<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. _________)1
Pick Communications Corp.
(Name of Issuer)
Common Stock, par value $.001
(Title of Class of Securities)
719569105
(CUSIP Number)
Michael E. Goldberg, Esq.
Associate General Counsel
c/o Long Drive Management Trust
2 World Financial Center
17th Floor
New York, NY 10281
(212) 667-9372
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 12, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
Note. Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b)
for other parties to whom copies are to be sent.
(Continued on following pages)
Page 1 of 85 Pages
Exhibit Index Found on Page 14
13D
- --------------
1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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===============================
CUSIP No. 719569105
===============================
- ---------======================================================================
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Tri-Links Investment Trust
- ---------======================================================================
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ X ]
- ---------======================================================================
3 SEC USE ONLY
- ---------======================================================================
4 SOURCE OF FUNDS*
WC
- ---------======================================================================
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
[ ]
- ---------======================================================================
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ----------------------=========================================================
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
------=========================================================
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,871,500 [See Preliminary Note]
------=========================================================
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
------=========================================================
PERSON WITH 10 SHARED DISPOSITIVE POWER
3,871,500 [See Preliminary Note]
- ----------------------=========================================================
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,871,500 [See Preliminary Note]
- ---------======================================================================
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ---------======================================================================
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.1 % [See Preliminary Note]
- ---------======================================================================
14 TYPE OF REPORTING PERSON*
OO
- ---------======================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 85 Pages
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13D
===============================
CUSIP No. 719569105
===============================
- ---------======================================================================
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (ENTITIES ONLY)
Long Drive Management Trust
- ---------======================================================================
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ X ]
- ---------======================================================================
3 SEC USE ONLY
- ---------======================================================================
4 SOURCE OF FUNDS*
OO
- ---------======================================================================
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e)
[ ]
- ---------======================================================================
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ----------------------=========================================================
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
------=========================================================
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,871,500 [See Preliminary Note]
------=========================================================
EACH 9 SOLE DISPOSITIVE POWER
REPORTING -0-
------=========================================================
PERSON WITH 10 SHARED DISPOSITIVE POWER
3,871,500 [See Preliminary Note]
- ----------------------=========================================================
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,871,500 [See Preliminary Note]]
- ---------======================================================================
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ---------======================================================================
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.1% [See Preliminary Note]
- ---------======================================================================
14 TYPE OF REPORTING PERSON*
OO, IA
- ---------======================================================================
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 85 Pages
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Preliminary Note: The Reporting Persons (as defined below) are filing this
Schedule 13D with respect to the common stock, par value $.001 per share (the
"Shares"), of Pick Communications Corp. (the "Company"). As of the date of this
filing, the Reporting Persons are not the record holder of any Shares. On May
12, 1999, Tri-Links Investment Trust ("Tri-Links") purchased from Pick
Communications Corp. certain Units (the "Units"), each Unit consisting of one
share of Series D Convertible Preferred Stock, par value $.001 per share (the
"Preferred Shares"), and two warrants, each representing the right to purchase
one Share (the "Warrants"). Subject to the terms and conditions of the
Certificate of Designations for the Preferred Shares ("Certificate of
Designations"), each Preferred Share is immediately convertible into 23.81
Shares. Subject to the terms and conditions of the Warrant Agreement dated as of
May 12, 1999 (the "Warrant Agreement"), each warrant is immediately exercisable
into one Share at an exercise price of $0.63 per Share. The Reporting Persons
are therefore filing this Schedule 13D with respect to Shares which they are
deemed to beneficially own through Tri-Links' ownership of the Preferred Shares
and Warrants. See Section 4 for further information regarding Tri-Links'
purchase of the Units.
Item 1. Security and Issuer.
This statement relates to shares of common stock, par value $.001 per
share, of Pick Communications Corp. The Company's principal offices are located
at 115 Route 46 West, Wayne Interchange Plaza II, Wayne, New Jersey 07470.
Item 2. Identity and Background.
(a) This statement is filed by: (i) Tri-Links Investment Trust, a Delaware
business trust ("Tri-Links"), with respect to the Shares of which it is the
deemed beneficial owner through its ownership of Units and (ii) Long Drive
Management Trust, a Delaware business trust ("Long Drive"), with respect to the
Shares of which Tri-Links is the deemed beneficial owner. Long Drive,
Page 4 of 85 Pages
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as investment adviser to Tri-Links, may be deemed to be the beneficial holder of
any Shares of which Tri-Links is the deemed beneficial holder. Long Drive
disclaims beneficial ownership of any such Shares. Tri-Links and Long Drive
shall be referred to collectively as the "Reporting Persons".
Tri-Links is owned by Long Drive and Nomura Holding America, Inc. Long
Drive is a wholly-owned subsidiary of Nomura Holding America, Inc. The executive
officers of Long Drive are as follows: Dennis G. Dolan, President; Michael J.
Doyle, Michael J. Embler, Thomas M. Fuller, Jean M. Mink, David J. Teolis and
Janet Piez, Vice Presidents.
(b) The address of the principal business and principal office of Tri-Links
is c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, DE 19890-0001. The address of the principal business and principal
office of Long Drive is 2 World Financial Center, 17th Floor, New York, New York
10281.
(c) The principal business of Tri-Links is to acquire and manage a
portfolio of primarily below investment-grade investments. The principal
business of Long Drive is to serve as investment adviser to Tri-Links.
(d) Since their formation in 1998, neither Tri-Links nor Long Drive have
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) Since their formation in 1998, neither Tri-Links nor Long Drive have
been party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds and Other Consideration.
The net investment cost (including commissions) is approximately $1,500,000
for the 150,000 Units held by Tri-Links. Each Unit consists of one Preferred
Share and two Warrants. Each
Page 5 of 85 Pages
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Preferred Share is immediately convertible into 23.81 Shares, subject to the
terms and conditions of the Certificate of Designations. Each Warrant is
immediately exercisable into one Share at an exercise price of $0.63 per Share,
subject to the terms and conditions of the Warrant Agreement. Tri-Links obtained
the consideration for the acquisition of the Units from cash on hand available
from (i) a cash equity contribution, (ii) the proceeds of its offering of
certain debt securities due in 2005 and (iii) a revolving credit agreement
expiring in 2004. Tri-Links considers such funds to be its working capital.
Item 4. Purpose of the Transaction.
The purpose of the acquisition of the Units (and corresponding Shares) is
for investment and the acquisition of the Units by Tri-Links was made in the
ordinary course of business.
On May 12, 1999, Tri-Links and the Company entered into a Subscription
Agreement (the "Subscription Agreement") pursuant to which Tri-Links purchased
from the Company 150,000 Units. Pursuant to the Subscription Agreement, as long
as Tri-Links owns at least 75,000 of such Preferred Shares, (i) a representative
of Tri-Links is permitted to attend all meetings of the Company's Board of
Directors as an observer and to receive all information distributed in
connection with such meetings and (ii) at the request of Tri-Links, the Company
will use its best efforts to cause David Teolis (or any other nominee of
Tri-Links reasonably acceptable to the Company) to be elected to the Company's
Board of Directors.
Pursuant to the Subscription Agreement, in the event of a Change of Control
(as such term is defined in the Subscription Agreement) of the Company,
Tri-Links has the option to cause the Company to redeem all or a portion (as
specified by Tri-Links) of the Preferred Shares at their liquidation value plus
accrued, unpaid dividends thereon. If the Company fails to so repurchase such
Preferred Shares, the effective conversion ratio for converting the Preferred
Shares into Shares is
Page 6 of 85 Pages
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reduced. Under the Subscription Agreement, Tri-Links also has the benefit of
certain negative covenants.
This summary of the Subscription Agreement, and each other document
described herein, is qualified in its entirety by the text of such documents. A
copy of the Subscription Agreement is filed as Exhibit 2 hereto.
The Preferred Shares are convertible into Shares at any time by the holder
at a conversion rate of 23.81 Shares per one Preferred Share, subject to certain
adjustments set forth in the Certificate of Designations. The Preferred Shares
are also entitled to certain dividend rights, liquidation preferences, voting
rights and redemption rights as set forth in the Certificate of Designations.
For the full terms and conditions of the Preferred Shares, see the Series D
Preferred Certificate of Designations filed as Exhibit 3 to the Schedule 13D.
The 150,000 Units includes 300,000 Warrants (i.e., two Warrants per Unit).
Each Warrant entitles Tri-Links to acquire one Share at a price of $0.63 per
Share. The exercise price is subject, in certain circumstances, to adjustment as
set forth in the Warrant Agreement. The Warrants are immediately exercisable.
For the full terms and conditions of the Warrants, see the Warrant Agreement
filed as Exhibit 4 to the Schedule 13D.
Pursuant to the Subscription Agreement, the Company and Tri-Links also
entered into an Investor Rights Agreement (the "Investor Rights Agreement")
dated as of May 12, 1999. Subject to the terms and conditions of such agreement,
the Company agreed to file with the Securities and Exchange Commission, no later
than August 10, 1999, a registration statement registering a number of Shares
sufficient to cover those Shares issued or issuable upon conversion of the
Preferred Shares and Warrants (the "Registrable Securities"). If the
registration statement is not declared effective on the earlier of (i) five days
after notice by the SEC that the registration statement may be declared
effective and (ii) November 8, 1999, then the Company shall be required to issue
additional Shares
Page 7 of 85 Pages
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to Tri-Links determined as if the Preferred Share conversion price had been
reduced. The Warrant exercise price would be similarly reduced.
The holders of the Registrable Securities also have certain "piggyback"
registration rights with respect to registrations made by the Company, including
registrations made on behalf of other stockholders of the Company. The Company
has agreed to pay most registration expenses in connection with the registration
of the Registrable Securities. In addition, the Investor Rights Agreement
restricts the Company's ability to subsequently grant comparable information and
registration rights to other stockholders of the Company.
A copy of the Investor Rights Agreement is filed as Exhibit 5 to the
Schedule 13D.
Although no Reporting Person has any specific plan or proposal to acquire
or dispose of Units (and corresponding Shares), each Reporting Person at any
time and from time to time may acquire additional Units (and corresponding
Shares), dispose of any or all of its Units (and corresponding Shares) or
convert its Preferred Shares and/or Warrants into Shares depending upon an
ongoing evaluation of the investment in the Units, prevailing market conditions,
other investment opportunities, liquidity requirements of the Reporting Person
and/or other investment considerations. No Reporting Person has made a
determination regarding a maximum or minimum number of Units or Shares which it
may hold at any point in time.
Also, consistent with their investment intent, the Reporting Persons may
engage in communications with one or more shareholders of the Company, one or
more officers of the Company, and/or one or more members of the board of
directors of the Company regarding the Company, including but not limited to its
operations.
Except to the extent the foregoing may be deemed a plan or proposal, none
of the Reporting Persons has any plans or proposals which relate to, or could
result in, any of the matters referred to in paragraphs (a) through (j),
inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting
Page 8 of 85 Pages
<PAGE>
Persons may, at any time and from time to time, review or reconsider their
position and/or change their purpose and/or formulate plans or proposals with
respect thereto.
Item 5. Interest in Securities of the Issuer.
A. Tri-Links Investment Trust
(a), (b) The information set forth in Rows 7, 8, 9, 10, 11 and 13 of
the cover page hereto for Tri-Links is incorporated herein
by reference. The percentage amount set forth in Row 13 of
such cover page and of each other cover page filed herewith
is calculated based upon the 43,867,335 Shares outstanding
as of May 10, 1999 as reported by the Company in the
Subscription Agreement.
(c) The trade dates, number of Units purchased or sold and the price
per Unit for all purchases and sales of the Units in the past 60
days are set forth on Schedule A hereto and are incorporated
herein by reference. All of such transactions were purchases made
by Tri-Links pursuant to the Subscription Agreement.
(d) None.
(e) Not applicable.
B. Long Drive Management Trust
(a), (b) The information set forth in Rows 7, 8, 9, 10, 11 and 13 of
the cover page hereto for Long Drive is incorporated herein
by reference.
(c) None.
(d) None.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Except as described in Item 4 above, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the Reporting Persons
or between such persons and any other person with respect to any securities of
the Company, including but not limited to transfer or voting of any securities
of the Company, finder's fees, joint ventures, loan or option arrangements,
Page 9 of 85 Pages
<PAGE>
puts or calls, guarantees of profits, divisions of profits or loss, or the
giving or withholding of proxies.
Item 7. Materials to be Filed as Exhibits.
There is filed herewith as Exhibit 1 a written agreement relating to the
filing of joint acquisition statements as required by Rule 13d-1(f)(1) under the
Securities Exchange Act of 1934, as amended. There is filed herewith as Exhibit
2 a copy of the Subscription Agreement. There is filed herewith as Exhibit 3 a
copy of the Certificate of Designations. There is filed herewith as Exhibit 4 a
copy of the Warrant Agreement. There is filed herewith as Exhibit 5 a copy of
the Investor Rights Agreement.
Page 10 of 85 Pages
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: May 21, 1999
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee
By: /s/ Robert P. Hines, JR.
---------------------------------
Name: Robert P. Hines, JR.
Title: Financial Services Officer
LONG DRIVE MANAGEMENT TRUST
As Depositor
By:
--------------------------------
Name:
Title:
Page 11 of 85 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: May 21, 1999
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee
By:
---------------------------------
Name:
Title:
LONG DRIVE MANAGEMENT TRUST
As Depositor
By: /s/ Dennis Dolan
--------------------------------
Name: Dennis Dolan
Title: President
Page 12 of 85 Pages
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SCHEDULE A
TRI-LINKS INVESTMENT TRUST
NO. OF UNITS
PURCHASED (P) PRICE
TRADE DATE OR SOLD (S) PER UNIT
(including commission)
5/12/99 150,000(P)2 $10.00
- -----------------
2Each Unit consists of one share of Series D Convertible Preferred Stock
and two warrants, each warrant representing the right to purchase one Share.
Each Unit, subject to the terms and conditions of the Certificate of
Designations and the Warrant Agreement, is immediately convertible into 25.81
Shares.
Page 13 of 85 Pages
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EXHIBIT INDEX
EXHIBIT 1 Joint Acquisition Statement Pursuant to Rule 13D-(f)(1)
EXHIBIT 2 Subscription Agreement
EXHIBIT 3 Series D Preferred Stock Certificate of Designations
EXHIBIT 4 Warrant Agreement
EXHIBIT 5 Investor Rights Agreement
Page 14 of 85 Pages
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EXHIBIT 1
to
SCHEDULE 13D
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-(f)(1)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him, her or it contained therein, but
shall not be responsible for the completeness and accuracy of the information
concerning the other entities or persons, except to the extent that he, she or
it knows or has reason to believe that such information is inaccurate.
Dated: May 21, 1999
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee
By: /s/ Robert P. Hines, JR.
----------------------------------
Name: Robert P. Hines, JR.
Title: Financial Services Officer
LONG DRIVE MANAGEMENT TRUST
As Depositor
By:
----------------------------------
Name:
Title:
Page 15 of 85 Pages
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EXHIBIT 1
to
SCHEDULE 13D
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-(f)(1)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him, her or it contained therein, but
shall not be responsible for the completeness and accuracy of the information
concerning the other entities or persons, except to the extent that he, she or
it knows or has reason to believe that such information is inaccurate.
Dated: May 21, 1999
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company,
not in its individual capacity but
solely as Owner Trustee
By:
----------------------------------
LONG DRIVE MANAGEMENT TRUST
As Depositor
By: /s/ Dennis Dolan
----------------------------------
Name: Dennis Dolan
Title: President
Page 16 of 85 Pages
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EXHIBIT 2
to
SCHEDULE 13D
SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of May 12, 1999, between
PICK COMMUNICATIONS CORP., a Nevada corporation with offices at 155 Route 46
West, Wayne Interchange Plaza II, Third Floor, Wayne, New Jersey 07470 (the
"Company"), and TRI-LINKS INVESTMENT TRUST (the "Purchaser").
RECITALS
A. The Purchaser desires to purchase from the Company, and the Company
desires to issue and sell to the Purchaser, in a private placement, 150,000
units (the "Units"), each consisting of (i) one share of Series D Convertible
Preferred Stock, par value $.001 per share (the "Series D Preferred Stock"), of
the Company, and (ii) 2 warrants (the "Warrants"), each to purchase one share of
Common Stock, par value $.001 per share (the "Common Stock"), of the Company,
all on the terms and conditions set forth herein.
B. In consideration of the issuance and sale of the Units, the Purchaser
will purchase and pay for the Units as provided herein.
AGREEMENT
In consideration of the premises and the mutual covenants and the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Action" against a Person means an action, suit, investigation,
complaint, litigation, arbitration, contest, hearing, inquiry, inquest,
audit, examination or other proceeding threatened or pending against or
affecting the Person or its property, whether civil, criminal,
administrative, investigative or appellate, in law or equity before any
arbitrator or Governmental Body.
"Affiliate" of a Person means any other Person (a) that directly or
indirectly controls, is controlled by or is under common control with, the
Person or any of its Subsidiaries, (b) that directly or indirectly
beneficially owns or holds 5% or more of any class of Equity Security or
other similar interests of the Person or any of its
Page 17 of 85 Pages
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Subsidiaries or (c) 5% or more of the Equity Securities of which is
directly or indirectly beneficially owned or held by the Person or any of
its Subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting
securities, by Contract or otherwise.
"Affiliated Group" means any affiliated group as defined in Code ss.
1504 that has filed a consolidated return for federal income tax purposes
(or any similar group under state, local or foreign law) for a period
during which the Company or any of its Subsidiaries was a member.
"Ancillary Agreements" means (a) the certificates representing the
Series D Preferred Stock, (b) the Warrant Agreement, (c) the Investor
Rights Agreement, and (d) all other agreements, certificates, instruments
and other writings provided for herein.
"Approval" means any approval, consent, authorization or order of,
notice to or registration or filing with, or any other action by, any
Governmental Body or other Person.
"Business" means the business and operations of the Company and its
Subsidiaries as conducted by the Company and its Subsidiaries on the date
of this Agreement.
"Change of Control" means (a) the approval of the stockholders of the
Company (or if such approval is not required, the approval of the Board of
Directors of the Company (the "Board")) of (i) any consolidation or merger
of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted
into cash, securities or other property other than a merger in which the
holders of Common Stock immediately prior to the merger will have the same
proportionate ownership of Common Stock of the surviving corporation
immediately after the merger, (ii) 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 Company, or (iii) adoption of any
plan or proposal for the liquidation or dissolution of the Company, (b)
when any "person" (as defined in Section 13(a)(9) or 13(d) of the Exchange
Act of 1934) shall become the "beneficial owner" of more than 30% of the
Common Stock outstanding at the time, or (c) if at any time during a period
of two consecutive years, individuals who at the beginning of such period
constituted the Board shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by the
Company's stockholders of each new director during such two-year period was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such two-year period.
-2-
Page 18 of 85 Pages
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"Cleanup" means all actions required to (a) cleanup, remove, treat or
otherwise remediate Hazardous Materials present in the indoor or outdoor
Environment, (b) prevent, pursuant to Regulation or an order or direction
of a Governmental Body, the Release of Hazardous Materials so that it does
not enter the Environment, migrate, endanger or threaten to endanger public
health or welfare or the indoor or outdoor Environment, (c) perform
pre-remedial studies and investigations and post-remedial monitoring and
care, or (d) respond to any government directives, orders, requests for
information or other documents in any way relating to cleanup, removal,
treatment or remediation or potential cleanup, removal, treatment or
remediation of Hazardous Materials in the indoor or outdoor Environment.
"Code" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular Code section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"Contract" means any agreement, contract, license, lease (including,
without limitation, subleases, sale-leaseback agreements and similar
arrangements), instrument, note, bond, mortgage, indenture, guarantee, or
other legally binding commitment or obligation, whether or not written,
each as amended or modified from time to time.
"Environment" means surface or subsurface soil or strata, surface
waters and sediments, navigable waters, groundwater, drinking water supply
and air. The term "Environment" also includes indoor air to the extent it
is regulated under any Environmental Laws.
"Environmental Laws" means all federal, state, local and foreign
Regulations relating to pollution or protection of human health or the
Environment, including, without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials, including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act and all similar
federal and state statutes.
"Equity Security" of any Person means any capital stock or other
ownership or equity interest or profit participation or similar right with
respect to such Person (including, without limitation, any partnership or
membership interest, any stock appreciation, phantom stock or similar right
or plan, and any note or debt security having or containing equity or
profit participation features), or any option, warrant or other security or
right which is directly or indirectly convertible into or exercisable or
exchangeable for any other Equity Security of such Person.
-3-
Page 19 of 85 Pages
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"Governmental Body" means any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
"Hazardous Materials" means any hazardous or toxic substance, waste,
contaminant, pollutant, gas or material, including, without limitation,
radioactive materials, oil, petroleum and petroleum products and
constituents thereof, which are regulated under any Environmental Law,
including, without limitation, any substance, waste or material which is
(a) designated a "pollutant", "hazardous substance", "extremely hazardous
substance" or "toxic chemical" under the Federal Water Pollution Control
Act and/or the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and/or the Emergency Planning and
Community Right-To-Know Act, as amended, (b) designated or classified as a
"hazardous waste" or "regulated substance" pursuant to the Resource
Conservation Recovery Act (a/k/a Solid Waste Disposal Act), (c) designated
or classified as a "hazardous material" under the Hazardous Material
Transportation Act, as amended, (d) designated or classified as a "toxic
substance" under the Toxic Substances Control Act, or (e) regulated in any
way under the Regulations of any state where the Company or any of its
Subsidiaries conducts the Business or owns any real property or has any
leasehold interest.
"Indebtedness" means at a particular time, without duplication, (a)
any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (b) any indebtedness evidenced
by any note, bond, debenture or other debt security, (c) any indebtedness
for the deferred purchase price of property or services with respect to
which a Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred
in the ordinary course of business), (d) any commitment by which a Person
assures a creditor against loss (including, without limitation, contingent
reimbursement obligations with respect to letters of credit), (e) any
indebtedness guaranteed in any manner by a Person (including, without
limitation, guarantees in the form of an agreement to repurchase or
reimburse), (f) any indebtedness secured by a Lien on a Person's assets and
(g) any unsatisfied obligation for "withdrawal liability" to a
"multi-employer plan" as such terms are defined under ERISA; provided that
"Indebtedness" does not include the Securities.
"Intellectual Property Rights" means all (a) patents, patent
applications, patent disclosures and inventions, (b) trademarks, service
marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with all
of the goodwill associated therewith, (c) copyrights (registered or
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<PAGE>
unregistered) and copyrightable works and registrations and applications
for registration thereof, (d) mask works and registrations and applications
for registration thereof, (e) computer software, data, data bases and
documentation thereof, (f) trade secrets and other confidential information
(including, without limitation, ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
plans, proposals, technical data, copyrightable works, financial and
marketing plans and customer and supplier lists and information), (g) other
intellectual property rights and (h) copies and tangible embodiments
thereof (in whatever form or medium).
"Investment" as applied to any Person means (a) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (b) any
capital contribution by such Person to any other Person.
"Investor Rights Agreement" means the Investor Rights Agreement, dated
as of the Closing Date, between the Company and the Purchaser,
substantially in the form of Exhibit A hereto.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional
sale or other title retention agreement or lease in the nature thereof),
any sale of receivables with recourse against the Company or any
Subsidiary, any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to the Company or any
Subsidiary under a lease which is not in the nature of a conditional sale
or title retention agreement, or any subordination arrangement in favor of
another Person (other than any subordination arising in the ordinary course
of business).
"Material Adverse Effect" means (a) a material adverse effect upon any
of (i) the Business, results of operations, the Company's or its
Subsidiaries material assets, condition (financial or otherwise), or
prospects of the Company and its Subsidiaries or (ii) the legality,
validity or enforceability of this Agreement or any Ancillary Agreement,
(b) the impairment, hindrance or adverse effect in any material respect
upon the ability of the Company to perform any of its obligations under
this Agreement or the Ancillary Agreements or to consummate the
Transactions or (d) a material adverse effect on the value of the
Securities.
"Permit" means any permit, license, franchise, approval, consent,
permission, confirmation, endorsement, waiver, certification, registration,
qualification, clearance or other authorization issued, granted, given or
otherwise made available by or under
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the authority of any Governmental Body or pursuant to any federal, state,
local or foreign law, ordinance, rule or regulation.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a Governmental Body.
"Regulation" means each applicable law, rule, regulation, order,
guidance or recommendation (or any change in its interpretation or
administration) by any Governmental Body, central bank or comparable agency
and any request or directive (whether or not having the force of law) of
any of those Persons and each writ, judgment, injunction, order, decree or
award of any arbitrator, Governmental Body or other Person.
"Release" means any releasing, spilling, emitting, discharging,
leaking, pumping, injecting, pouring, depositing, disposing, dispersing,
leaching or migrating into the indoor or outdoor Environment, including,
without limitation, ambient air, surface water, groundwater and surface or
subsurface strata, or into or out of any property, including the movement
of Hazardous Materials through or in the air, soil, surface water,
groundwater, surface or subsurface strata or property. The term "Release"
also includes the abandonment or discarding of barrels, tanks, containers
or recepticals, whether or not sealed or closed, containing, or which
formerly contained, Hazardous Materials.
"Securities" means the Units, the shares of Series D Preferred Stock
purchased hereunder, the Warrants purchased hereunder, and the shares of
Common Stock issuable upon the conversion of the Series D Preferred Stock
and the exercise of the Warrants.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"SEC" means the United States Securities and Exchange Commission and
includes any Governmental Body succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Subsidiary" of a Person means any Person of which Securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors, the manager or other persons performing similar
functions are at the time directly or indirectly owned by the Person.
Unless the context otherwise requires, references to one or more
Subsidiaries are references to Subsidiaries of the Company.
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"Tax" or "Taxes" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether disputed or
not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
"Transactions" means the lawful issuance and sale of the Units, the
conversion of the Series D Preferred Stock into shares of Common Stock, the
exercise of the Warrants for shares of Common Stock, the issuance of the
shares Common Stock upon such conversion or exercise and the other
transactions contemplated by this Agreement and the Ancillary Agreements.
"Warrant Agreement" means the Warrant Agreement, dated as of the
Closing Date, between the Company and the Purchaser, in the form attached
hereto as Exhibit B, representing the Warrants to be purchased hereunder.
ARTICLE II
Issuance and Sale of Units
Section 2.01. Issuance and Sale of Units. Upon the terms and subject to the
satisfaction of the conditions set forth in this Agreement, at the Closing, the
Company will issue, sell, transfer, assign and deliver to the Purchaser, and the
Purchaser will purchase from the Company, free and clear of all Liens, an
aggregate of 150,000 Units, at a purchase price of $10.00 per Unit for an
aggregate purchase price of $1,500,000 (the "Purchase Price").
Section 2.02. Use of Proceeds. The net proceeds from the sale of the Units
shall be used to repay short-term indebtedness of the Company and for working
capital.
ARTICLE III
Closing, Effective Time; Transactions to be Effected at Closing
Section 3.01. Time and Place of Closing. The closing of the issuance and
sale of the Units (the "Closing") will take place at the offices of Richards
Spears Kibbe & Orbe, at 10:00 a.m. (New York City time), on May 12, 1999, or at
such other location or time as the Company and the Purchaser may agree in
writing (such date of the Closing being hereinafter referred to as the "Closing
Date").
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Section 3.02. Effective Time. The issuance, sale, transfer, assignment and
delivery of the Units contemplated by this Agreement will be effective as of the
time of the receipt of the Purchase Price by the Company (such time being
referred to herein as the "Effective Time").
Section 3.03. Transactions to be Effected at the Closing. Upon the terms
and subject to the satisfaction of the conditions set forth in this Agreement,
at the Closing:
(a) Company Deliveries. The Company will deliver to the Purchaser: (i)
certificates representing the shares of Series D Preferred Stock,
registered in the name of the Purchaser, or the Purchaser's nominee, (ii)
the Warrant Agreement, duly executed by the Company, and (iii) such other
documents as the Purchaser or its counsel may reasonably request to
demonstrate satisfaction of the conditions and compliance with the
agreements set forth in this Agreement; and
(b) Purchaser Deliveries. The Purchaser will deliver to the Company:
(A) payment of the Purchase Price by wire transfer to the account set forth
on Schedule I, and (ii) such other documents as the Company or its counsel
may reasonably request to demonstrate satisfaction of the conditions and
compliance with the agreements set forth in this Agreement.
ARTICLE IV
Conditions to Closing
Section 4.01. Conditions to the Purchaser's Obligations. The obligations of
the Purchaser under this Agreement are subject to the satisfaction of each of
the following conditions, unless waived by the Purchaser in writing, at or
before the Closing:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement and in the Ancillary Agreements
shall be true and correct in all respects when made, and shall be true and
correct on the Closing Date with the same force and affect as though made
on and as of the Closing Date.
(b) Performance of Agreements. The Company shall have performed and
complied with all of its obligations and covenants contained in this
Agreement and in the Ancillary Agreements required to be performed or
complied with by the Company at or before the Closing.
(c) Approvals. All Approvals that are required in connection with
consummation of the Transactions shall have been duly obtained or made and
shall be effective on and as of the Closing Date, including, without
limitation, the qualification of the Transactions under any applicable
state securities laws. No such Approval shall have been withdrawn or
suspended.
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(d) No Material Adverse Effect. No Material Adverse Effect shall have
occurred.
(e) Compliance Certificate. The Purchaser shall have received a
certificate of the Chief Executive Officer of the Company certifying to the
Purchaser the satisfaction of the conditions set forth in Section 4.01(a),
(b), (c) and (d).
(f) No Actions. There shall be no (i) Action by or before any
Governmental Body or by any other Person (A) challenging or seeking to
restrain or prohibit the Transactions, (B) seeking to obtain from the
Purchaser or any of its Affiliates in connection with the Transactions any
damages that are material in relation to the Purchaser or any of its
Affiliates or (C) which could reasonably be expected to cause a Material
Adverse Effect, or (ii) Regulation in effect that has or could reasonably
be expected to have any of the consequences referred to in clause (i)
above.
(g) Ancillary Agreements. The Purchaser shall have received copies of
each of the Ancillary Agreements, each dated as of the Closing Date, duly
executed by the Company and each other party thereto, each in form and
substance satisfactory to counsel for the Purchaser.
(h) Certificates and Agreements. The Company shall have delivered to
the Purchaser (i) the certificates representing the shares of Series D
Preferred Stock to be purchased by the Purchaser, registered in the name of
the Purchaser and (ii) the Warrant Agreement representing the Warrants to
be purchased by the Purchaser, duly executed and delivered by the Company.
(i) Opinion of Counsel. The Purchaser shall have received an opinion
of Snow Becker Krauss P.C., counsel for the Company, substantially in the
form of Exhibit C.
(j) Good Standing Certificate. The Purchaser shall have received a
certificate of the Secretary of State of Nevada, dated as of a recent date,
as to the good standing of the Company and as to the charter documents of
the Company on file in the office of the Secretary of State of Nevada.
(k) Proceedings and Documents. All corporate and other proceedings in
connection with the Transactions and all documents and instruments incident
to such Transactions shall be reasonably satisfactory in form and substance
to the Purchaser and its counsel.
(l) Restructuring of Notes. On or prior to the Closing Date, the
Company shall have restructured its obligations to the holders of the
Company's Senior Secured 18% Notes due April 27, 1999 (the "Notes"), which
restructured notes shall have a maturity of at least three years and in all
other respects shall be acceptable to the Purchaser.
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(m) Waiver of Defaults. The Company shall have received waivers of all
events of default that exist as of the Closing Date, whether under the
Notes or otherwise, and agreements to forebear from exercising any rights
or remedies resulting from future events of default until the first
anniversary of the Closing Date.
(n) Form 10-K. The Company shall have filed with the SEC its annual
report on Form 10-K for the year ended December 31, 1998.
(o) Equity Infusion. The Company shall have entered into a letter of
intent with Commonwealth Associates, L.P. to raise additional equity
capital in an aggregate amount of not less than $15,000,000 and not more
than $30,000,000.
Section 4.02. Conditions to the Company's Obligations. The obligations of
the Company under this Agreement are subject to the satisfaction of each of the
following conditions, unless waived by the Company in writing, at or before the
Closing:
(a) Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement and in the Ancillary
Agreements shall be true and correct in all respects when made, and shall
be true and correct on the Closing Date with the same force and affect as
though made on and as of the Closing Date.
(b) Performance of Agreements. The Purchaser shall have performed and
complied with all of its obligations and covenants contained in this
Agreement and in the Ancillary Agreements required to be performed or
complied with by the Purchaser at or before the Closing.
(c) Approvals. All Approvals that are required in connection with the
consummation of the Transactions by the Purchaser shall have been duly
obtained or made and shall be effective on and as of the Closing Date.
(d) Ancillary Agreements. The Company shall have received copies of
each of the Ancillary Agreements, each dated as of the Closing Date, duly
executed by the Purchaser, each in form and substance satisfactory to
counsel for the Company.
(e) Purchase Price. The Purchaser shall have delivered the Purchase
Price to the Company.
ARTICLE V
Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchaser as of the date
of this Agreement and as of the Closing Date as follows:
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Section 5.01. Corporate Existence and Power. The Company and each of its
Subsidiaries (a) is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, (b) is
duly qualified under the laws of each jurisdiction in which qualification is
required to own, lease or license its properties or to carry on the Business and
(c) has all necessary corporate power and authority to own its properties, to
carry on the Business and to execute and deliver this Agreement and each of the
Ancillary Agreements and to consummate the Transactions.
Section 5.02. Authorization; Binding Effect. The execution and delivery by
the Company of this Agreement and each of the Ancillary Agreements, the
performance by it of its obligations under this Agreement and the Ancillary
Agreements and the consummation of the Transactions has been duly authorized by
all necessary corporate action on the part of the Company and its Subsidiaries.
No other proceedings on the part of the Company or the Subsidiaries are
necessary to approve and adopt this Agreement and the Ancillary Agreements or to
approve the consummation of the Transactions. This Agreement has been duly
executed and delivered by the Company, and each of the Ancillary Agreements is,
or when executed and delivered in accordance with this Agreement will be, legal,
valid and binding obligations of the Company enforceable against it in
accordance with its terms.
Section 5.03. Contravention. Neither the execution, delivery and
performance of this Agreement or the Ancillary Agreements by the Company nor the
consummation of the Transactions will (with or without notice or lapse of time
or both) (a) conflict with, violate or breach any provision of the Company's or
any of its Subsidiar's articles of incorporation or bylaws, (b) violate,
conflict with or result in a breach of any Regulation by which the Company, and
of its Subsidiaries or any of their assets may be bound or affected, (c)
conflict with, result in a default under, or give rise to a right of
termination, cancellation, or acceleration under any Material Contract, or (d)
result in or require the creation or imposition of any Lien on any of the
Company's or its Subsidiaries' assets.
Section 5.04. Approvals. All Approvals have been obtained which are
required in connection with (i) the due execution and delivery by the Company of
this Agreement and the Ancillary Agreements, (ii) the consummation of the
Transactions, (iii) the performance by the Company of its obligations under this
Agreement and the Ancillary Agreements, or (iv) the exercise by the Purchaser of
its rights and remedies under this Agreement and the Ancillary Agreements.
Section 5.05. Capitalization.
(a) Capitalization. As of May 10, 1999, the authorized and issued capital
stock of the Company consists of (i) 400,000,000 shares of Common Stock, of
which 43,867,335 shares were issued and outstanding, 200,000 shares are reserved
for issuance upon conversion of the Notes (at $.25 per share), 9,830,000 shares
are
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<PAGE>
reserved for issuance upon conversion of the amended Notes (at an assumed
conversion price of $1.00 per share), 9,830,000 shares are reserved for issuance
to the holders of the amended Notes, 18,710,000 shares are reserved for issuance
in connection with the Company's Series B Preferred Stock, 4,535,000 shares are
reserved for issuance in connection with options outstanding under the Company's
1996 Employee Stock Option Plan (the "Plan"), 15,550,000 shares are reserved for
issuance in connection with stock options issued outside of the Plan, and
19,585,340 shares are reserved for issuance in connection with outstanding
warrants to purchase Common Stock, and (ii) 10,000,000 shares of preferred
stock, par value $.001 per share (the "Preferred Stock"), of which (A) 70,000
shares have been designated as Series A Preferred Stock (the "Series A Preferred
Stock"), of which no shares are issued and outstanding, (B) 2,000,000 shares
have been designated as Series B Preferred Stock, of which 1,871,000 shares are
issued and outstanding, (C) 100,000 shares have been designated as Series C
Preferred Stock (the "Series C Preferred Stock"), of which no shares are issued
and outstanding, (D) 500,000 shares have been designated as Series D Preferred
Stock, of which 156,500 shares are issued and outstanding and an additional
125,000 shares are subscribed for prior to the Closing, and (E) 1,500,000 shares
have been designated as Series E Preferred Stock (the "Series E Preferred
Stock"), of which no shares are issued and outstanding. In addition, Liberty
Capital has made a claim (which the Company disputes and will contest) that the
Company is required to issue up to 4,109,711 shares of Common Stock to Liberty
Capital. As of the Closing, the Company shall not have outstanding any Equity
Securities, except as set forth above.
(b) Other Rights. (i) As of the Closing, neither the Company nor any of its
Subsidiaries shall be subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of their respective Equity
Securities. As of the Closing, all of the outstanding shares of the Company's
Equity Securities shall be validly issued, fully paid and nonassessable.
(ii) There are no statutory or contractual shareholders preemptive rights
or rights of refusal with respect to the issuance of the Series D Preferred
Stock or the Warrants hereunder or the issuance of the Common Stock upon
conversion of the Series D Preferred Stock or the exercise of the Warrants.
Neither the Company nor any of its Subsidiaries has violated any applicable
federal or state securities laws in connection with the offer, sale or issuance
of any of its capital stock, and the offer, sale and issuance of the Series D
Preferred Stock or the Warrants hereunder or the issuance of the Common Stock
upon conversion of the Series D Preferred Stock or the exercise of the Warrants
do not require registration under the Securities Act or any applicable state
securities laws. To the best of the Company's knowledge, there are no agreements
between the Company's shareholders with respect to the voting or transfer of the
Company's capital stock or with respect to any other aspect of the Company's
affairs.
Section 5.06. Securities.
(a) Series D Preferred Stock. The shares of the Series D Preferred Stock
purchased by the Purchaser hereunder will have the terms and provisions set
forth in the Certificate of Designations (the "Certificate of Designations")
attached hereto as Exhibit D. Upon the
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<PAGE>
payment of the Purchase Price at the Closing as contemplated by this Agreement,
the Purchaser will receive good and marketable title to the shares of Series D
Preferred Stock free and clear of all Liens. Upon such issuance, the shares of
Series D Preferred Stock will be duly authorized, validly issued, fully paid and
nonassessable. The Conversion Number (as defined in the Certificate of
Designations) as of the Closing Date will be 23.81 (i.e., each share of Series D
Preferred Stock will be convertible, as of the Closing date, into 23.81 shares
of Common Stock).
(b) Warrants. The Warrants purchased by the Purchaser hereunder will have
the terms and provisions set forth in the Warrant Agreement. Upon the payment of
the Purchase Price at the Closing as contemplated by this Agreement, the
Purchaser will receive good and marketable title to the Warrants free and clear
of all Liens.
(c) Common Stock. Upon the conversion of the Series D Preferred Stock as
provided in the Certificate of Designations, and the payment of the conversion
price thereunder, (i) the Purchaser (or transferee of the Purchaser) will
receive good and marketable title to the shares of Common Stock issuable upon
such conversion and (ii) the shares of Common Stock issuable upon such
conversion will be duly authorized, validly issued, fully paid and
nonassessable. Upon the exercise of the Warrants as provided in the Warrant
Agreement, and the payment of the exercise price thereunder, (i) the Purchaser
(or transferee of the Purchaser) will receive good and marketable title to the
shares of Common Stock issuable upon such exercise and (ii) the shares of Common
Stock issuable upon such exercise will be duly authorized, validly issued, fully
paid and nonassessable. The Company currently has, and at all times will
maintain, a sufficient number of authorized but unissued shares of Common Stock
so that the Company will at all times have a sufficient number of authorized
shares of Common Stock to issue upon the conversion in full of the Series D
Preferred Stock and the exercise in full of the Warrants.
Section 5.07. Subsidiaries and Investments.
(a) Subsidiaries. Schedule 5.07 sets forth a correct and complete list of
each Subsidiary of the Company, showing as of the date of this Agreement (i) the
jurisdiction of its incorporation and jurisdictions in which it is qualified to
do business, (ii) the number of shares of each class of Equity Security
authorized, (iii) the number of those shares issued and outstanding, (iv) the
percentage of outstanding shares owned directly or indirectly by the Company,
(v) the number of authorized shares covered by all outstanding options,
warrants, rights of conversion or purchase, and similar rights, (vi) the
percentage of those options, warrants or rights owned directly or indirectly by
the Company, and (vii) the names of the record holders of shares of each class
of Equity Security and the number of shares held by each such holder.
(b) Subsidiary Capital Stock. All outstanding shares of Equity Security of
each Subsidiary are duly authorized, validly issued, fully paid and
nonassessable and are free of any
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preemptive rights and are owned, directly or indirectly, beneficially and of
record by the Company free and clear of all Liens and any options, warrants and
other rights. There are no voting trusts, stockholder agreements, proxies or
other Contracts or understandings in effect with respect to the voting or
transfer of any Equity Security of any Subsidiary.
(c) Investments. Except as specifically set forth in the Company's audited
financial statements included in the 10-K (as defined below), the Company does
not own or hold any equity security or the right to acquire any Equity Security
or other Investment in any other Person.
Section 5.08. Financial Statements
(a) Balance Sheets. The audited consolidated balance sheets of the Company
and its Subsidiaries dated as of December 31, 1998 (the "Latest Balance Sheet")
and December 31, 1997, copies of which were included in the Company's annual
report on Form 10-K for the periods ended on such dates were prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis in accordance with the past practice of the Company and fairly
present the consolidated financial position of the Company and its Subsidiaries
as of their respective dates.
(b) Other Financial Statements. The audited consolidated statements of
operations, statements of changes in shareholder's equity and statements of cash
flows of the Company and its Subsidiaries for the 12-month periods ended on
December 31, 1998 and December 31, 1997, copies of which were included in the
Company's annual report on Form 10-K for the periods ended on such dates were
prepared in accordance with GAAP applied on a consistent basis in accordance
with the past practice of the Company and fairly present the consolidated
results of operations, changes in shareholder's equity and cash flows of the
Company and its Subsidiaries for such period.
Section 5.09. Absence of Undisclosed Liabilities. Neither the Company nor
any of its Subsidiaries has and will not have as of the Closing any obligation
or liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether or not known to the Company, whether due or to become due and regardless
of when asserted) arising out of transactions entered into at or prior to the
date of this Agreement, or any action or inaction at or prior to the date of
this Agreement, or any state of facts existing at or prior to the date of this
Agreement other than (a) liabilities and obligations which have arisen after the
date of the Latest Balance Sheet in the ordinary course of business (none of
which is a liability resulting from breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) and (b) liabilities which individually or
in the aggregate do not and could not reasonably be expected to have a Material
Adverse Effect.
Section 5.10. SEC Filings. None of the Company's (a) annual report on Form
10-K for the fiscal year ended December 31, 1998 (the "10-K"), (b) quarterly
reports on Form 10-Q
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for the fiscal quarter ended September 30, 1998, and (c) proxy statement for the
Company's annual meeting of shareholders held on November 4, 1998, contained, at
the time they were filed with the SEC, any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
to make the statements made therein in light of the circumstances under which
they were made, not misleading.
Section 5.11. No Material Adverse Effect. Except as specifically set forth
in the 10-K or on Schedule 5.11, since December 31, 1998 there has been no
Material Adverse Effect.
Section 5.12. Absence of Certain Developments
(a) Absence of Certain Changes. Except as specifically set forth on
Schedule 5.12 hereto, since December 31, 1998, neither the Company nor any of
its Subsidiaries has:
(i) issued any notes, bonds or other debt securities or any capital
stock or other Equity Securities (except for the Notes and capital stock
set forth in Section 5.05(a));
(ii) borrowed any amount or incurred or become subject to any
Indebtedness or other liabilities, except current liabilities incurred in
the ordinary course of business consistent with past practice and
liabilities under Contracts entered into in the ordinary course of business
consistent with past practice and except for the Notes set forth in Section
5.05(a);
(iii) discharged or satisfied any Lien or paid any obligation or
liability, other than current liabilities paid in the ordinary course of
business consistent with past practice;
(iv) declared or made any payment or distribution of cash or other
property to its shareholders with respect to its capital stock or other
Equity Securities or purchased or redeemed any shares of its capital stock
or other Equity Securities;
(v) mortgaged or pledged any of its properties or assets or subjected
them to any Lien;
(vi) sold, assigned or transferred any of its tangible assets, except
obsolete or replaced equipment disposed of in the ordinary course of
business consistent with past practice, or canceled any debts or claims;
(vii) sold, assigned or transferred any Intellectual Property Rights,
or disclosed any proprietary confidential information to any Person (other
than to the Purchaser or any representative thereof);
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(viii) suffered any extraordinary losses or waived any material rights
of value, whether or not in the ordinary course of business consistent with
past practice;
(ix) made capital expenditures or commitments therefor that aggregate
in excess of $100,000;
(x) made any loans or advances to, guarantees for the benefit of, or
any Investments in, any Persons in excess of $100,000 in the aggregate;
(xi) suffered any damage, destruction or casualty loss exceeding in
the aggregate $100,000 whether or not covered by insurance;
(xii) made any Investment in or taken steps to incorporate any
Subsidiary;
(xiii) entered into any other transaction other than in the ordinary
course of business consistent with past practice or entered into any other
material transaction, whether or not in the ordinary course of business
consistent with past practice; or
(xiv) committed or agreed to do any of the foregoing.
(b) Certain Payments. Neither the Company nor any Subsidiary has at any
time made any bribes, kickback payments or other illegal payments.
Section 5.13. Litigation. Except as set forth on Schedule 5.13, there is no
Action (a) against the Company or any of its Subsidiaries (except as set forth
in the 10-K), (b) that questions the validity of this Agreement or any of the
Ancillary Agreements or that involves or relates to any of the Transactions, or
(c) affecting any of the Company's or its Subsidiaries' material assets. None of
the Actions disclosed on Schedule 5.13 or in the 10-K could reasonably be
expected to have a Material Adverse Effect.
Section 5.14. Compliance with Laws. The Company and its Subsidiaries are
and at all times have been in compliance with each Regulation applicable to its
business, properties and operations. Neither the Company nor any of its
Subsidiaries has, nor have any of them received notice of, a violation of or
default with respect to, any Regulation applicable to it or its business,
properties or operations, which violation or default, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.15. Assets. The Company or one of its Subsidiaries has good and
marketable title to, or a valid leasehold interest in, the properties and assets
used by it, located on its premises or shown on the Latest Balance Sheet or
acquired thereafter, free and clear of all Liens, except for obsolete or
replaced equipment disposed of in the ordinary course of business consistent
with past practice since the date of the Latest Balance Sheet and except for
Liens specifically disclosed on the Latest Balance Sheet. The Company's and its
Subsidiaries'
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buildings, equipment and other tangible assets are in good operating condition
in all material respects (ordinary wear and tear excepted) and are fit for use
in the ordinary course of business consistent with past practice. The Company or
one of its Subsidiaries owns, or has a valid leasehold interest in, all tangible
assets necessary for the conduct of the Business as presently conducted and as
presently proposed to be conducted.
Section 5.16. Tax Matters
(a) Filing of Returns and Payment of Taxes. The Company and each Affiliated
Group have filed all Tax Returns which they are required to file under
applicable Regulations. All such Tax Returns are complete and correct in all
material respects and have been prepared in compliance with all applicable
Regulations. The Company and each Affiliated Group have paid all Taxes due and
owing by them (whether or not such Taxes are required to be shown on a Tax
Return) and have withheld and paid over to the appropriate taxing authority all
Taxes which they are required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party; neither the Company nor
any Affiliated Group has waived any statute of limitations with respect to any
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency. The accrual for Taxes on the Latest Balance Sheet would be adequate
to pay all Tax liabilities of the Company and its Subsidiaries if the current
tax year were treated as ending on the date of the Latest Balance Sheet
(excluding any amount recorded which is attributable solely to timing
differences between book and Tax income). Since the date of the Latest Balance
Sheet, neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes other than in the ordinary course of business consistent
with past practice. The assessment of any additional Taxes for periods for which
Tax Returns have been filed by the and each Affiliated Group shall not exceed
the recorded liability therefor on the Latest Balance Sheet (excluding any
amount recorded which is attributable solely to timing differences between book
and Tax income). No foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being conducted with
respect to the Company or any Affiliated Group, no information related to Tax
matters has been requested by any foreign, federal, state or local taxing
authority and no written notice indicating an intent to open an audit or other
review has been received by the Company from any foreign, federal, state or
local taxing authority. There are no material unresolved questions or claims
concerning the Company or any Affiliated Group Tax liability.
(b) Certain Tax Matters. Neither the Company nor any of its Subsidiaries
has made an election under ss. 341(f) of the Internal Revenue Code of 1986, as
amended. Neither the Company nor any of its Subsidiaries is liable for the Taxes
of another Person under (i) Treas. Reg. ss. 1.1502-6 (or comparable provisions
of state, local or foreign law), (ii) as a transferee or successor, (iii) by
Contract or indemnity or (iv) otherwise. Neither the Company nor any of its
Subsidiaries is a party to any Tax sharing agreement. The Company and each
Affiliated Group have disclosed on their federal income Tax Returns any position
taken for which substantial authority (within the meaning of Code ss.
6662(d)(2)(B)(i)) did not exist at the time the return was filed. Neither the
Company nor any of its Subsidiaries has made any payments,
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is not obligated to make payments and is not a party to any Contract that could
obligate it to make any payments that would not be deductible under Code ss.
280G.
(c) FIRPTA. Neither the Company nor any of its Subsidiaries is a "United
States real property holding corporation", as defined in Code ss. 897 and in
applicable regulations thereunder.
Section 5.17. Contracts and Commitments
(a) Schedule of Material Contracts. Schedule 5.17 sets forth a correct and
complete list of all of the Material Contracts to which the Company or one of
its Subsidiaries is a party or by which it or any of the property, assets or
rights of the Company or one of its Subsidiaries is bound or subject, indicating
as to each Material Contract the categories of the definition of Material
Contract specified below which are applicable thereto. As used in this
Agreement, "Material Contracts" means all of the following Contracts which in
each case (except for clause (viii) below which shall not have any dollar
threshold) involves an aggregate future liability, benefit or right to payment
in excess of $100,000:
(i) mortgages, deeds of trust, indentures, security agreements, pledge
agreements, deposit agreements, conditional sale agreements or other
Contracts granting a Lien to any Person;
(ii) credit agreements, loan agreements, indentures, purchase
agreements, guarantees, capitalized leases, notes, investments and other
instruments providing for or relating to Indebtedness in respect of which
the Company or any Subsidiary is in any manner directly or contingently
obligated or liable;
(iii) Contracts under which the Company or any Subsidiary has,
directly or indirectly, made any advance, loan, extension of credit or
capital contribution to, or other Investment in, any Person, and all joint
venture, partnership and limited liability company agreements;
(iv) Contracts under which the Company or any Subsidiary (A) is lessee
of, or holds or operates, any equipment, vehicle or other tangible personal
property, or (B) has a leasehold interest or (C) is the lessor or sublessor
of real property;
(v) Contracts for any capital expenditure or research and development;
(vi) Contracts for the sale or purchase of assets, goods, materials,
supplies, machinery, capital assets or services;
(vii) Contracts relating in whole or in part to the Company's
Intellectual Property Rights;
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(viii) Contracts which (A) require the Company or any of its
Subsidiaries to deal on an exclusive basis with any Person, (B) restrict or
purport to restrict the Company or any of its Subsidiaries from doing any
kind of business or from doing business with any Person or in any
geographic area or from competing with any Person or (C) requires the
Company or any of its Subsidiaries to maintain the confidentiality of any
matter;
(ix) Employment, retainer or consulting Contracts and Contracts with
any labor union or other collective bargaining group and all Contracts
relating to employee benefit plans;
(x) Contracts with any shareholder, director, officer or other
Affiliate of the Company and all shareholders' agreements, proxies, voting
trusts, or powers of attorney to act on behalf of the Company or any of its
Subsidiaries;
(xi) Contracts pursuant to which the Company or any of its
Subsidiaries has an obligation to indemnify any Person;
(xii) Contracts granting any Person any right of first refusal, right
of first offer, buy-sell or economically preferential right or other
similar rights, to purchase any of the properties or assets of the Company
or any of its Subsidiaries;
(xiii) Contracts granting a warranty to any Person or giving any party
the right to renegotiate or require a reduction or rebate in price or the
repayment of any amount previously paid to the Company or any of its
Subsidiaries;
(xiv) Contracts with any Governmental Body;
(xv) Contracts not made in the ordinary course of business or which
are materially adverse to the Business; and
(xvi) Other Contracts to which the Company or any of its Subsidiaries
is a party or by or to which it or any of its assets or business is bound
or subject which has an aggregate future liability benefit or right to
payment to any Person in excess of $100,000.
(b) Copies of Material Contracts. The Company has furnished to the
Purchaser true, complete and correct copies of all Material Contracts or, a
written summary setting forth the terms of each oral Material Contract.
(c) Enforceability. Each of the Material Contracts (i) has been duly
authorized, executed and delivered by the Company, or one of its Subsidiaries,
as the case may be, and the other parties thereto, and is in full force and
effect and (ii) constitutes the legal, valid and
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binding obligations of the Company or such Subsidiary, as the case may be, and
the other parties thereto, enforceable against the Company or such Subsidiary,
as the case may be, and the other parties thereto in accordance with the terms
of each such Material Contract. There exists no breach or default (or event
which with or without the lapse of time or the giving of notice, or both would
constitute a breach or default) under the Material Contracts by the Company or
its Subsidiary, as the case may be, or to the knowledge of the Company, the
other parties thereto. To the knowledge of the Company, no party to any Material
Contract has any intention to terminate any Material Contract nor has the
Company or any of its Subsidiaries received any notice to such effect. The
consummation of the Transactions will not cause any of the Material Contracts to
cease to be in full force and effect, in each case without the breach of any
terms or conditions thereof, without the forfeiture or impairment of any rights
thereunder and without material penalty or other material adverse consequence.
Section 5.18. Intellectual Property Rights.
(a) Schedule of Intellectual Property Rights. Schedule 5.18 sets forth a
complete and correct list of all (i) registered Intellectual Property Rights
owned or used by the Company or its Subsidiaries, (ii) pending applications for
registrations of Intellectual Property Rights filed by the Company or its
Subsidiaries, (iii) unregistered trade names and corporate names owned or used
by the Company or its Subsidiaries and (iv) unregistered trademarks, service
marks, copyrights, mask works and computer software owned or used by the Company
or its Subsidiaries. Schedule 5.18 sets forth a complete and accurate list of
all licenses and other rights granted by the Company or its Subsidiaries to any
third party with respect to any Intellectual Property Rights and all licenses
and other rights granted by any third party to the Company or its Subsidiaries
with respect to any Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights. The Company or one of its Subsidiaries
owns all right, title and interest to, or has the right to use pursuant to a
valid license, all Intellectual Property Rights necessary for the operation of
the Business as presently conducted and as presently proposed to be conducted,
free and clear of all Liens. No loss or expiration of any Intellectual Property
Right or related group of Intellectual Property Rights owned or used by the
Company or its Subsidiaries or any which would reasonably be expected to have a
Material Adverse Effect is, to the best of the Company's knowledge, threatened,
pending or reasonably foreseeable. The Company and its Subsidiaries have taken
all reasonably necessary actions to maintain and protect the Intellectual
Property Rights which it owns. To the best of the Company's knowledge, the
owners of any Intellectual Property Rights licensed to the Company or its
Subsidiaries have taken all reasonably necessary actions to maintain and protect
the Intellectual Property Rights which are subject to such licenses.
(b) Title to Intellectual Property Rights. (i) The Company or its
Subsidiaries own all right, title and interest in and to all of the Intellectual
Property Rights listed on Schedule 5.18, free and clear of all Liens, (ii) there
have been no claims made against the Company or its Subsidiaries asserting the
invalidity, misuse or unenforceability of any of such Intellectual Property
Rights, and, to the best of the Company's knowledge, there are no grounds for
the
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same, (iii) the Company has not received any notices of, or is aware of any
facts which indicate a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to such Intellectual Property
Rights (including, without limitation, any demand or request that the Company or
its Subsidiaries license any rights from a third party), (iv) the conduct of the
Business has not infringed, misappropriated or conflicted with and does not
infringe, misappropriate or conflict with any Intellectual Property Rights of
other Persons, nor would any future conduct as presently contemplated infringe,
misappropriate or conflict with any Intellectual Property Rights of other
Persons, and (e) to the best of the Company's knowledge, the Intellectual
Property Rights owned by or licensed to the Company or its Subsidiaries have not
been infringed, misappropriated or conflicted by other Persons.
Section 5.19. Insurance. All material insurable assets, properties and
risks of the Company and its Subsidiaries are covered by valid and currently
effective insurance policies or binders of insurance, including, without
limitation, general liability insurance, property insurance and workers'
compensation insurance, issued in favor of the Company or one of its
Subsidiaries, in each case with financially sound and reputable insurance
companies in such types and amounts and covering such assets, properties and
risks as are consistent with customary practices and standards of companies
engaged in business and operations substantially similar to those of the Company
and its Subsidiaries. Neither the Company nor any of its Subsidiaries is in
default with respect to its obligations under any insurance policy maintained by
it. Neither the Company nor any of its Subsidiaries has any self-insurance or
co-insurance programs.
Section 5.20. Employees. The Company is not aware that any executive or key
employee of the Company or any of its Subsidiaries or any group of employees of
the Company or its Subsidiaries has any plans to terminate employment with the
Company or such Subsidiary; provided, however, that the Company may terminate
all members of management employed by PICK US Inc., PICK Net Inc. and PICK Net
UK PLC or anyone else other than Thomas Malone and Diego Leiva. The Company and
its Subsidiaries have complied in all material respects with all Regulations
relating to the employment of labor, including, without limitation, provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other Taxes, and the Company is not aware
that it has any material labor relations problems, including, without
limitation, any union organization activities, threatened or actual strikes or
work stoppages or material grievances. Neither the Company, any of its
Subsidiaries, nor, to the best of the Company's knowledge after due inquiry, any
of their employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of the Company or its
Subsidiaries, except for agreements between the Company and its present and
former employees.
Section 5.21. ERISA
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(a) Multiemployer Plans. Neither the Company nor any of its Subsidiaries
has any obligation to contribute to (or any other liability, including current
or potential withdrawal liability, with respect to) any "multiemployer plan" (as
defined in Section 3(37) of ERISA).
(b) Retiree Welfare Plans. Neither the Company nor any of its Subsidiaries
maintains or has any obligation to contribute to (or any other liability with
respect to) any plan or arrangement whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for current or
future retired or terminated employees (except for limited continued medical
benefit coverage required to be provided under Section 4980B of the Code or as
required under applicable state law).
(c) Defined Benefit Plans. Neither the Company nor any of its Subsidiaries
maintains, contributes to or has any liability under (or with respect to) any
employee plan which is a tax-qualified "defined benefit plan" (as defined in
Section 3(35) of ERISA), whether or not terminated.
(d) Defined Contribution Plans. Neither the Company nor any of its
Subsidiaries maintains, contributes to or has any liability under (or with
respect to) any employee plan which is a tax-qualified "defined contribution
plan" (as defined in Section 3(34) of ERISA), whether or not terminated.
(e) Other Plans. Neither the Company nor any of its Subsidiaries maintains,
contributes to or has any liability under (or with respect to) any plan or
arrangement providing benefits to current or former employees, including any
bonus plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated.
(f) The Company. For purposes of this paragraph 3.18, the term "Company"
includes all organizations under common control with the Company pursuant to
Section 4.14(b) or (c) of the Code.
Section 5.22. Environmental Matters.
(a) No Environmental Liability. Neither the Company nor any of its
Subsidiaries has, nor will they have, any actual, alleged or contingent
liability or obligation (i) under any Environmental Law and/or (ii) with respect
to the generation, presence, disposal, Release, handling, transportation,
storage, Cleanup or contamination of or by any Hazardous Material (any such
liability or obligation being an "Environmental Liability").
(b) No Violation of Environmental Laws. Neither the Company, any of its
Subsidiaries has, any of their assets, nor the operation of the Business, has
violated or is in violation of any Environmental Law or Permit and no condition
or event has occurred or exists which, with notice, or passage of time or both,
would constitute a violation of any such
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Environmental Law or a material liability. The Company and its Subsidiaries
currently possess all Permits required under applicable Environmental Laws, such
Permits are valid and in full force and effect and the Company and the
Subsidiaries are in full compliance with the terms and conditions thereof.
(c) Basis for Environmental Claims. (i) Neither the Company nor any of its
Subsidiaries has been identified or listed as a potentially responsible party or
a responsible party under the federal Comprehensive Environmental Response,
Compensation and Liability Act or any other Environmental Law, nor has the
Company received any information requests from a Governmental Body under any
Environmental Law. No Relevant Property is listed or is proposed for listing on
the federal National Priorities List or any other similar Regulation.
(ii) There are no underground storage tanks, storing or previously storing
Hazardous Materials at any property, site or facility currently or previously
owned, leased or operated by the Company or any of its Subsidiaries.
(iii) Neither the Company nor any of its Subsidiaries has agreed, by
Contract or otherwise, to assume the liability of any other Person pursuant to
or with respect to any Relevant Property and/or any Environmental Law.
(d) Notices. Neither the Company nor any of its Subsidiaries has received
any written communication from any Governmental Body or Person within the past
five years, alleging (i) that the Company, any of its Subsidiaries or any
Relevant Property has violated or is in violation of any Environmental Law or is
liable for any Cleanup of Hazardous Materials or (ii) that the Company or any of
its Subsidiaries has any Environmental Liability.
(e) Filing of Reports. The Company and its Subsidiaries have timely filed
all reports, obtained all Approvals and Permits and generated and maintained,
and currently generates and maintains, all Approvals, Permits, data,
documentation and records required under any Environmental Laws.
(f) "Relevant Property". For purposes of this Agreement, the term "Relevant
Property" means all sites, facilities, real property and leaseholds presently or
formerly owned, leased, used or operated by the Company or one of its
Subsidiaries (whether or not such properties are currently owned, leased, used
or operated by the Company or such Subsidiary) and all sites, facilities,
properties and other locations at which any Hazardous Material has been
transported, disposed, treated, stored or Released by or on behalf of the
Company or any of its Subsidiaries (each, a "Relevant Property").
Section 5.23. Affiliated Transactions. Except as specifically set forth in
the 10-K, no officer, director, stockholder or Affiliate of the Company or any
of its Subsidiaries or any individual related by blood, marriage or adoption to
any such individual or any entity in which any such Person or individual owns
any beneficial interest, is a party to any agreement,
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contract, commitment or transaction with the Company or has any material
interest in any material property used by the Company or any of its
Subsidiaries.
Section 5.24. Brokerage. Except for the commission payable to Ashley
Cooper, Robert Becker and John Clarke, which commission will be paid by the
Company, there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
or the Ancillary Agreements based on any arrangement or agreement binding upon
the Company or any of its Subsidiaries.
Section 5.25. Disclosure. Neither this Agreement nor any of the exhibits,
schedules, attachments, written statements, documents, certificates or other
items supplied to the Purchaser by or on behalf of the Company or any of its
Subsidiaries with respect to the transactions contemplated hereby contain any
untrue statement of a material fact or omit a material fact necessary to make
each statement contained herein or therein, under the circumstances in which
they are made, not misleading. There is no fact which the Company or any of its
Subsidiaries has not disclosed to the Purchaser in writing and of which any of
its officers, directors or executive employees is aware and which has had or
would reasonably be expected to have a Material Adverse Effect.
ARTICLE VI
Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Company as of the date
of this Agreement and as of the Closing Date as follows:
Section 6.01. Existence and Power. The Purchaser (a) is validly existing
and in good standing under the laws of the jurisdiction of its organization, and
(b) has all necessary power and authority to execute and deliver this Agreement
and each of the Ancillary Agreements and to consummate the Transactions.
Section 6.02. Authorization; Binding Effect. The execution and delivery by
the Purchaser of this Agreement and each of the Ancillary Agreements, the
performance by it of its obligations under this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby has been duly authorized by all necessary action. No other proceedings
on the part of the Purchaser are necessary to approve and adopt this Agreement
and the Ancillary Agreements or to approve the consummation of the transactions
contemplated hereby or thereby. This Agreement has been duly executed and
delivered by the Purchaser, and each of the Ancillary Agreements is, or when
executed and delivered in accordance with this Agreement will be, legal, valid
and binding obligations of the Purchaser enforceable against it in accordance
with its terms.
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Section 6.03. Contravention. Neither the execution, delivery and
performance of this Agreement or the Ancillary Agreements by the Purchaser nor
the consummation of the transactions contemplated hereby or thereby will (with
or without notice or lapse of time or both) (a) conflict with, violate or breach
any provision of the Purchasers organizational documents, (b) violate, conflict
with or result in a breach of any Regulation by which the Purchaser or any of
its assets may be bound or affected, or (c) conflict with, result in a default
under, or give rise to a right of termination, cancellation, or acceleration
under any material Contract to which the Purchaser is a party or by which its
assets may be bound or affected.
Section 6.04. Approvals. All Approvals have been obtained which are
required in connection with (i) the due execution and delivery by the Purchaser
of this Agreement and the Ancillary Agreements, (ii) the consummation of the
Transactions, and (iii) the performance by the Purchaser of its obligations
under this Agreement and the Ancillary Agreements.
Section 6.05. Investment Representations.
(a) Purchase for Own Account. The Securities will be acquired for the
Purchaser's own account, not as a nominee or agent, and not with a view to the
distribution of any part thereof in violation of applicable securities laws.
(b) No Registration. The Purchaser understands that the Securities have not
been registered under the Securities Act or under similar securities laws of any
other jurisdiction by reason of reliance upon certain exemptions therefrom, and
that the reliance of the Company on such exemptions is predicated upon, among
other things, the bona fide nature of the Purchaser's investment intent as
expressed herein. The Purchaser understands that the Securities being purchased
hereunder are "restricted securities" within the meaning of Rule 144 under the
Securities Act; that the Securities are not registered and must be held
indefinitely unless they are subsequently registered or an exemption from such
registration is available.
(c) Speculative Investment. The Purchaser understands that the purchase of
the Securities represents a speculative investment, and is aware of and has
investigated the Company's business, management and financial condition, and has
had access to such other information about the Company as such Purchaser has
deemed necessary or desirable to reach an informed and knowledgeable decision to
acquire the Securities.
(d) Sophisticated Purchaser. The Purchaser is experienced in evaluating and
investing in securities of companies in stages of development similar to the
Company. The Purchaser is knowledgeable in business and financial matters and is
capable of evaluating the merits and risks of an investment in the Company. The
Purchaser acknowledges that it has the ability to bear the economic risk of its
investment pursuant to this Agreement.
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(e) Accredited Investor. The Purchaser is an "accredited investor" as
defined in Rule 501(a) of the Securities Act.
(f) Not Formed for Purpose of Investing in the Securities. The Purchaser
has not been organized or materially reorganized for the purpose of investing in
the Securities.
Section 6.06. Legends.
(a) Legends. The Purchaser acknowledges that each certificate representing
the Securities may be endorsed with the following legends (or substantial
equivalents):
(i) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT OR (ii)
IN COMPLIANCE WITH RULE 144, OR (iii) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE ACT.
(ii) Any other legends required by applicable state blue sky laws.
(b) Removal of Legend and Transfer Restrictions. Any legend endorsed on a
certificate pursuant to Section 6.06(a) and any stop transfer instructions with
respect to such legended Securities shall be removed, and the Company shall
issue a certificate without such legend to the holder of such Securities if (i)
such Securities are registered and sold under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available, (ii) the sale of such Security is exempt from registration pursuant
to Rule 144 promulgated under the Securities Act ("Rule 144") or (iii) if such
holder satisfies the requirements Rule 144(k) and, where reasonably deemed
necessary by the Company, provides the Company with an opinion of counsel for
such holder of the Securities, reasonably satisfactory to the Company, to the
effect that (x) such sale meets the requirements of Rule 144, (y) such holder
meets the requirements of Rule 144(k) or (z) a public sale, transfer or
assignment of such Securities may be made without registration under the
Securities Act.
ARTICLE VII
Covenants
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Section 7.01. Conduct of Business. From the date of this Agreement up to
and including the Closing Date, the Company and its Subsidiaries shall conduct
their business and operations only in the ordinary course and in a manner that
is consistent with past practice, including, without limitation (a) performing
all of their obligations under Contracts by which it and its properties are
bound, (b) using all reasonable efforts in maintaining (i) their business
organization intact, (ii) all of its properties, equipment and other assets in
good repair, working order and condition, (iii) its present workforce, including
all officers of the Company and its Subsidiaries, and (iv) its current
relationships with its suppliers and customers, and (c) keeping in full force
and effect the insurance currently maintained by them.
Section 7.02. Cooperation. From the date of this Agreement up to and
including the Closing Date, the Company and its Subsidiaries shall use their
reasonable efforts to cause the Transactions to be consummated, including,
without limitation, (a) obtaining all Approvals as may be necessary or
reasonably requested by the Purchaser in order to consummate the Transactions,
and (b) giving prompt notice to the Purchaser of any event, notice or other
communication which causes or in the reasonable judgment of the Company could
cause a Material Adverse Effect.
Section 7.03. Access to the Company. From the date of this Agreement up to
and including the Closing Date, the Company and its Subsidiaries shall afford
the Purchaser and its representatives reasonable access, upon reasonable prior
notice and at such scheduled times and places during normal business hours as
shall be reasonably approved by the Company (but without any interference with
the business operations of the Company and its Subsidiaries), to the books,
records, properties and facilities of the Company and its Subsidiaries.
Section 7.04. Notification of Breach of Representations, Warranties and
Covenants. From the date of this Agreement up to and including the Closing Date,
the Company and its Subsidiaries shall promptly give written notice to the
Purchaser upon becoming aware of the occurrence or impending or threatened
occurrence of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of the Company contained or referred to
in this Agreement or in the Ancillary Agreements and shall use its best efforts
to prevent the same or remedy the same promptly.
Section 7.05. Changes in Capital Stock. From the date of this Agreement up
to and including the Closing Date, without the prior written consent of the
Purchaser, neither the Company nor any of its Subsidiaries shall (a) amend its
charter documents or bylaws, (b) make any change in their authorized, issued or
outstanding capital stock or any other equity security, (c) issue, sell, pledge,
assign or otherwise encumber or dispose of, or purchase, redeem or otherwise
acquire, any of their shares of capital stock or other equity securities or
enter into any agreement, call or commitment of any character so to do, (d)
grant or issue any stock option relating to, right to acquire, or security
convertible into, shares of their capital stock or other equity security;
purchase, redeem, retire or otherwise acquire any shares of, or any
-27-
Page 43 of 85 Pages
<PAGE>
security convertible into, their capital stock or other equity securities, or
(e) agree to do any of the foregoing.
Section 7.06. Litigation Developments. From the date of this Agreement up
to and including the Closing Date, the Company agrees to promptly advise the
Purchaser with respect to any and all Actions and to promptly advise the
Purchaser with respect to any significant developments arising in connection
with said Actions.
Section 7.07. Accounting Review. The Company and its Subsidiaries shall
permit (and reasonably cooperate with) the Purchaser's accounting firm to
conduct a review of the Company's and its Subsidiaries' financial statements,
financial information and books and records.
Section 7.08. Board of Directors Rights.
(a) Board Observation Rights. For so long as the Purchaser owns not less
than 50% of the shares of Series D Preferred Stock purchased by the Purchaser
hereunder, and in the event that a director selected by the Purchaser is not
serving on the Company's Board of Directors, the Company shall permit a
representative of the Purchaser reasonably acceptable to the Company's Board of
Directors to attend as an observer all meetings of the Company's Board of
Directors and to receive all written materials and other information given to
directors in connection with such meetings; provided, however, that such
representative shall have entered into the Company's standard confidentiality
agreement prior to attending any meetings of the Board of Directors or receiving
any written materials in connection with such meetings.
(b) Director. For so long as the Purchaser owns not less than 50% of the
shares of Series D Preferred Stock purchased by the Purchaser hereunder, upon
the request of the Purchaser, the Company agrees to use its best efforts to
cause David Teolis or another person nominated by the Purchaser and reasonably
acceptable to the Company, to be elected and to serve as a director of the
Company.
Section 7.09. Negative Covenants. The Company agrees that without the prior
written consent of the Purchaser, the Company shall not:
(a) Equity Securities. Issue or sell (i) any Equity Security ranking
senior to the Series D Preferred Stock in respect of distributions or
dividends or upon liquidation, and (ii) any shares of Series A Preferred
Stock, Series C Preferred Stock or Series E Preferred Stock. In addition,
the Company will not repurchase, redeem or cancel any Equity Security of
the Company, except (i) as specifically provided in the agreements (as such
agreements exist as of the date hereof) creating Company Equity Securities
which are outstanding on the date hereof or (ii) as approved by a majority
of the holders of the Company's outstanding Equity Securities;
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Page 44 of 85 Pages
<PAGE>
(b) Transactions with Affiliates. Enter into any transaction with any
Affiliate of the Company.
Section 7.10. Change of Control "Put".
(a) Right to "Put" Securities. In the event that a Change of Control shall
occur, the Company shall give prompt notice of such Change of Control,
describing in reasonable detail the definitive terms and date of consummation
thereof to the Purchaser, but in any event such notice shall be given not less
than 10 days prior to the occurrence of such Change of Control (or as soon
thereafter as the Company becomes aware of such Change of Control). The
Purchaser shall have the right to require the Company to redeem all or a portion
of the Series D Preferred Stock owned by the Purchaser at a price per share
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon) by giving written notice to the Company of such election within 30 days
of receipt of the Company's notice. Upon receipt by the Company of such written
notice from the Purchaser, the Company shall be obligated to redeem the
aggregate number of shares of Series D Preferred Stock specified therein within
ten days of the receipt of such notice from the Purchaser.
(b) Failure to Repurchase Securities. In the event that the Company shall
fail to repurchase the shares of Series D Preferred Stock as contemplated above,
then upon the conversion by the Purchaser of the shares of Series D Preferred
Stock held by the Purchaser, the Company shall issue to the Purchaser the number
of shares of Common Stock equal to the number of shares of Common Stock that
would have been issuable to the Purchaser had the Conversion Rate (as defined in
the Certificate of Designations for the Series D Preferred) been reduced by
$.025 for the first 30 day period or portion thereof after the date of
consummation of a Change of Control that the Company shall fail to repurchase
such shares of Series D Preferred Stock and $.05 for each 30 day period or
portion thereof after such first 30 day period (e.g., the initial Conversion
Rate will be reduced from $.42 to $.395 for the first 30 day period and by $.05
for each additional 30 day period).
ARTICLE VIII
Termination
Section 8.01. Termination. This Agreement may be terminated at any time
prior to the Closing by:
(a) the mutual written consent of the Company and the Purchaser;
(b) the Purchaser or the Company, upon prior written notice, if there
shall have been a breach by the other party of any of the terms or
provisions of this Agreement or the Ancillary Agreements which shall not
have been waived in writing by the non-
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Page 45 of 85 Pages
<PAGE>
breaching party and such breach cannot be cured by May 12, 1999 (the
"Termination Date");
(c) the Purchaser or the Company, upon written notice, if the Closing
shall not have occurred on or before the Termination Date for any reason
other than the failure or refusal of the party seeking to terminate to
perform any of its obligations hereunder; or
(d) the Purchaser or the Company if any court having competent
jurisdiction or other Governmental Authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Transactions.
Section 8.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01 hereof, such termination shall be the
sole remedy, and (a) this Agreement shall forthwith become void, and (b) there
shall be no liability on the part of the Company or the Purchaser; provided,
however, that if such termination shall result from the breach by a party hereto
of any of its obligations under this Agreement, such party shall be fully liable
for any and all damages sustained or incurred by the other party hereto, its
Affiliates or any of the representatives of any of them as a result of or
arising from such breach and such other party shall be entitled to seek any
remedies available to its at law or in equity.
ARTICLE IX
Miscellaneous
Section 9.01. Notices. All notices, requests, demands and other
communications to any party or given under this Agreement or any Ancillary
Agreement (collectively, "Notices") will be in writing and delivered personally,
by overnight courier or by registered mail to the parties at the address for
such party set forth on the signature pages hereto or sent by telecopier, with
confirmation received, to the telecopy number specified for such party on the
signature pages hereto (or at such other address or telecopy number as will be
specified by a party by like notice given at least five calendar days prior
thereto). All Notices will be deemed delivered when actually received.
Section 9.02. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, and by different parties hereto in separate
counterparts, each of which when executed will be deemed an original, but all of
which taken together will constitute one and the same instrument.
Section 9.03. Integration. This Agreement and the Ancillary Agreements
contain and constitute the entire agreement of the parties with respect to the
subject matter hereof and
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Page 46 of 85 Pages
<PAGE>
supersedes all prior negotiations, agreements and understandings, whether
written or oral, of the parties hereto.
Section 9.04. Incorporation of Schedules and Exhibits. The Schedules and
Exhibits hereto are incorporated into this Agreement and will be deemed a part
hereof as if set forth herein in full. References to "this Agreement" and the
words "herein", "hereof" and words of similar import refer to this Agreement
(including the Schedules and Exhibits) as an entirety. In the event of any
conflict between the provisions of this Agreement and any Schedule or Exhibit,
the provisions of this Agreement will control.
Section 9.05. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 9.06. Successors and Assigns. This Agreement will be binding upon
and inures to the benefit of and is enforceable by the respective successors and
permitted assigns of the parties hereto.
Section 9.07. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement and the Ancillary
Agreements will be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.08. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 9.09. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
Section 9.10. Limitation of Liability. It is expressly understood and
agreed by the parties hereto that (a) this Agreement is executed and delivered
by Wilmington Trust Company, not individually or personally but solely as Owner
Trustee of Purchaser, in the exercise of the powers and authority conferred and
vested in it, (b) each of the representations,
-31-
Page 47 of 85 Pages
<PAGE>
undertakings and agreements herein made on the part of Purchaser is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Purchaser, (c) nothing herein contained shall be construed as creating
any liability on Wilmington Trust Company, individually or personally, to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Purchaser or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by Purchaser under this Agreement or any Ancillary Agreement.
Section 9.11 Custodian. The Company is hereby instructed that all payments
and distributions on the Securities shall hereafter be made, and a copy of all
notices shall be sent, to State Street Bank and Trust Company (including any
successor under that certain Custodial Agreement dated as of August 11, 1998, as
it may from time to time be amended, "Custodian"), pursuant to the instructions
attached. This instruction may not be revoked or modified by the Purchaser
without the written consent of Custodian. It is further understood that
Custodian is acting strictly in its capacity as a Custodian and Agent for the
Purchaser, and not individually for its own account, and that there shall be no
recourse against the Custodian in its individual or corporate capacity (or
against any properties owned by it in its individual or corporate capacity) with
respect to any obligations or liabilities that may exist or arise under or with
respect to the Securities, this Agreement or the Ancillary Agreements.
-32-
Page 48 of 85 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PICK COMMUNICATIONS CORP.
Address for Notices:
155 Route 46 West
Wayne, New Jersey 07470
Attention: Thomas M. Malone By: /s/ Thomas M. Malone
Facsimile No.: 973-812-4181 -------------------------------
Name: Thomas M. Malone
Title: Chief Executive Officer
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company, not in
its individual capacity but solely
as Owner Trustee
Address for Notices:
State Street Bank and Trust Company
2 International Place - 5th Floor
By:
Boston, Massachusetts 02110 -------------------------------
Attn: Joseph Tremonte, Name:
Corporate Trust Division Title:
Telephone: (617) 664-5276
Fax: (617) 664-5291
and
Attention: Ralph Creasia, Corporate Trust Division
Telephone: (617) 664-5634
Fax: (617) 664-5291
AND
Tri-Links Investment Trust
2 World Financial Center
17th Floor
New York, New York 10281
Attention: Doug Dragotti
Telephone: (212) 667-1964
Fax: (212) 667-1708
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Page 49 of 85 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PICK COMMUNICATIONS CORP.
Address for Notices:
155 Route 46 West
Wayne, New Jersey 07470
Attention: Thomas M. Malone By:
Facsimile No.: 973-812-4181 -------------------------------
Name:
Title:
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company, not in
its individual capacity but solely
as Owner Trustee
Address for Notices:
- ------------------------------
- ------------------------------
Attention: By: /s/ David A. Vanaskey
-------------------- -------------------------------
Facsimile No.: Name: David A. Vanaskey
---------------- Title: Assistant Vice President
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Page 50 of 85 Pages
<PAGE>
SCHEDULE I
to
SUBSCRIPTION AGREEMENT
Company's Wire Transfer Instructions
Chase Manhattan Bank, NA
ABA # 021-000-021
Pick, Inc.
Acct. # 6097-001339
-34-
Page 51 of 85 Pages
<PAGE>
EXHIBIT 3
to
SCHEDULE 13D
CERTIFICATE OF DESIGNATION, NUMBER, POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS,
LIMITATIONS, RESTRICTIONS, AND OTHER DISTINGUISHING CHARACTERISTICS OF SERIES
D CONVERTIBLE PREFERRED STOCK
OF
PICK COMMUNICATIONS CORP.
It is hereby certified that:
1. The name of the company (hereinafter called the "Company") is PICK
Communications Corp., a Nevada company whose address is 155 Route 46 West, Wayne
Interchange Plaza II, Third Floor, Wayne, NJ 07470.
2. The articles of incorporation of the Company authorizes the issuance of ten
million (10,000,000) shares of Preferred Stock, of a par value of $.001 per
share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue any or all of said shares in one or more
series and by resolution or resolutions to establish the designation, number,
full or limited voting powers, or the denial of voting powers, preferences and
relative, participation, optional, and other special rights and the
qualifications, limitations, restrictions, and other distinguishing
characteristics of each series to be issued.
3. The Board of Directors of the Company authorized seventy thousand (70,000) of
the ten million (10,000,000) shares of Preferred Stock of the Company be
designated Series A Convertible Preferred Stock, $.001 par value per share, none
of which shares have been issued (the "Series A Convertible Preferred Stock").
4. The Board of Directors of the Company authorized two million (2,000,000) of
the ten million (10,000,000) shares of Preferred Stock of the Company be
designated Series B Convertible Preferred Stock, $.001 par value per share, of
which two million (2,000,000) shares have been issued (the "Series B Convertible
Preferred Stock").
5. The Board of Directors of the Company authorized one hundred thousand
(100,000) of the ten million (10,000,000) shares of Preferred Stock of the
Company be designated Series C Convertible Preferred Stock, $.001 par value per
share, none of which shares have been issued (the "Series C Convertible
Preferred Stock").
6. The Board of Directors of the Company, pursuant to the authority expressly
vested in it as aforesaid, has adopted the following resolutions creating a
Series D issue of Convertible Preferred Stock:
RESOLVED, that five hundred thousand (500,000) of the ten million (10,000,000)
authorized shares of Preferred Stock of the Company shall be designated Series D
Convertible Preferred Stock, $.001 par value per share, and shall possess the
rights and privileges set forth below:
SECTION 1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series D Convertible Preferred
Stock" (the "Series D Convertible Preferred Stock") and the number of shares
constituting the Series D Convertible Preferred Stock shall be five hundred
thousand (500,000). Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, however, that no decrease shall
reduce the number of shares of Series D Convertible Preferred Stock to a number
less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Company convertible into Series D Convertible Preferred Stock.
SECTION 2. RANK.
The Series D Convertible Preferred Stock shall rank: (i) prior to all of the
Company's Common Stock, par value $.001 per share ("Common Stock"); (ii) prior
to any class or series of capital stock of the Company specifically ranking by
its terms junior to any Series D Convertible Preferred Stock of whatever
subdivision (collectively, with the Common Stock, "Junior Securities"); (iii) on
parity with the Series B Convertible Preferred Stock and the Series C
Convertible Preferred Stock and (iv) on parity with any class or series of
capital stock of the Company hereafter created specifically ranking by its terms
on parity with the Series D Convertible Preferred Stock ("Parity Securities") in
each case as to distributions of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary (all such distributions
being referred to collectively as "Distributions").
Page 52 of 85 Pages
<PAGE>
SECTION 3. DIVIDENDS.
The holders of Series D Convertible Preferred Stock ("Holders") shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Company, out of the funds of the Company legally available therefor, dividends
ratably with any declaration or payment of any dividend with holders of the
Common Stock or other Junior Securities of this Corporation, when, as and if
declared by the Board of Directors, based on the number of shares of Common
Stock into which each share of Series D Preferred Stock is then convertible.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the Holders of shares of Series D Convertible
Preferred Stock shall be entitled to receive, immediately after any
distributions to securities ("Senior Securities") required by the Company's
Certificate of Incorporation or any certificate of designation of preferences,
and prior and in preference to any distribution to Junior Securities, but in
parity with any distribution of Parity Securities, an amount per share equal to
the sum of $10.00 for each outstanding share of Series D Convertible Preferred
Stock (the "Original Series D Issue Price"). If upon the occurrence of such
event, the assets and funds thus distributed among the Holders of the Series D
Convertible Preferred Stock and Parity Securities shall be insufficient to
permit the payment to such Holders of the full preferential amounts due to the
Holders of the Series D Convertible Preferred Stock and the Parity Securities,
respectively, then the entire assets and funds of the Company legally available
for distribution shall be distributed among the Holders of the Series D
Convertible Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate of designation of
preferences.
(b) Upon the completion of the distribution required by subsection 4(a), if
assets remain in this Company, they shall be distributed to holders of Parity
Securities (unless holders of Parity Securities have received distributions
pursuant to subsection (a) above) and Junior Securities in accordance with the
Company's Certificate of Incorporation including any duly adopted certificate(s)
of designation of preferences.
(c) A consolidation or merger of the Company with or into any other corporation
or corporations, or a sale, conveyance or disposition of all or substantially
all of the assets of the Company or the effectuation by the Company of a
transaction or series of related transactions in which more than 50% of the
voting power of the Company is disposed of, shall not be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 4, but
shall instead be treated pursuant to Section 6 hereof.
SECTION 5. CONVERSION. THE RECORD HOLDERS OF THIS SERIES D CONVERTIBLE PREFERRED
STOCK SHALL HAVE CONVERSION RIGHTS AS FOLLOWS (THE "CONVERSION RIGHTS"):
Holder's Right to Convert.
(i) The record Holder of this Series D Convertible Preferred Stock shall be
entitled (at the times and in the amounts set forth below), at the office of the
Company or any transfer agent for the Series D Convertible Preferred Stock, to
convert portions of the Series D Convertible Preferred Stock held by such Holder
(but only in multiples of $1,000) into that number of unrestricted, fully-paid
and non-assessable shares of Common Stock at the Conversion Rate as set forth
below. The number of shares of Common Stock into which this Series D Convertible
Preferred Stock may be converted is hereinafter referred to as the "Conversion
Number" for such Series D Convertible Preferred Stock. The record Holder of this
Series D Convertible Preferred Stock shall be entitled to convert the initial
number of shares of Series D Convertible Preferred Stock held by such Holder
beginning on the date of the closing (the "Closing") of a sale of such Series D
Convertible Preferred Stock that occurs pursuant to the offering (the
"Offering") of the Series D Convertible Preferred Stock by the Company. The
following formula sets forth the number of shares (Conversion Number) issued
upon conversion of one (1) share of Series D Convertible Preferred Stock as an
amount equal to 23.81 shares of Common Stock:
Conversion Number = 10
----------------------
Conversion Rate
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Page 53 of 85 Pages
<PAGE>
where,
Conversion Rate = $.42 per share.
Notwithstanding the foregoing, if the Company has not issued Series D
Convertible Preferred Stock aggregating $2,500,000 and if more than 75% of the
outstanding obligations to the holders of the 18% Senior Secured Notes (the
"Notes") of the Company convert their Notes into Common Stock at $.25 per share,
the Holders of the Series D Convertible Preferred Stock may convert their shares
of Series D Convertible Preferred Stock at a Conversion Rate of $.25 per share.
(ii) Mechanics of Conversion. In order to convert Series D Convertible Preferred
Stock into full shares of Common Stock, the Holder shall (i) transmit facsimile
copy of the fully executed notice of conversion in the form attached hereto
("Notice of Conversion") to the Company at such office that he elects to convert
the same (Facsimile number (973) 812-4181), which notice shall specify the
number of shares of Series D Convertible Preferred Stock to be converted and
shall contain a calculation of the Conversion Rate (together with a copy of the
first page of each certificate to be converted) to the Company or its designated
transfer agent prior to midnight, New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion and
(ii) surrender the original certificate or certificates therefor, duly endorsed,
and deliver the original Notice of Conversion by either overnight courier or
2-day courier, to the office of the Company or of any transfer agent for the
Series D Convertible Preferred Stock; provided, however, that the Company shall
not be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless either the certificates evidencing such
Series D Convertible Preferred Stock are delivered to the Company or its
transfer agent as provided above, or the Holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed. Upon
receipt by the Company of evidence of the loss, theft, destruction or mutilation
of the certificate or certificates ("Stock Certificates") representing shares of
Series D Convertible Preferred Stock, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of the Stock Certificate(s), if mutilated,
the Company shall execute and deliver new Stock Certificate(s) of like tenor and
date. No fractional shares of Common Stock shall be issued upon conversion of
this Series D Convertible Preferred Stock. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company shall pay cash to such
Holder in an amount equal to such fraction multiplied by the Conversion Rate
then in effect. In the case of a dispute as to the calculation of the Conversion
Rate, the Company's calculation shall be deemed conclusive absent manifest
error.
The Company shall use all reasonable efforts to issue and deliver within three
(3) business days after delivery to the Company of the stock certificates, or
after such agreement and indemnification, to such Holder of Series D Convertible
Preferred Stock at the address of the Holder on the books of the Company, a
certificate or certificates for the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid. The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth in such
Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before midnight, New York City time, on the
Date of Conversion, and (ii) that the original Stock Certificates representing
the shares of Series D Convertible Preferred Stock to be converted are received
by the transfer agent or the Company within five (5) business days thereafter.
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 on such date. If the original Stock
Certificates representing the Series D Convertible Preferred Stock to be
converted are not received by the transfer agent or the Company within five (5)
business days after the Date of Conversion or if the facsimile of the Notice of
Conversion is not received by the Company or its designated transfer agent prior
to the Conversion Notice Deadline, the Notice of Conversion, at the Company's
option, may be declared null and void.
Following conversion of shares of Series D Convertible Preferred Stock, such
shares of Series D Convertible Preferred Stock will no longer be outstanding.
-3-
Page 54 of 85 Pages
<PAGE>
(b) Reservation of Stock Issuable Upon Conversion. 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 conversion of the Series D
Convertible Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all then outstanding
Series D Convertible Preferred Stock; and 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 D Convertible Preferred
Stock, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(c) Adjustment to Conversion Rate.
(i) If, prior to the conversion of all Series D Convertible Preferred Stock,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Company shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity, then the Holders of Series D Convertible Preferred
Stock shall thereafter have the right to purchase and receive upon conversion of
Series D Convertible Preferred Stock, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Series D Convertible Preferred Stock held by
such Holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Series D Convertible Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the number of shares issuable upon conversion of the Series D Convertible
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any shares of stock or securities thereafter deliverable upon the
exercise hereof. The Company shall not effect any transaction described in this
subsection 5(c) unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Holders
of the Series D Convertible Preferred Stock such shares of stock and/or
securities as, in accordance with the foregoing provisions, the Holders of the
Series D Convertible Preferred Stock may be entitled to purchase.
(ii) If, prior to the conversion of all Series D Convertible Preferred Stock,
the Company issues or sells any shares of Common Stock or other equity
securities or securities convertible into or exercisable for equity securities,
other than the shares of Common Stock underlying options or warrants outstanding
as of the Closing, for a consideration per share less than the Conversion Rate
in effect immediately prior to such issuance or sale, then immediately after the
date the Holders receive written notice from the Company of such issuance or
sale, the Conversion Rate then in effect shall be reduced to an amount equal to
the consideration per share of Common Stock in such issuance or sale.
(iii) If, any adjustment under this subsection 5(c) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
SECTION 6. CORPORATE CHANGE.
The Conversion Rate shall be appropriately adjusted to reflect, as deemed
equitable and appropriate by the Company, any stock dividend, stock split or
share combination of the Common Stock. In the event of a merger, reorganization,
recapitalization or similar event of or with respect to the Company (a
"Corporate Change") (other than a Corporate Change in which or substantially all
of the consideration received by the holders of the Company's equity securities
upon such Corporate Change consists of cash or assets other than securities
issued by the acquiring entity or any affiliate thereof), this Series D
Convertible Preferred Stock shall be assumed by the acquiring entity and
thereafter
-4-
Page 55 of 85 Pages
<PAGE>
this Series D Convertible Preferred Stock shall be convertible into such class
and type of securities as the Holder would have received had the Holder
converted this Series D Convertible Preferred Stock immediately prior to such
Corporate Change.
SECTION 7. VOTING RIGHTS.
(a) In addition to any other rights provided for herein or by law, the
holders of Series D Preferred Stock shall be entitled to vote, together with the
holders of Common Stock as one class, on all matters as to which holders of
Common Stock shall be entitled to vote, in the same manner and with the same
effect as such Common Stock holders. In any such vote each share of Series D
Preferred Stock shall entitle the holder thereof to the number of votes per
share that equals the number of whole shares of Common Stock into which each
such share of Series D Preferred Stock is then convertible, calculated to the
nearest share.
(b) So long as at least twenty percent (20%) of the Series D Preferred
Stock remains outstanding, the consent of the holders of two-thirds of the then
outstanding Series D Preferred Stock, voting as one class, either expressed in
writing or at a meeting called for that purpose, shall be necessary to permit
effect or validate the creation and issuance of any series of preferred stock or
other security of the Company which is senior as to Distributions to the Series
D Preferred Stock.
(c) So long as at least twenty percent (20%) of the Series D Preferred
Stock remains outstanding, the consent of two-thirds of the holders of the then
outstanding Series D Preferred Stock, voting as one class, either expressed in
writing or at a meeting called for that purpose, shall be necessary to repeal,
amend or otherwise change this Certificate of Designation or the Articles of
Incorporation of the Company, as amended, in a manner which would alter or
change the powers, preferences, rights, privileges, restrictions and conditions
of the Series D Preferred Stock so as to adversely affect the Series D Preferred
Stock.
(d) Each share of the Series D Preferred Stock shall entitle the holder
thereof to one vote on all matters to be voted on by the holders of the Series D
Preferred Stock, as set forth above.
(e) In the event that the holders of the Series D Preferred Stock are
required to vote as a class on any other matter, the affirmative vote of holders
of not less than fifty percent (50%) of the outstanding shares of Series D
Preferred Stock shall be required to approve each such matter to be voted upon,
and if any matter is approved by such requisite percentage of holders of Series
D Preferred Stock, such matter shall bind all holders of Series D Preferred
Stock.
SECTION 8. STATUS OF CONVERTED STOCK.
In the event any shares of Series D Convertible Preferred Stock shall be
converted pursuant to Section 5 hereof, the shares so converted shall be
canceled, shall return to the status of authorized, but unissued Convertible
Preferred Stock of no designated series, and shall not be issuable by the
Company as Series D Convertible Preferred Stock.
SECTION 9. MISCELLANEOUS.
(a) There is no sinking fund with respect to the Series D Preferred Stock.
-5-
Page 56 of 85 Pages
<PAGE>
(b) The shares of the Series D Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Certificate of
Designation, and in the Articles of Incorporation of the Company, as amended.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series D Convertible Preferred
Stock and fixing the number, powers, preferences and relative, optional,
participating, and other special rights and the qualifications, limitations,
restrictions, and other distinguishing characteristics thereof shall, upon the
effective date of said series, be deemed to be included in and be a part of the
certificate of incorporation of the Company pursuant to the provisions of
Chapter 78 of the Nevada Revised Statutes.
Signed on April 14, 1999
/s/ Diego Leiva
-------------------------------
Diego Leiva, President
Attest: /s/ Elliot H. Lutzker
-----------------------------------------
Elliot H. Lutzker, Assistant Secretary
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
The foregoing instrument was subscribed before me, a notary public for the
State of New York, this 14th day of April 1999, by Diego Leiva and Elliot H.
Lutzker, who are personally known to me.
/s/ Michael P. Buck
------------------------------
Notary Public
My commission expires: 12/6/2000
-6-
Page 57 of 85 Pages
<PAGE>
NOTICE OF CONVERSION
(To be executed by the Registered Holder
in order to Convert the Series D Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert __________ shares of
Series D Convertible Preferred Stock, represented by stock certificate No(s).
________ (the "Convertible Preferred Stock Certificates") into shares of common
stock ("Common Stock") of PICK Communications Corp., (the "Company") according
to the conditions of the Certificate of Designation of Series D Convertible
Preferred Stock, as of the date written below. If shares are to be issued in the
name of a person other than undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates.
No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Series D Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Act or pursuant to an exemption from
registration under the Act.
Conversion Calculations:
Date of Conversion
Applicable Conversion Rate
Signature
Name
Address
- --------------------------------------------------------------------------------
No shares of Common Stock shall be issued until the original Convertible
Preferred Stock Certificate(s) to be converted and the Notice of Conversion are
received by the Company's Attorney or Transfer Agent. The original Stock
Certificates representing the Series D Convertible Preferred Stock to be
converted and the Notice of Conversion must be received by the Company's
Attorney or Transfer Agent by the fifth business day following the Date of
Conversion, or the Notice of Conversion, at the Company's option, may be
declared null and void.
- --------------------------------------------------------------------------------
-7-
Page 58 of 85 Pages
<PAGE>
EXHIBIT 4
to
NO. WD-1 SCHEDULE 13D
WARRANT TO PURCHASE COMMON STOCK
OF
PICK COMMUNICATIONS CORP.
This is to Certify That, FOR VALUE RECEIVED, TRI-LINKS INVESTMENT TRUST, or
assigns ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from PICK Communications Corp., a Nevada corporation ("Company"), three
hundred thousand (300,000) fully paid, validly issued and nonassessable shares
of Common Stock of the Company ("Common Stock") at a price equal to $.63 per
share at any time or from time to time during the period from the date of
issuance of this Warrant until May 12, 2001, subject to adjustment as set forth
herein. The number of shares of Common Stock to be received upon the exercise of
this Warrant and the price to be paid for each share of Common Stock may be
adjusted from time to time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Common Stock in effect at any time and as adjusted from time to time
is hereinafter sometimes referred to as the "Exercise Price".
(a) EXERCISE OF WARRANT; CANCELLATION OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any time or
from time to time on or after the date of issuance of this Warrant until
May 12, 2001, (the "Exercise Period"); provided, however, that if such day
is a day on which banking institutions in the State of New York are
authorized by law to close, then this Warrant may be exercised on the next
succeeding day which shall not be such a day. This Warrant may be exercised
by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the
Purchase Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of the Warrants, but not
later than seven (7) days from the date of such exercise, the Company shall
issue and deliver to the Holder a certificate or certificate for the
Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant for cancellation, execute
and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock
transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically
delivered to the Holder.
Page 59 of 85 Pages
<PAGE>
(2) At any time during the Exercise Period, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant Exchange"),
into the number of Warrant Shares determined in accordance with this
Section (a)(2), by surrendering this Warrant at the principal office of the
Company or at the office of its stock transfer agent, accompanied by a
notice stating such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests
that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant
Exchange shall take place on the date specified in the Notice of Exchange
or, if later, the date the Notice of Exchange is received by the Company
(the "Exchange Date"). Certificates for the shares issuable upon such
Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the shares remaining subject to this Warrant, shall be
issued as of the Exchange Date and delivered to the Holder within seven (7)
days following the Exchange Date. In connection with any Warrant Exchange,
this Warrant shall represent the right to subscribe for and acquire the
number of Warrant Shares (rounded to the next highest integer) equal to (i)
the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal
to the quotient obtained by dividing (A) the product of the Total Number
and the existing Exercise Price by (B) the current market value of a share
of Common Stock. Current market value shall have the meaning set forth
Section (c) below, except that for purposes hereof, the date of exercise,
as used in such Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for
trading on the Nasdaq National Market, the current market value shall be
the last reported sale price of the Common Stock on such exchange or market
on the last business day prior to the date of exercise of this Warrant or
if no such sale is made on such day, the average closing bid and asked
prices for such day on such exchange or market; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq SmallCap Market, the
current market value shall be the average of the closing bid and asked
prices for such day on such market and if the Common Stock is not so
traded, the current market value shall be the mean of the last reported bid
and asked prices reported by the National
2
Page 60 of 85 Pages
<PAGE>
Quotation Bureau, Inc. on the last business day prior to the date of the
exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount, not less than book value thereof
as at the end of the most recent fiscal year of the Company ending prior to
the date of the exercise of the Warrant, determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be canceled. This Warrant may be divided or combined
with other warrants which carry the same rights upon presentation hereof at the
principal office of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the names and denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. Subject to the provisions of Section l
hereof, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of
3
Page 61 of 85 Pages
<PAGE>
Common Stock into a smaller number of shares, the Exercise Price in effect
at the time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall
be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number
of shares of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price (the "Subscription Price") (or
having a conversion price per share) less than the current market price of
the Common Stock (as defined in Subsection (5) below) on the record date
mentioned below, or less than the Exercise Price on such record date, the
Exercise Price shall be adjusted so that the same shall equal, the price
determined by multiplying the Exercise Price in effect immediately prior to
the date of issuance by a fraction, the numerator of which shall be the sum
of the number of shares outstanding on the record date mentioned below and
the number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered (or
the aggregate conversion price of the convertible securities so offered)
would purchase at the Exercise Price in effect immediately prior to the
date of such issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding on the record date mentioned
below and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become effective
immediately after the record date for the determination of shareholders
entitled to receive such rights or warrants; and to the extent that shares
of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants
the Exercise Price shall be readjusted to the Exercise Price which would
then be in effect had the adjustments made upon the issuance of such rights
or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock)
actually delivered.
(3) In case the Company shall hereafter distribute to the holders of
its Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions and dividends or distributions referred to in
Subsection (1) above) or subscription rights or warrants (excluding those
referred to in Subsection (2) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of
which shall be the total number of shares of
4
Page 62 of 85 Pages
<PAGE>
Common Stock outstanding multiplied by the current market price per share
of Common Stock (as defined in Subsection (5) below), less the fair market
value (as determined by the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such rights or warrants, and
the denominator of which shall be the total number of shares of Common
Stock outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
distribution.
(4) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsections (1), (2), and (3) above, the number of
Shares purchasable upon exercise of this Warrant shall simultaneously be
adjusted by multiplying the number of Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof
and dividing the product so obtained by the Exercise Price, as adjusted.
(5) For the purpose of any computation under Subsections (2) and (3)
above, the current market price per share of Common Stock at any date shall
be determined in the manner set forth in Section (c) hereof except that the
current market price per share shall be deemed to be the higher of (i) the
average of the prices for 30 consecutive business days before such date or
(ii) the price on the business day immediately preceding such date.
(6) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent
($0.01) in such price; provided, however, that any adjustments which by
reason of this Subsection (6) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (f) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to
the holders of Common Stock or securities convertible into Common Stock
(including Warrants).
(7) In the event that the Registration Statement covering the Warrant
Shares is not effective by the Required Effective Date (as defined in the
Investor Rights Agreement) then upon the exercise by the Holder of this
Warrant, the Company shall issue to the Holder the number of Warrant Shares
equal to the number of Warrant Shares that would have been issuable to the
Holder had the
5
Page 63 of 85 Pages
<PAGE>
Exercise Price been reduced by $.025 for the initial 90 day period or
portion thereof after the Required Effective Date that the Registration
Statement is not effective and $.05 for each additional 90 day period
thereafter (e.g., the initial Exercise Price will be reduced from $.63 to
$.605 for the first 90 day period and by $.05 for each additional 90 day
period).
(8) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Subsections (1) to
(6), inclusive above.
(9) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the holder or any holder of a Warrant
executed and delivered pursuant to Section (a) and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to
the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification,
6
Page 64 of 85 Pages
<PAGE>
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any is to be fixed,
as of which the holders of Common Stock or other securities shall receive cash
or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The holder will have
registration rights with respect to the Warrant Shares as more particularly set
forth in the Investor Rights Agreement executed in connection with the purchase
of Series D Convertible Preferred Stock of the Company.
PICK COMMUNICATIONS CORP.
By: /s/ Thomas M. Malone
-----------------------------------------
Thomas M. Malone, Chief Executive Officer
Dated: May 12, 1999
Attest:
/s/ Elliot H. Lutzker
- --------------------------------------
Elliot H. Lutzker, Assistant Secretary
7
Page 65 of 85 Pages
<PAGE>
PURCHASE FORM
Dated ________
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing_______ shares of Common Stock and hereby makes
payment_______ of in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ____________________
(Please typewrite or print in block letters)
Address _________________
Signature _______________
ASSIGNMENT FORM
FOR VALUE RECEIVED, __________ hereby sells, assigns and transfers unto
Name _______________________
(Please typewrite or print in block letters)
Address ____________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ________ Attorney, to transfer the same on the books of
the Company with full power of substitution in the premises.
Date ____________________
Signature _______________
Page 66 of 85 Pages
<PAGE>
EXHIBIT 5
to
SCHEDULE 13D
INVESTOR RIGHTS AGREEMENT (the "Agreement"), dated as of May 12, 1999,
between PICK COMMUNICATIONS CORP., a Nevada corporation (the "Company"), and
TRI-LINKS INVESTMENT TRUST (the "Investor").
RECITALS
A. The Company and the Investor have entered into the Subscription
Agreement dated as of May 12, 1999 (the "Subscription Agreement"), pursuant to
which the Investor agreed to purchase 150,000 units (the "Units"), each
consisting of (i) one share of Series D Convertible Preferred Stock, par value
$.001 per share (the "Series D Preferred Stock"), of the Company, and (ii) 2
warrants (the "Warrants"), each to purchase one share of Common Stock, par value
$.001 per share (the "Common Stock"), of the Company.
B. As a condition to the Investor's obligations under the Subscription
Agreement, the Company desires to grant the Investor certain rights as set forth
herein.
AGREEMENT
In consideration of the premises and the mutual covenants and the
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Board" or "Board of Directors" means the board of directors of the
Company as constituted from time to time.
"Common Stock" includes (a) the Company's Common Stock, and (b) any
other securities into which or for which any of the Company's Common Stock
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Governmental Body" means any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign.
Page 67 of 85 Pages
<PAGE>
"Holder" shall initially mean the Investor and subsequently shall mean
any Person who holds outstanding Registrable Securities which have not been
sold to the public, or any Person to whom any Holder shall sell or transfer
pursuant to Section 3.09 of this Agreement its Registrable Securities and
expressly transfer its rights hereunder.
"Investor's Designee" means the member of the Board of Directors of
the Company designated by the Investor, in accordance with the Subscription
Agreement.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a Governmental Body
"Potential Material Event" means any of (a) the possession by the
Company of material information not ripe for disclosure in a registration
statement, which shall be evidenced by determinations in good faith by the
Board of Directors that disclosure of such information in the registration
statement would be detrimental to the business and affairs of the Company,
or (b) any material engagement or activity by the Company which would, in
the good faith determination of the Board of Directors, be adversely
affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the
Board of Directors that the registration statement would be materially
misleading absent the inclusion of such information.
"Preferred Holder" means the Investor and any Person to whom the
Investor shall sell or transfer its Preferred Shares pursuant to the terms
of this Agreement and expressly transfer its rights hereunder.
"Preferred Shares" means (a) the shares of Series D Preferred Stock
purchased by the Investor pursuant to the Subscription Agreement and (b)
any other securities into which or for which any of the Series D Preferred
Stock may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
"Registrable Securities" shall mean and include all shares of Common
Stock issued or issuable upon (a) the conversion of the Preferred Shares
and (b) upon the exercise of the Warrants; provided, however, that (i)
Registrable Securities shall cease to be Registrable Securities upon the
consummation of any sale of such securities pursuant to a registration
statement or Rule 144 under the Securities Act and (ii) shall cease to be
Registrable Securities if sold in a transaction in which rights under
Article III of this Agreement are not assigned.
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"Register", "registered" and "registration" refer to a registration
effected through the preparation and filing of a registration statement or
similar document in compliance with the Securities Act and the declaration
or ordering of effectiveness of such registration statement or document.
"Registration Expenses" shall mean all expenses incurred by the
Company in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification and filing
fees, printing expenses, escrow fees, fees and disbursements of counsel for
the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration and the reasonable fees
and disbursements of one special legal counsel to represent all of the
Holders together (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company).
"Registration Statement" means a registration statement on Form S-3
(if prepared pursuant to Section 3.01) or any other appropriate form (if
prepared pursuant to Section 3.03) prepared and filed with the SEC by the
Company pursuant to Article III of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"SEC" means the United States Securities and Exchange Commission and
includes any Governmental Body succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal law then in force.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities
registered by the Holders.
"Subsidiary" of a Person means any Person of which equity securities
or other ownership interests having ordinary voting power to elect a
majority of the board of directors, the manager or other persons performing
similar functions are at the time directly or indirectly owned by the
Person. Unless the context otherwise requires, references to one or more
Subsidiaries are references to Subsidiaries of the Company
"Warrant Holder" means the Investor and any Person to whom the
Investor shall sell or transfer its Warrants pursuant to the terms of this
Agreement and expressly transfer its rights hereunder.
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Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
ARTICLE II
Covenants of the Company.
Section 2.01. Affirmative Covenants of the Company Other Than Reporting
Requirements. Except to the extent the following covenants and provisions of
this Section 2.01 are waived in any instance by a majority of the Preferred
Holders, the Company covenants and agrees that so long as not less than 50% (the
"Minimum Percentage") of the Preferred Shares originally issued to the Investor
remain outstanding, it will perform and observe the following covenants and
provisions:
(a) Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common
Stock sufficient to yield 150% of the number of shares of Common Stock
issuable at conversion or exercise as may be required to satisfy (i) the
conversion rights of the Preferred Holders pursuant to the terms and
conditions of the Preferred Shares and (ii) the exercise rights of the
Warrant Holders pursuant to the terms and conditions of the Warrants.
(b) Meeting of Directors and Committees. The Company's Board of
Directors shall hold meetings at least every other month.
(c) Indemnification. The Company shall at all times maintain
provisions in its Bylaws or Articles of Incorporation exculpating and
indemnifying all of the members of the Board of Directors from and against
liability to the maximum extent permitted under the laws of the state of
its incorporation.
(d) Expenses of Directors. The Company shall promptly reimburse in
full the Investor's Designee for all of his reasonable out-of-pocket
expenses incurred in attending each meeting of the Board of Directors of
the Company or any committee thereof in conformity with the Company's
policy.
Section 2.02. Reporting Requirements of the Company. Until less than the
Minimum Percentage of the Preferred Shares originally issued to the Investor are
outstanding, the Company will furnish the following to each Preferred Holder and
Warrant Holder:
(a) Monthly Reports. Starting with results for the month of June,
1999, as soon as available but in any event within 15 days after the end of
each monthly accounting period in each fiscal year, unaudited consolidating
and consolidated
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statements of income and cash flows of the Company and its Subsidiaries for
such monthly period and for the period from the beginning of the fiscal
year to the end of such month, and unaudited consolidating and consolidated
balance sheets of the Company and its Subsidiaries as of the end of such
monthly period, setting forth in each case comparisons to the Company's
annual budget and to the corresponding period in the preceding fiscal year,
and all such statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied, subject to the
absence of footnote disclosures and to normal year-end adjustments, and
shall be certified by the Company's chief financial officer.
(b) Certificate of No Default. Accompanying the financial statements
referred to in subsection 2.02(a) is an officer's certificate stating that
there is no event of default in existence and that neither the Company nor
any of its Subsidiaries is in default under any of its other material
agreements or, if any event of default or any such default exists,
specifying the nature and period of existence thereof and what actions the
Company and its Subsidiaries have taken and propose to take with respect
thereto.
(c) Annual Reports. Within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal year, and consolidating and
consolidated balance sheets of the Company and its Subsidiaries as of the
end of such fiscal year, setting forth in each case comparisons to the
Company's annual budget and to the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles, consistently
applied, and accompanied by (i) with respect to the consolidated portions
of such statements, an opinion containing no exceptions or qualifications
(except for qualifications regarding specified contingent liabilities) of
an independent accounting firm of recognized national standing, (ii) a
certificate from such accounting firm, addressed to the Board of Directors,
stating that in the course of its examination nothing came to its attention
that caused it to believe that there was an event of default in existence
or that there was any other default by the Company or any Subsidiary in the
fulfillment of or compliance with any of the terms, covenants, provisions
or conditions of any material agreement to which the Company or any
Subsidiary is a party or, if such accountants have reason to believe any
event of default or other default by the Company or any Subsidiary exists,
a certificate specifying the nature and period of existence thereof, and
(iii) a copy of such firm's annual management letter to the Board of
Directors.
(d) Auditor Reports. Promptly upon receipt thereof, any additional
reports, management letters or other detailed information concerning
significant aspects of the Company's or any Subsidiary's operations or
financial affairs given to the Company or any Subsidiary by its independent
accountants (and not otherwise contained in other materials provided
hereunder).
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(e) Annual Budget. At least 30 days prior to the beginning of each
fiscal year, an annual budget prepared on a monthly basis for the Company
and its Subsidiaries for such fiscal year (displaying anticipated
statements of income and cash flows and balance sheets), and promptly upon
preparation thereof any other significant budgets prepared by the Company
or any Subsidiary and any revisions of such annual or other budgets, and
within 30 days after any monthly period in which there is a material
adverse deviation from the annual budget, a certificate of the President or
any Vice President of the Company explaining the deviation and what actions
the Company and its Subsidiaries have taken and propose to take with
respect thereto.
(f) Default Notice. Promptly (but in any event within five business
days) after the discovery or receipt of notice of any event of default, any
default under any material agreement to which it or any of its Subsidiaries
is a party or any other material adverse change, event or circumstance
affecting the Company or any Subsidiary, a certificate of the President or
any Vice President of the Company specifying the nature and period of
existence thereof and what actions the Company and its Subsidiaries have
taken and propose to take with respect thereto.
(g) Stockholder Information. Within ten days after transmission
thereof, copies of all financial statements, proxy statements, reports and
any other general written communications which the Company sends to its
stockholders and copies of all registration statements and all regular,
special or periodic reports which it files, or any of its officers or
directors file with respect to the Company, with the SEC or with any
securities exchange on which any of its securities are then listed, and
copies of all press releases and other statements made available generally
by the Company to the public concerning material developments in the
Company's and its Subsidiaries' businesses.
(h) Other Information. With reasonable promptness, such other
information and financial data concerning the Company and its Subsidiaries
as any Person entitled to receive information under this Section 2.02 may
reasonably request. Each of the financial statements referred to in
subsection 2.02(a), (c) and (g) shall be true and correct in all material
respects as of the dates and for the periods stated therein, subject in the
case of the unaudited financial statements to changes resulting from normal
recurring year-end adjustments which will not be material in amount.
Section 2.03. Inspection of Property. The Company shall permit any
representatives designated by any Preferred Holder or any Warrant Holder, upon
reasonable notice and during normal business hours and at such other times as
any such holder(s) may reasonably request, to (a) visit and inspect any of the
properties of the Company and its Subsidiaries, (b) examine the corporate and
financial records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (c) discuss the affairs, finances and accounts of any
such Persons with the directors, officers, key employees, lawyers, independent
accountants and other agents and consultants of the Company and its
Subsidiaries. The presentation of an executed copy of
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<PAGE>
this Agreement to the Company's independent accountants shall constitute the
Company's permission to its independent accountants to participate in
discussions with such representatives.
Section 2.04. Confidentiality. With respect to the information and other
material furnished under or in connection with this Agreement (whether furnished
before, on or after the date hereof) which constitutes or contains non-public
business, financial or other information of the Company ("Non-Public
Information"), each Preferred Holder and each Warrant Holder hereby covenants
that it will use due care to prevent its officers, directors, employees,
counsel, accountants and other representatives from (x) disclosing any
Non-Public Information to Persons other than such Preferred Holder's or Warrant
Holder's authorized employees, counsel, accountants, shareholders, members,
partners, limited partners and other authorized representatives or (y) using
Non-Public Information in any manner that would constitute a violation of
federal or state securities laws; provided, however, that the Preferred Holders
and the Warrant Holders may disclose or deliver any Non-Public Information
should such Preferred Holder or Warrant Holder be advised by its counsel that
such disclosure or delivery is required by law, regulation or judicial or
administrative order. For purposes of this Section 2.04, "due care" means at
least the same level of care that such Preferred Holder or Warrant Holder, as
the case may be, would use to protect the confidentiality of its own sensitive
or proprietary information, and this obligation shall survive termination of
this Agreement.
ARTICLE III
Registration.
Section 3.01. Mandatory Registration.
(a) Filing of Registration Statement. The Company shall prepare and file
with the SEC, no later than 90 days after the date of this Agreement, a
Registration Statement registering for resale by the Holders a sufficient number
of shares of Common Stock for (i) the Preferred Holders to sell the Registrable
Securities into which the Preferred Stock would be convertible at the time of
filing of such Registration Statement (assuming for such purposes that all
shares of Preferred Stock had been converted into Common Stock in accordance
with their terms) and (ii) the Warrant Holders to sell the Registrable
Securities for which the Warrants are exercisable at the time of filing such
Registration Statement. The Registration Statement (x) shall include only (I)
the Registrable Securities and (II) the other shares of Common Stock issuable
upon conversion of the 156,500 shares of Series D Preferred Stock that are
outstanding as of the date of this Agreement, plus any shares of Common Stock
issuable upon conversion of the Company's remaining authorized Series D
Preferred Stock and (y) shall also state that, in accordance with Rules 416 and
457 under the Securities Act, it also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Preferred Stock or exercise of the Warrants resulting from
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<PAGE>
adjustment in the conversion price or exercise price or to prevent dilution
resulting from stock splits or stock dividends.
(b) Effectiveness. The Company will use its best efforts to cause such
Registration Statement to be declared effective no later than the earlier of (i)
five days after notice by the SEC that it may be declared effective and (ii) 180
days after the date hereof (such date being the "Required Effective Date"). If
at any time the sum of (x) the number of shares of Common Stock into which the
Preferred Sock may be converted, plus (y) the number of shares of Common Stock
for which the Warrants may be exercised, exceeds the aggregate number of shares
of Common Stock then registered, the Company shall either (i) amend the
Registration Statement filed by the Company pursuant to the preceding provisions
of this Section 3.01, if such Registration Statement has not been declared
effective by the SEC at that time, to register all shares of Common Stock into
which the Preferred Stock may currently or in the future be converted and the
Warrants may currently or in the future be exercised, or (ii) if such
Registration Statement has been declared effective by the SEC at that time, file
with the SEC an additional Registration Statement to register the shares of
Common Stock into which the Preferred Stock may currently or in the future be
converted and the Warrants may currently or in the future be exercised that
exceed the aggregate number of shares of Common Stock already registered.
3.02. Delay in Effectiveness of Registration Statement.
(a) Preferred Stock. In the event that the Registration Statement covering
the Registrable Securities is not effective by the Required Effective Date, then
upon the conversion by the Purchaser of the shares of Series D Preferred Stock
held by the Purchaser, the Company shall issue to the Purchaser the number of
shares of Common Stock equal to the number of shares of Common Stock that would
have been issuable to the Purchaser had the Conversion Rate (as defined in the
Certificate of Designations for the Series D Preferred) been reduced by $.025
for the first 90 day period or portion thereof after the Required Effective Date
that the Registration Statement is not effective and $.05 for each additional 90
day period or portion thereof after the Required Effective Time that the
Registration Statement is not effective (e.g., the initial Conversion Rate will
be reduced from $.42 to $.395 for the first 90 day period and by $.05 for each
additional 90 day period).
(b) Warrants. The Warrants will contain a provision that if the
Registration Statement covering the Registrable Securities is not effective by
the Required Effective Date, then the per share exercise price of the Warrants
shall be reduced $.025 for the first 90 day period or portion thereof after the
Required Effective Date that the Registration Statement is not effective and
$.05 for each additional 90 day period or portion thereof after the Required
Effective Time that the Registration Statement is not effective (e.g., the
initial exercise price will be reduced from $.63 to $.605 for the first 90 day
period and by $.05 for each additional 90 day period).
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Section 3.03. Piggyback Registration.
(a) Notice of Registration. If, at any time or from time to time the
Company shall determine to register any of its securities for its own account in
connection with an offering of its securities to the general public for cash on
a form which would permit the registration of Registrable Securities, the
Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 20 days after mailing or personal delivery of such
written notice from the Company, by any Holders, except as set forth in
Section 3.03(b).
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
3.03(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 3.03 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall (together with the
Company) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 3.03, if the underwriter
determines that marketing factors require a limitation of the number of shares
to be underwritten, the Company shall so advise all Holders whose securities
would otherwise be registered and underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities entitled to
inclusion in such registration held by such Holders at the time of filing the
registration statement, or, if so determined by the underwriter, all Registrable
Securities shall be excluded from each registration and underwriting. If any
Holder disapproves of the terms of any such underwriting, the Holder may elect
to withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall not be
transferred in a public distribution prior to 120 days after the effective date
of such registration statement.
Section 3.04. Expenses of Registration. All Registration Expenses incurred
in connection with any registration, filing, qualification or compliance
pursuant to Sections 3.01 or 3.03 shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered by the
Holders shall be borne by the holders of such securities pro rata on the basis
of the number of shares so registered.
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Section 3.05. Further Obligations of the Company. For purposes of Sections
3.05(a) and (b), the term "Registration Statement" specifically refers to the
Registration Statement required by Section 3.01. For purposes of Sections
3.05(c) and (d), the term "Registration Statement" specifically refers to the
Registration Statement required by Section 3.03. For all other subsections in
this Section 3.05, the term "Registration Statement" refers to the Registration
Statement required by either Sections 3.01 or 3.03, as the case may be. Whenever
required under this Article III to effect the registration of any Registrable
Securities, the Company shall, as expeditiously and as reasonably possible:
(a) With respect to the Registration Statement required by Section
3.01 above, prepare promptly, and file with the SEC by the date which is 90
days after the date hereof, such Registration Statement, and thereafter use
its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective by the Required Effective Date
and keep the Registration Statement effective at all times until the date
the Holders no longer own any of the Registrable Securities (the
"Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during the Registration Period, comply
with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in the Registration Statement.
(c) Prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities and use its best efforts to cause
such Registration Statement to become effective and, upon the request of
the Holders of a majority of the Registrable Securities registered
thereunder, keep such Registration Statement effective for up to 120 days
or until the Holder or Holders have completed the distribution described in
the Registration Statement, whichever first occurs.
(d) Prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement.
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(e) The Company shall permit a single firm of counsel designated by
the Investor to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time (but not less than three
business days) prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects.
(f) Furnish to each Holder whose Registrable Securities are included
in the Registration Statement and its legal counsel identified to the
Company, (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of the
Registration Statement, each preliminary prospectus and prospectus, and
each amendment or supplement thereto, and (ii) such number of copies of a
prospectus, and all amendments and supplements thereto and such other
documents, as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
(g) As promptly as practicable after becoming aware thereof, notify
each Holder of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and use its best efforts
promptly to prepare a supplement or amendment to the Registration Statement
or other appropriate filing with the SEC to correct such untrue statement
or omission, and deliver a number of copies of such supplement or amendment
to each Investor as such Investor may reasonably request.
(h) As promptly as practicable after becoming aware thereof, notify
each Holder who holds Registrable Securities being sold (or, in the event
of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the
earliest possible time.
(i) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Holders in writing of the existence of a Potential Material
Event, the Holders shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Holder receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided,
however, that the Company may not so suspend the right to such holders of
Registrable Securities for more than two 20 day periods in the aggregate
during any 12-month period with at least a ten business day
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<PAGE>
interval between such periods, during the periods the Registration
Statement is required to be in effect.
(j) Use its reasonable efforts to secure NASDAQ/OTC Bulletin Board
authorization and quotation for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities
Dealers, Inc. as such with respect to such Registrable Securities.
(k) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of
the Registration Statement.
(l) Cooperate with the Holders who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the Registration
Statement and enable such certificates for the Registrable Securities to be
in such denominations or amounts as the case may be, as the Holders may
reasonably request, and, within three business days after a Registration
Statement which includes Registrable Securities is ordered effective by the
SEC, the Company shall deliver, and shall cause legal counsel selected by
the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Holders whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and
opinion of such counsel.
(m) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform his or
its obligations under such agreement.
(n) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Holders of the Registrable Securities
pursuant to the Registration Statement.
Section 3.06. Further Information Furnished by Holders. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Article III that the Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities as shall be required to
effect the registration of their Registrable Securities.
Section 3.07. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Article III:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, each of the officers, directors, partners,
members, managers,
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legal counsel and other agents of each Holder, any underwriter (as defined
in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities
Act or Securities Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Securities Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) 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; or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Securities Exchange Act, any state securities law
or any rule or regulation promulgated under the Securities Act, the
Securities Exchange Act or any state securities law;
and the Company will reimburse each such Holder, officer, director,
partner, manager, member or agent, underwriter or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 3.07(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such
loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in strict
conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such person are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify
and hold harmless the Company, each of its directors and officers, each
legal counsel and independent accountant of the Company, each person, if
any, who controls the Company within the meaning of the Securities Act,
each underwriter (within the meaning of the Securities Act) of the
Company's securities covered by such a registration statement, any person
who controls such underwriter, and any other Holder selling securities in
such
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<PAGE>
registration statement and each of its directors, officers, partners or
agents or any person who controls such Holder, against any losses, claims,
damages, or liabilities (joint or several) to which the Company or any such
underwriter, other Holder director, officer, partner or agent or
controlling person may become subject under the Securities Act, the
Securities Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
strict conformity with written information furnished by such Holder
expressly for use in connection with such registration, and each such
Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such underwriter, other Holder officer, director,
partner or agent or controlling person in connection with investigating or
defending any such loss, claim damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 3.07(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Holder which consent shall not be unreasonably withheld, and
provided, further, that the liability of any Holder for indemnification
pursuant to this Section 3.07(b) shall not exceed the net cash proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
3.07 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
3.07, notify the indemnifying party in writing of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the indemnifying party
would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such
counsel in such proceeding. The failure of any indemnified party to notify
an indemnifying party within a reasonable time of the commencement of any
such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of liability to the indemnified party under
this Section 3.7 only to the extent that such failure to give notice shall
materially prejudice the indemnifying party in the defense of any such
claim or any such litigation, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this Section 3.07.
(d) Notwithstanding the conditions provided in this Article III, the
Holders shall not be required to enter into an underwriting agreement that
contains
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<PAGE>
indemnification and contribution provisions which, in the sole discretion
of the Holder, materially differ from those contained in this Section 3.07.
Section 3.08. Rule 144 Reporting. With a view to making available to the
Holders the benefits of Rule 144 ("Rule 144") promulgated under the Securities
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144;
(b) use its best efforts to take such action, including the voluntary
registration of its Common Stock under Section 12 of the Securities
Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for
the sale of their Registrable Securities;
(c) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities
Act and the Securities Exchange Act (at any time after it has become
subject to such reporting requirements); and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, upon request, (i) a written statement by the Company that it
has complied with the reporting requirements of Rule 144 (at any time after
90 days after the effective date of the first registration statement filed
by the Company), the Securities Act and the Securities Exchange Act (at any
time after it has become subject to such reporting requirements), or that
it qualifies as a registrant whose securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation of
the SEC which permits the selling of any such securities without
registration or pursuant to such form.
Section 3.09. Transfer of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Article III may be
assigned by a Holder to a transferee or assignee of such Holder's Registrable
Securities, provided that the Company is, prior to such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
provided, however, that the transferee or assignee becomes a party to this
Agreement.
Section 3.10. Subsequent Registration Rights. From and after the date of
this Agreement, the Company may not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or
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<PAGE>
prospective holder of any securities of the Company which provides such holder
or prospective holder of securities of the Company comparable information and
registration rights granted to the Holders hereby.
Section 3.11. "Market Stand-off" Agreement. Each Holder hereby agrees that
it will not, to the extent requested by the Company and an underwriter of Common
Stock (or other securities) of the Company sell or otherwise transfer or dispose
of any Registrable Securities, except Common Stock included in such
registration, during the 90 day period following the effective date of a
registration statement of the Company filed under the Securities Act; provided,
however, that all other Persons with registration rights (whether or not
pursuant to this Agreement) and all officers, directors and holders of more than
5% of the then outstanding voting capital stock of the Company enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such 90-day period.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. All notices, requests, demands and other
communications to any party or given under this Agreement (collectively,
"Notices") will be in writing and delivered personally, by overnight courier or
by registered mail to the parties at the address for such party set forth on the
signature pages hereto or sent by telecopier, with confirmation received, to the
telecopy number specified for such party on the signature pages hereto (or at
such other address or telecopy number as will be specified by a party by like
notice given at least five calendar days prior thereto). All Notices will be
deemed delivered when actually received.
Section 4.02. Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, and by different parties hereto in separate
counterparts, each of which when executed will be deemed an original, but all of
which taken together will constitute one and the same instrument.
Section 4.03. Amendment of Agreement. This Agreement may not be amended
except by an instrument in writing signed by (a) the Company, (b) Preferred
Holders holding at least 50% of the outstanding Preferred Shares and (c) Warrant
Holders holding at least 50% of the outstanding Warrants.
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<PAGE>
Section 4.04. Successors and Assigns. This Agreement will be binding upon
and inures to the benefit of and is enforceable by the respective successors and
permitted assigns of the parties hereto.
Section 4.05. No Waiver; Remedies. No failure or delay by any party in
exercising any right, power or privilege under this Agreement will operate as a
waiver of the right, power or privilege. A single or partial exercise of any
right, power or privilege will not preclude any other or further exercise of the
right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement will be cumulative
and not exclusive of any rights or remedies provided by law.
Section 4.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
Section 4.07. Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the state of New York applicable to
contracts executed in and to be performed entirely within that state.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PICK COMMUNICATIONS CORP.
Address for Notices:
155 Route 46 West
Wayne, New Jersey 07470
Attention: Thomas M. Malone By: /s/ Thomas M. Malone
Facsimile No.: 973-812-4181 -------------------------------
Name: Thomas M. Malone
Title: Chief Executive Officer
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company, not in
its individual capacity but solely
as Owner Trustee
Address for Notices:
State Street Bank and Trust Company
2 International Place - 5th Floor
By:
Boston, Massachusetts 02110 -------------------------------
Attn: Joseph Tremonte, Name:
Corporate Trust Division Title:
Telephone: (617) 664-5276
Fax: (617) 664-5291
and
Attention: Ralph Creasia, Corporate Trust Division
Telephone: (617) 664-5634
Fax: (617) 664-5291
AND
Tri-Links Investment Trust
2 World Financial Center
17th Floor
New York, New York 10281
Attention: Doug Dragotti
Telephone: (212) 667-1964
Fax: (212) 667-1708
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Page 84 of 85 Pages
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
PICK COMMUNICATIONS CORP.
Address for Notices:
155 Route 46 West
Wayne, New Jersey 07470
Attention: Thomas M. Malone By:
Facsimile No.: 973-812-4181 -------------------------------
Name:
Title:
TRI-LINKS INVESTMENT TRUST
By: Wilmington Trust Company, not in
its individual capacity but solely
as Owner Trustee
Address for Notices:
- ------------------------------
- ------------------------------
Attention: By: /s/ David A. Vanaskey
-------------------- -------------------------------
Facsimile No.: Name: David A. Vanaskey
---------------- Title: Assistant Vice President
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Page 85 of 85 Pages
