.P. 86,792 173,584 216,980 80 Cuttermill Road, Suite 311 Great Neck, NY 11021 Wheatley Partners II, L.P. 94,339 188,678 235,848 80 Cuttermill Road, Suite 311 Great Neck, NY 11021 Wheatley Foreign Partners, L.P. 7,547 15,094 18,868 80 Cuttermill Road, Suite 311 Great Neck, NY 11021
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Number of Shares of Common Stock Number of Shares of Name and Address Number of Shares of Upon Conversion Common Stock Upon of Preferred Stockholder Preferred Stock of Preferred Stock Exchange ------------------------ ------------ ------------ ------------ Woodland Partners 94,339 188,678 235,848 68 Wheatley Road Brookville, NY 11545 Woodland Venture Fund 212,264 424,528 530,660 68 Wheatley road Brookville, NY 11545 ------------ ------------ ------------ Total Series E Preferred Stock 2,483,508 4,967,016 6,208,770 ============ ============ ============
14 Series D Convertible Preferred Stock ------------------------------------
Number of Shares of Common Stock Number of Shares of Name and Address Number of Shares of Upon Conversion Common Stock Upon of Preferred Stockholder Preferred Stock of Preferred Stock Exchange ------------------------ ------------ ------------ ------------ Woodland Venture Fund 69,379 117,550 146,936 68 Wheatley Road Brookville, NY 11545 Seneca Ventures 34,689 58,774 73,468 68 Wheatley Road Brookville, NY 11545 Woodland Partners 34,689 58,774 73,468 68 Wheatley Road Brookville, NY 11545 Irwin Lieber 34,689 58,774 73, 468 Wheatley Partners, L.P. 825 Third Avenue New York, NY 10028-1170 Barry Fingerhut 34,689 58,774 73,468 Wheatley Partners, L.P. 825 Third Avenue New York, NY 10028-1170 Applegreen Partners 8,672 14,693 18,364 c/o Jonathan Lieber 271 Hamilton Road Chappaqua, NY 10514 Emanuel Pearlman 4,098 6,943 8,677 Liberation Investment Group 11766 Wilshire Blvd., Suite 870 Los Angeles, CA 90025 Barry Rubenstein 495 839 1,049 68 Wheatley Road Brookville, NY 11545 Marilyn Rubenstein 495 839 1,049 68 Wheatley Road Brookville, NY 11545 Sandler Company Investment Partners 9,159 15,518 19,398 ------------ ------------ ------------ 767 Fifth Avenue - 45th Floor New York, NY 10153 Total Series D Preferred Stock 231,054 391,478 489,348 ------------ ------------ ------------ TOTAL PREFERRED STOCK (SERIES E AND SERIES D) 2,714,562 5,358,494 6,698,118 ============ ============ ============
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