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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 19, 1998
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IAT MULTIMEDIA, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-22101 13-3920210
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(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
Geschaftshaus Wasserschloss,
Aarestrasse 17, Vogelsang-Turgi, Switzerland CH-5300
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-41-56-223-5022
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Private Placement
The Company entered into a securities purchase agreement (the
"Purchase Agreement"), dated as of June 19, 1998, with two purchasers (the
"Investors") and consummated the first transaction contemplated thereby
("Tranche A") in a private placement of its securities pursuant to Regulation
D. Tranche A consisted of the issuance of 198,255 shares of its common stock
and $3 million aggregate principal amount of the Company's 5% Convertible
Debentures due 2001 ("Debentures") in exchange for $5 million in cash. In
addition, the Company issued five-year warrants to purchase 158,829 shares of
common stock at a price equal to $13.25 per share, 120% of the Average Price
(as defined in the Debentures; the "Warrants") to the Investors and the
transaction's placement agent. The Company has undertaken to register with the
Securities and Exchange Commission (the "SEC") the shares of common stock
issued and subsequently issuable upon conversion of the Debentures issued in
Tranche A within 75 days of their issuance.
The Debentures are immediately convertible into shares of
Common Stock at the option of either the Company (subject to certain
limitations) or the Investors. Resales of shares of common stock issued upon
conversions at the option of the Investors are prohibited for a period of nine
months from the date of issuance; thereafter, sales by the Investors are
subject to certain volume limitations. Any portion of the Debentures remaining
unconverted on the second anniversary of the effectiveness of the registration
statement for the underlying shares shall convert automatically. The number of
shares of Common Stock issuable upon conversion of the Debentures is the lesser
of (i) 120% of the average of the closing bid prices from the five trading
days immediately preceeding the Original Issue Date (as defined) and (ii) 87%
of the average of the five lowest closing bid prices during the 15 Trading Days
immediately preceding the conversion date. The conversion price on the Tranche
A Closing Date (as defined in the Purchase Agreement) would have been $8.265
per share. The terms and conditions with respect to conversion of Debentures
and the number of shares of Common Stock issuable thereunder are set forth in
the Purchase Agreement and the Debentures which are incorporated herein by
reference.
The Purchase Agreement also provides that, among other things,
upon or simultaneously with the consummation of an acquisition which had
positive EBITDA in its last fiscal quarter and revenues of at least DM 100
million in its most recent fiscal year, the Investors wil purchase up to $12
million aggregate principal amount of additional Debentures ("Tranche B").
Additional Warrants to purchase 141,171 shares of common stock are also
issuable in Tranche B. The amount of Debentures issuable in Tranche B is
limited to such amount, assuming the conversion of the full principal amount of
such Debentures occurs on the Original Issue Date thereof and the payment of
interest on account of such principal amount is made for the full term in
shares of Common Stock, result in the issuance of a number of underlying shares
which, when added to the number of underlying shares previously issued in
respect of conversions of Debentures and as payment of interest theron and as
are then issuable upon conversion in full of the unconverted principal amount
of all previously issued Debentures and as payment of interest thereon in
shares of Common Stock, as would equal 70% of the otherwise issuable amount.
The Company is also obligated to register the shares of
Common Stock issuable upon exercise of the Warrants and upon conversion of the
Debentures in Tranche B with the SEC and maintain such registration for three
years or until the Investors have sold all such Common Stock. The complete
terms and conditions relating to all such registration requirements are set
forth in the Registration Rights Agreement which is incorporated herein.
In compliance with NASDAQ rules, at no time may the Investors
convert Debentures into such number of shares of Common Stock as would exceed
19.99% of the outstanding Common Stock on the date of the closing of Tranche A
unless the stockholders of the IAT approved such transaction. The Company will
pay an amount in cash to the Investors for any conversions prohibited by such
restriction 22 months after the effectiveness of the Registration Statement.
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New Directors
On June 24, 1998, the Company announced the appointment of
two new members of the Board of Directors, Robert Weiss and Dr. Erich Weber.
Robert Weiss, age 51, is a European-based PC specialist with 25 years of
experience in the technology and professional computing industry. He is a
senior consultant to various leading PC companies, and publishes on the
industry. Dr. Erich Weber, 56, is an expert in data processing and related
software, as well as co-founder and member of the Board of Directors of a Swiss
EDP-consulting firm. Messrs. Weiss and Weber replace Reiner Hallauer and Arnold
Wasserman who both recently resigned.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Exhibits
10.1 Securities Purchase Agreement, dated as of June 19, 1998, by and among
IAT Multimedia, Inc., JNC Opportunity Fund Ltd. and JNC Strategic
Fund, Ltd.
10.2 Registration Rights Agreement, dated as of June 19, 1998, by and among
IAT Multimedia, Inc., JNC Opportunity Fund Ltd. and JNC Strategic
Fund, Ltd.
10.3 5% Convertible Debenture due 2008, dated as of June 19, 1998, issued
by IAT Multimedia.
10.4 Form of Warrant, attached as exhibit to Securities Purchase Agreement
(exhibit 10.1 hereon)
99.1 Press release issued by IAT Multimedia, Inc., dated June 23, 1998.
99.2 Press release issued by IAT Multimedia, Inc., dated June 24, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereto duly authorized.
IAT MULTIMEDIA, INC.
By: /s/ Klaus Grissemann
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Name: Klaus Grissemann
Title: Chief Financial Officer
Date: June 26, 1998
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SECURITIES PURCHASE AGREEMENT
Among
IAT MULTIMEDIA, INC.,
JNC OPPORTUNITY FUND LTD.
And
JNC STRATEGIC FUND LTD.
Dated as of June 19, 1998
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 19,
1998, among IAT Multimedia, Inc., a Delaware corporation (the "Company"), JNC
Opportunity Fund Ltd., a Cayman Islands corporation ("Opportunity"), and JNC
Strategic Fund Ltd., a Cayman Islands corporation ("Strategic"). Each of
Opportunity and Strategic are sometimes referred to herein as a "Purchaser" and
collectively as the "Purchasers."
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers
severally and not jointly desire to purchase an aggregate of (a) 198,255 shares
(the "Common Shares") of the Company's common stock, $.01 par value per share
(the "Common Stock"),(b) an aggregate principal amount of $3,000,000 of the
Company's Series A 5% Convertible Debentures, due June 19, 2001 (the "Series A
Debentures"), which are convertible into shares of Common Stock, and (c) up to
an aggregate principal amount of $12,000,000 of the Company's Series B 5%
Convertible Debentures, due three years from the Series B Closing (as defined
below) (the "Series B Debentures"). The Series A Debentures and the Series B
Debentures are sometimes collectively referred to in this Agreement as the
"Debentures."
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1
I The Closings.
(a) The Series A Closing. (i) The closing of the purchase and sale of
the Series A Debentures and the Common Shares (the "Series A Closing") shall
take place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP
(the "Escrow Agent"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof or such later date as the parties
shall agree. The date of the Series A Closing is hereinafter referred to as the
"Series A Closing Date."
(ii) Prior to the Series A Closing, the parties shall deliver or
shall cause to be delivered to the Escrow Agent such items as are required to
be delivered by them in accordance with and subject to the terms and conditions
of the Escrow Agreement, dated as of the date hereof, by and among the Company,
the Purchasers and the Escrow Agent, substantially in the form of Exhibit E
(the "Series A Escrow Agreement"), including the following: (A) the Company
shall deliver to (1) the Series A Debentures, registered in the name of
Opportunity, and (2) a Common Stock purchase warrant in the form of Exhibit B,
registered in the name of Opportunity, to purchase an aggregate of 35,300
shares of Common Stock at an exercise price (subject to adjustment as set forth
therein)
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equal to 120% of the Average Price (as defined below) on the Series A Closing
Date (the "Series A Opportunity Warrant"); (3) the Common Shares, registered in
the name of Strategic, (4) a Common Stock purchase warrant in the form of
Exhibit B, registered in the name of Strategic, to purchase an aggregate of
23,529 shares of Common Stock at an exercise price (subject to adjustment as
set forth therein) equal to 120% of the Average Price on the Series A Closing
Date (the "Series A Strategic Warrant" and, together with the Series A
Opportunity Warrant, the "Series A Warrants"), (5) the legal opinion of Baker &
McKenzie, outside counsel to the Company, addressed to each Purchaser,
substantially in the form of Exhibit D, and (6) all other documents,
instruments and writings required to have been delivered at or prior to the
Series A Closing by the Company pursuant to this Agreement, including, without
limitation, executed originals of each of the Series A Escrow Agreement, the
Registration Rights Agreement, dated the date hereof, by and among the Company
and the Purchasers, in the form of Exhibit C (the "Registration Rights
Agreement"), and the Irrevocable Transfer Agent Instructions, dated the Series
A Closing date, in the form of Exhibit E, delivered to and acknowledged by the
Company's transfer agent (the "Transfer Agent Instructions"); (B) Opportunity
shall deliver (1) $3,000,000 in United States dollars in immediately available
funds by wire transfer to the account designated in the Series A Escrow
Agreement, and (2) all documents, instruments and writings required to have
been delivered by Opportunity at or prior to the Series A Closing pursuant to
this Agreement, including without limitation, executed originals of the Series
A Escrow Agreement and the Registration Rights Agreement; and (C) Strategic
shall deliver (1) $2,000,000 in United States dollars in immediately available
funds by wire transfer to the account designated in the Series A Escrow
Agreement and (2) all documents, instruments and writings required to have been
delivered by Strategic at or prior to the Series A Closing pursuant to this
Agreement, including without limitation, executed originals of the Series A
Escrow Agreement and the Registration Rights Agreement.
(b) The Series B Closing. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall have the right to deliver a written
notice to the Purchasers (a "Subsequent Financing Notice") requiring the
Purchasers to purchase, severally and not jointly, (subject to adjustment as
provided herein) an aggregate of no less than $7,500,000 and no more than
$12,000,000 principal amount of Series B Debentures. A Subsequent Financing
Notice may be delivered no later than 90 days after the Series A Closing Date.
The closing of the purchase and sale of the Series B Debentures (the "Series B
Closing") shall take place at the offices of the Escrow Agent on the date
indicated in the Series B Subsequent Financing Notice (which may not be prior
to the 3rd Trading Day or subsequent to the 5th Trading Day after receipt by
the Purchasers of the Subsequent Financing Notice, or as otherwise agreed to by
the parties); provided that in no case shall the Series B Closing take place
unless and until the conditions listed in Section 4.1 have been satisfied or
waived by the appropriate party. The date of the Series B Closing is
hereinafter referred to as the "Series B Closing Date."
(ii) Prior to the Series B Closing, the parties shall deliver or
shall cause to be delivered to the Escrow Agent such items as are required to
be delivered by them in accordance with and subject to the terms and conditions
of an Escrow Agreement, in the form of Exhibit E, to be executed by and among
the Company, each Purchaser who is acquiring Series B Debentures and the Escrow
Agent prior to the Series B Closing Date (the "Series B Escrow Agreement" and,
together
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with the Series A Escrow Agreement, the "Escrow Agreements"), including the
following: (A) the Company shall deliver (1) Series B Debentures, registered in
the name of each Purchaser acquiring Series B Debentures, representing the
principal amount of the Series B Debentures to be issued and sold at the Series
B Closing to such Purchaser (which, in the aggregate shall, subject to the
satisfaction or waiver of the conditions set forth in this Agreement and
subject to adjustment as provided herein, equal the principal amount of Series
B Debentures set forth in the Series B Subsequent Financing Notice), (2) a
Common Stock purchase warrant in the form of Exhibit B, registered in the name
of each Purchaser acquiring Series B Debentures, to purchase an aggregate
number of shares of Common Stock as equals each Purchaser's pro rata portion of
the Series B Warrants (as defined below in this paragraph), determined by
reference to the percentage of the principal amount of Series B Debentures to
be acquired by such Purchaser, at an exercise price (subject to adjustment as
set forth therein) equal to 120% of the Average Price on the Series B Closing
Date, and (3) all documents, instruments and writings required to have been
delivered by the Company at or prior to the Series B Closing pursuant to this
Agreement, including without limitation, those described in Section 4.1; and
(B) each Purchaser acquiring Series B Debentures and Series B Warrants shall
deliver (1) the immediately available funds, in United States dollars in
immediately available funds by wire transfer to an account designated in the
Series B Escrow Agreement, an amount equal to the principal amount of Series B
Debentures to be acquired by it at the Series B Closing and (2) all documents,
instruments and writings required to have been delivered by such Purchaser at
or prior to the Series B Closing pursuant to this Agreement, including without
limitation, executed originals of the Series B Escrow Agreement. Subject to the
terms and conditions set forth herein, each Purchaser shall purchase at the
Series B Closing such percentage of the aggregate principal amount of Series B
Debentures to be issued and sold thereat as determined by Encore Capital
Management, L.L.C. ("Encore"). The Common Stock purchase warrants to be issued
and sold at the Series B Closing (the "Series B Warrants") shall entitle the
holders thereof to acquire an aggregate of 141,171 shares of Common Stock.
1.1 Form of Debentures. The Debentures shall be in the form of Exhibit A.
1.2 Certain Defined Terms. For purposes of this Agreement, "Original Issue
Date," "Trading Day," "Per Share Market Value" and "Average Price" shall have
the meanings set forth in Exhibit A. "Business Day" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other governmental action to close. "Warrants" shall mean,
collectively, the Series A Warrants and the Series B Warrants.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Purchasers:
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(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
The Company has no subsidiaries other than as set forth in Schedule 2.1(a)
(collectively the "Subsidiaries"). Each of the Subsidiaries is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
full power and authority (corporate and otherwise) to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of the Transaction Documents (as defined below) in any material
respect, (y) have or result in a material adverse effect on the results of
operations, assets, prospects, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of this Agreement, the Debentures, the Warrants, the Escrow Agreements or the
Registration Rights Agreement (collectively, the "Transaction Documents") (any
of (x), (y) or (z), being a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents, and otherwise to carry out
its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, by-laws or other charter documents.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company is set forth in Schedule 2.1(c). No shares of Common Stock
are entitled to preemptive or similar rights, nor is any holder of the Common
Stock entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any of the Transaction Documents.
Except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Debentures and the Warrants, securities, rights or obligations convertible into
or exchangeable for, or giving any person any right to subscribe for or acquire
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Documents (as
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defined below) or Schedule 2.1(c), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the
right to acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of 5% of the Common Stock. A "Person" means
an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
(d) Issuance of the Debentures, Common Shares and the Warrants. The
Debentures, the Common Shares and the Warrants are duly authorized, and, when
issued and paid for in accordance with the terms hereof, shall have been
validly issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind (collectively, "Liens").
The Company has on the date hereof and at all times while the Debentures and
any Warrants are outstanding will maintain an adequate reserve of duly
authorized shares of Common Stock, to enable it to perform its conversion,
exercise and other obligations under this Agreement, the Warrants and the
Debentures, and in no circumstances shall such reserved and available shares of
Common Stock be less than the sum of (i) (subject to the operation of the
conversion limitation set forth in Section 4(a)(iv)(C) of the Debentures) 130%
of the maximum number of shares of Common Stock which would be issuable upon
conversion in full of the Debentures issued pursuant to the terms hereof
assuming such conversion were effected on the Original Issue Date for such
Debentures, (ii) the number of shares of Common Stock issuable upon exercise in
full of the Warrants, and (iii) the number of shares Common Stock which would
be issuable upon payment of interest on the Debentures, assuming each Debenture
is outstanding for the full term stated therein and all interest is paid in
shares of Common Stock. All such authorized shares of Common Stock shall be
duly reserved for such issuance to the holders of such Debentures and Warrants.
The shares of Common Stock issuable upon conversion of the Debentures, as
payment of interest thereon and upon exercise of the Warrants are collectively
referred to herein as the "Underlying Shares." The Debentures, Warrants, Common
Shares and Underlying Shares are, collectively, the "Securities". When issued
in accordance with the Debentures, and upon exercise of the Warrants, the
Underlying Shares shall have been duly authorized, validly issued, fully paid
and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii) subject to
obtaining the Required Approvals (as defined below), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Company debt or otherwise) to which the Company is a
party or by which any property or asset of the Company is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including Federal and state securities laws
and regulations), or by which any material property or asset of the Company is
bound or affected, except in the case of each of clauses (ii) and (iii), such
conflicts, defaults, terminations, amendments,
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accelerations, cancellations and violations as could not, individually or in
the aggregate, have or result in a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental authority, except for violations which, individually or in
the aggregate, could not have or result in a Material Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other Federal,
state, local, foreign or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of a registration statement
with the Securities and Exchange Commission (the "Commission") meeting the
requirements set forth in the Registration Rights Agreement covering the resale
of the Underlying Shares by the Purchasers (the "Underlying Securities
Registration Statement"), (ii) the filings required by Section 3.12 herein,
(iii) the application(s) to the Nasdaq National Market (the "NASDAQ") for the
listing of the Underlying Shares with the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed), (iv)
applicable Blue Sky filings and (v) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration could not have or result in, individually or
in the aggregate, a Material Adverse Effect (the "Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
SEC Documents, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or
in the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except as could not individually or in the
aggregate, have or result in, a Material Adverse Effect.
(i) Schedules. The Schedules to this Agreement furnished by or on
behalf of the Company do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
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(j) Private Offering. Neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Assuming the
accuracy of the representations and warranties of the Purchasers set forth in
Sections 2.2(b)-(g), the offer, issue and sale of the Securities to the
Purchasers is exempt from the registration requirements of the Securities Act.
(k) SEC Documents; Financial Statements; No Adverse Change. The
Company has filed all reports required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the three years
preceding the date hereof (or such shorter period as the Company was required
by law to file such material) (the foregoing materials being collectively
referred to herein as the "SEC Documents" and, together with the Schedules to
this Agreement the "Disclosure Materials") on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC Documents
prior to the expiration of any such extension. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All material agreements to which the Company is a party or to
which the property or assets of the Company are subject have been filed as
exhibits to the SEC Documents as required. The financial statements of the
Company included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States
generally accepted accounting ("GAAP") principles applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. Since December
31, 1997, except as specifically disclosed in the SEC Documents, (a) there has
been no event, occurrence or development that has had or that could have or
result in a Material Adverse Effect, (b) the Company has not incurred any
liabilities (contingent or otherwise) other than (x) liabilities incurred in
the ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) except as set forth in Schedule 2.1(k), the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares
of its capital stock. The Company last filed audited financial statements with
the Commission on April 19, 1998, and has not received any comments from the
Commission in respect thereof.
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(l) Investment Company. The Company is not, and is not controlled by
or under common control with an affiliate (an "Affiliate") of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(m) Certain Fees. Except for certain fees payable by the Company to
Century City Securities, Inc. ("Century"), no fees or commissions will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, or bank with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates (as such term
is defined under Rule 405 promulgated under the Securities Act), from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(n) Solicitation Materials. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the Securities,
other than the Disclosure Materials and any amendments and supplements thereto,
or (ii) solicited any offer to buy or sell the Securities by means of any form
of general solicitation or advertising.
(o) Form S-3 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(p) Seniority. Except as set forth in Schedule 2.1(p), no indebtedness
of the Company is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation, dissolution or otherwise.
(q) Exclusivity. The Company shall not issue and sell the Debentures
to any Person other than the Purchasers other than with the specific prior
written consent of Encore.
(r) Listing and Maintenance Requirements Compliance. Except as
specifically set forth in Schedule 2.1(r), the Company has not since March 26,
1997 received notice (written or oral) from the NASDAQ or any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not
in compliance with the listing or maintenance requirements of such exchange or
market. Except as specifically set forth in Schedule 2.1(r), the Company is in
compliance with all such maintenance requirements.
(s) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the
"Intellectual Property Rights") which are necessary for use in connection with
its business, as currently conducted and as described in the SEC Documents, and
which the failure to so have would have a Material Adverse Effect. To the best
knowledge of the
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Company, there is no existing infringement by another Person of any of the
Intellectual Property Rights which are necessary for use in connection with the
Company's business.
(t) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(u) Registration Rights; Rights of Participation. Except as set forth
on Schedule 6(b) to the Registration Rights Agreement, (i) the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied and
(ii) no Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(v) Disclosure. The Company confirms that it has not provided the
Purchasers or their agents or counsel with any information that constitutes or
might constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. None of the Disclosure
Materials or any other information provided to the Purchaser by or on behalf of
the Company in connection with the transactions contemplated herein contain any
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, severally and not jointly, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Purchaser is an entity organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and to
carry out its obligations thereunder. The acquisition of the Securities to be
acquired hereunder by such Purchaser has been duly authorized by all necessary
action on the part of such Purchaser. Each Transaction Document, when executed
and delivered in accordance with the terms and conditions hereof, shall have
been duly executed and delivered by such Purchaser and shall constitute the
valid and legally binding obligation of such Purchaser, enforceable against it
in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities to
be acquired hereunder by such Purchaser for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof or interest therein, without prejudice, however,
to such Purchaser's right, subject to the provisions of this Agreement and the
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Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act and in compliance with applicable state securities
laws or under an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser was offered the
Securities to be acquired hereunder by such Purchaser, it was, at the date
hereof, it is, and at the each of the Series A Closing Date and Series B
Closing Date, it will be, an "accredited investor" as defined in Rule 501(a)
under the Securities Act.
(d) Experience of Purchaser. Such Purchaser either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such Purchaser
acknowledges that the Securities are speculative investments and involve a high
degree of risk. Such Purchaser can bear the loss of its entire investment in
the Securities.
(f) Access to Information. Such Purchaser acknowledges receipt of the
Disclosure Materials and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities, and the merits and risks of
investing in the Securities, (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment,
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser's right
to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company's representations and warranties contained in the Transaction
Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities to be acquired by it hereunder as a result of or subsequent to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar.
(h) Certain Trading Activities. On the date of this Agreement such
Purchaser does not have a short position on any shares of Common Stock, and
from the date of this Agreement to the Series A Closing Date such Purchaser
will not establish a short position in the Common Stock.
(i) Reliance. Such Purchaser understands and acknowledges that (i) the
Securities to be acquired by it hereunder are being offered and sold to it
without registration under
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the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed pursuant to
an effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from or in a transaction not subject to the
registration requirements of the Securities Act. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities (x) between Purchasers and
(y) by a Purchaser to an Affiliate thereof or to an investment fund under
common management with such Purchaser, or any transfer among any such
Affiliates or funds, provided that, in each case, transferee certifies to the
Company that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes. Any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
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Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Debentures, the payment of interest thereon,
exercise of Warrants or other issuances of Underlying Shares as contemplated
hereby or by the Debentures occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or in the event
there is not an effective Underlying Securities Registration Statement at such
time, if in the opinion of counsel to the Company such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the Transfer Agent Instructions
attached hereto as Exhibit E to the Company's transfer agent on the day that
the Underlying Securities Registration Statement is declared effective by the
Commission. The Company agrees that it will provide the Purchaser, upon
request, with a certificate or certificates representing Underlying Shares and
Common Shares (as the case may be), free from such legend at such time as such
legend is no longer required hereunder. The Company may not make any notation
on its records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Common Shares and the issuance of the Underlying Shares upon (i)
conversion of the Debentures and payment of interest thereon in accordance with
the terms of the Debentures and (ii) exercise of the Warrants may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon (x) conversion of the
Debentures and payment of interest thereon in accordance with the terms of the
Debentures, and (y) exercise of the Warrants is unconditional and absolute,
subject to the limitations set forth in the Debentures or pursuant to the
Warrants, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
Act, it will prepare and furnish to each Purchaser and make publicly available
in accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required
thereby, in the time period that such filings would have been required to have
been made under the Exchange Act. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request,
all to the extent required from time to time to enable such Person to sell
Underlying Shares and Common Shares without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 promulgated
under the Securities Act. Upon the request of any such Person, the Company
shall deliver to such Person a written certification of a duly authorized
officer as to whether it has complied with such requirements.
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3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify or exempt the issuance and sale of the Underlying
Shares under the securities or Blue Sky laws of such jurisdictions as the
Purchasers may request and shall continue such qualification or exemption at
all times until each Purchaser notifies the Company in writing that it no
longer owns Securities; provided, however, that neither the Company nor its
Subsidiaries shall be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified or to take any action that
would subject the Company to general service of process or material tax in any
such jurisdiction where it is not then so subject.
3.5 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate shall, sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers.
3.6 Increase in Authorized Shares. At such times as the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from (a) converting, subject to the operation of the
conversion limitation set forth in Section 4(a)(iv)(C) of the Debentures, 130%
of the full outstanding principal amount of Debentures (and paying any earned
and unpaid interest in respect thereof in shares of Common Stock) that remain
unconverted at such date or (b) honoring the exercise in full of the Warrants
due to the unavailability of a sufficient number of shares of authorized but
unissued or reserved Common Stock, the Board of Directors of the Company shall
promptly (and in any case, within 30 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting
authorization to amend the Company's Certificate of Incorporation to increase
the number of shares of Common Stock which the Company is authorized to issue
to at least such number of shares as reasonably requested by the Purchaser in
order to provide for such number of authorized and unissued shares of Common
Stock to enable the Company to comply with its conversion, exercise and
reservation of shares obligations as set forth in this Agreement, the
Debentures and the Warrants (the sum of (x) the number of shares of Common
Stock then authorized, (y) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants (including the Warrants) and convertible
instruments, and (z) (subject to the operation of the conversion limitation set
forth in Section 4(a)(iv)(C) of the Debentures) 130% of the number of
Underlying Shares as are then issuable upon a conversion of the full
outstanding principal amount of Debentures then outstanding and as payment of
interest thereon, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such
increase, (b) recommend to and otherwise use its best efforts to promptly and
duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders no later than the 60th day after delivery
of the proxy materials relating to such meeting) and (c) within 5 business Days
of obtaining such stockholder authorization, file an appropriate amendment to
the Company's Certificate of Incorporation to evidence such increase.
3.7 Listing and Reservation of Underlying Shares. (a) The Company shall (i)
not later than the fifth Business Day following each Closing Date hereunder
prepare and file with the
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NASDAQ (or such other national securities exchange or market or trading or
quotation facility on which the Common Stock is then listed) an additional
shares listing application covering a number of shares of Common Stock which is
at least equal to the number of shares required to be reserved pursuant to
Section 2.1(d) with respect to the Warrants, Common Shares and principal amount
of Debentures to be issued and sold at such Closing, (ii) take all steps
necessary to cause such shares to be approved for listing in the NASDAQ (or
such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares as are issuable upon conversion in full of the then
outstanding principal amount of Debentures, as payment or interest thereon, and
upon exercise of the then unexercised portion of the Warrants exceeds 85% of
the number of Underlying Shares previously listed on account thereof with
NASDAQ (or such other required exchanges), the Company shall take the necessary
actions to immediately list a number of Underlying Shares as equals 130% of the
number of Underlying Shares then issuable upon conversion of the Debentures and
as payment of interest thereon and exercise of Warrants (subject to the
operation of the conversion limitations set forth in Section 4(a)(iv)(C) of the
Debentures).
(b) The Company shall maintain a reserve of Common Stock for issuance
upon conversion of the Debentures and for payment of interest thereupon in
shares of Common Stock pursuant to the terms of the Debentures and upon
exercise of the Warrants in accordance with their terms, in such amount as may
be required to fulfill obligations in full under the Transaction Documents,
which reserve shall include a number of shares of Common Stock equal to
(subject to the operation of Section 4(a)(iv)(C) of the Debentures) no less
than 130% the number of shares of Common Stock as would be issuable upon
conversion in full of the Debentures and or payment of interest thereon in
shares of Common Stock.
3.8 Conversion Procedures. The Transfer Agent Instructions, Conversion
Notices (as defined in Exhibit A) and Notice of Exercise set forth the totality
of the procedures with respect to the conversion of the Debentures and exercise
of Warrants, including the form of legal opinion, if necessary, that shall be
rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchasers to convert
Debentures and exercise Warrants as contemplated in the Debentures and
Warrants.
3.9 Notice of Breaches. (a) Each of the Company and the Purchasers shall
give prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in any Transaction Document, as well as
any events or occurrences arising after the date hereof which would reasonably
be likely to cause any representation or warranty or other agreement of such
party, as the case may be, contained therein to be incorrect or breached as of
any Closing Date. However, no disclosure by either party pursuant to this
Section shall be deemed to cure any breach of any representation, warranty or
other agreement contained in any Transaction Document.
(b) Notwithstanding the generality of Section 3.9(a), the Company
shall promptly notify the Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated by any Transaction
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Document violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall promptly furnish by
facsimile to the holders of the Securities a copy of any written statement in
support of or relating to such claim or notice.
3.10 Conversion and Exercise Obligations of the Company. The Company shall
honor conversions of the Debentures and exercises of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms and
conditions and time periods set forth in the Debentures and Warrants.
3.11 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of Encore,
offer, sell, grant any option to purchase (other than the warrants to be issued
to Century in connection with the transactions contemplated by this Agreement),
or otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition) any of its or its Affiliates' equity or
equity-equivalent securities in a transaction intended to be exempt or not
subject to registration under the Securities Act (a "Subsequent Placement") for
a period of 180 days after each Closing Date, except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan heretofore
or hereinafter duly adopted by the Company, (ii) shares of Common Stock issued
upon exercise of any currently outstanding warrants and upon conversion of any
currently outstanding convertible preferred stock in each case disclosed in
Schedule 2.1(c), (iii) shares of equity or equity-equivalent securities issued
or issuable as part of a primary underwritten offering by the Company, (iv)
shares of Common Stock issued upon conversion of Debentures, as payment of
interest thereon, or upon exercise of the Warrants in accordance with their
respective terms, and (v) equity or equity-equivalent securities issued by the
Company in connection with business combinations with non-affiliated third
parties or acquisitions of non-affiliated third parties, unless (A) the Company
delivers to Encore a written notice (the "Subsequent Placement Notice") of its
intention to effect such Subsequent Placement, which Subsequent Placement
Notice shall describe in reasonable detail the proposed terms of such
Subsequent Placement, the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent Placement shall be affected, and attached
to which shall be a term sheet or similar document relating thereto, and (B)
Encore shall not have notified the Company by 5:00 p.m. (New York City time) on
the tenth (10th) Trading Day after its receipt of the Subsequent Placement
Notice of its willingness to cause the Purchasers to provide (or to cause its
sole designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on substantially the terms set forth in
the Subsequent Placement Notice. If Encore shall fail to notify the Company of
its intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; provided, that the Company shall provide Encore with a second
Subsequent Placement Notice, and Encore shall again have the right of first
refusal set forth above in this paragraph (a), if the Subsequent Placement
subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within thirty (30) Trading Days after the date of the initial Subsequent
Placement Notice with the Person (or an Affiliate of such Person) identified in
the Subsequent Placement Notice.
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(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered (and as set forth in Schedule 6(b) to the Registration Rights
Agreement) in accordance with the Registration Rights Agreement, and (z) Common
Stock to be registered for resale in connection with financings permitted
pursuant to paragraph (a)(i) through (v) of paragraph (a) of this Section, the
Company shall not, without the prior written consent of the Purchasers (i)
issue or sell any of its or any of its Affiliates' equity or equity-equivalent
securities pursuant to Regulation S promulgated under the Securities Act, or
(ii) register for resale any securities of the Company for, in either case of
(i) and (ii) above, a period of not less than 90 Trading Days after the date
that the Underlying Securities Registration Statement is declared effective by
the Commission. Any days that a Purchasers is not permitted to sell Underlying
Shares under the Underlying Securities Registration Statement shall be added to
such 90 Trading Day period for the purposes of (i) and (ii) above.
3.12 Certain Securities Laws Disclosures; Publicity. The Company shall (i)
issue on each Closing Date a press release reasonably acceptable to the
Purchasers disclosing the transactions contemplated hereby, (ii) file within
ten (10) Business Days after each Closing Date with the Commission a Report on
Form 8-K disclosing the transactions contemplated hereby, and (iii) timely file
with the Commission a Form D promulgated under the Securities Act as required
under Regulation D promulgated under the Securities Act and provide a copy
thereof to the Purchaser promptly after the filing thereof. The Company shall,
no less than two (2) Business Days prior to the filing of any disclosure
required by clauses (ii) and (iii) above, provide a copy thereof to Encore.
Except as required by law and the rules and regulations of the Commission and
the Nasdaq Stock Market, Inc., no such filing or disclosure may be made that
mentions the Purchasers or Encore by name with the prior written consent of
Encore.
3.13 Use of Proceeds. The Company shall use all of the proceeds from the
sale of the Debentures and Common Shares for working capital purposes and to
fund acquisitions and not for the satisfaction of any portion of Company debt
or to redeem Company equity or equity-equivalent securities. Pending
application of the proceeds of this placement in the manner permitted hereby,
the Company will invest such proceeds in interest bearing accounts and/or
short-term, investment grade interest bearing securities.
3.14 Transfer of Intellectual Property Rights. So long as either Purchaser
owns Debentures and except in connection with the sale of all or substantially
all of the assets of the Company, the Company shall not transfer, sell or
otherwise dispose of any Intellectual Property Rights, or allow any of the
Intellectual Property Rights to become subject to any Liens, or fail to renew
such Intellectual Property Rights (if renewable and it would otherwise lapse if
not renewed), without the prior written consent of the Purchasers.
3.15 Reimbursement. In the event that a Purchaser, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated pursuant to the Transaction
Documents, the Company will reimburse such Purchaser for its reasonable legal
and
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other expenses (including the cost of any investigation and preparation)
incurred in connection therewith. In addition, other than with respect to any
matter in which such Purchaser is a named party, the Company will pay such
Purchaser the charges, as reasonably determined by each Purchaser, for the time
of any officers or employees of such Purchaser devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearings, trials,
and other proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliate of the Purchasers and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any person asserting claims on behalf of
or in right of the Company in connection with or as a result of the
consummation of the Transaction Documents except to the extent that any losses,
claims, damages, liabilities or expenses incurred by the Company result from
the gross negligence or willful misconduct of such Purchaser or entity in
connection with the transactions contemplated by this Agreement. The Purchasers
shall not, without the prior written consent of the Company, effect any
settlement of any action in respect of which the Company is a party.
3.16 Cut-Back Applicable to a Subsequent Financing Notice. Notwithstanding
anything herein to the contrary, the maximum principal amount of Debentures
that the Company may require the Purchasers to purchase at the Series B Closing
shall be limited to such principal amount as would, assuming the conversion of
the full principal amount of such Debentures occurs on the Original Issue Date
thereof and the payment of interest on account of such principal amount is made
for the full term in shares Common Stock, result in the issuance of a number of
Underlying Shares which, when added to the number of Underlying Shares
previously issued in respect of conversions of Debentures and as payment of
interest thereon and as are then issuable upon conversion in full of the
unconverted principal amount of all previously issued Debentures and as payment
of interest thereon in shares of Common Stock, equals 70% of the Issuable
Maximum (as defined in Exhibit A).
3.17 Transactions in the Common Stock. During the period from the receipt
by each Purchaser of a Subsequent Financing Notice until the earlier of (i)
five (5) Trading Days following such receipt and (ii) the Series B Closing
Date, such Purchaser, for itself and not for any other Purchaser, agrees that
it shall not establish a short position in the Common Stock (but may maintain
any short positions established prior to the beginning of such period).
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ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to Purchase
Series B Debentures and Series B Warrants. The obligation of each Purchaser to
acquire and pay for the Series B Debentures and the Series B Warrants is
subject to the satisfaction or waiver by such Purchaser, at or before the
Series B Closing of each of the following conditions:
(a) Series A Closing. The Series A Closing shall have occurred;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained herein shall be true
and correct as of the date when made and as of the Series B Closing Date as
though made on and as of the Series B Closing Date;
(c) Performance by the Company. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Series B Closing Date;
(d) Underlying Securities Registration Statement. If an Underlying
Securities Registration Statement shall have been declared effective under the
Securities Act by the Commission between the Series A Closing Date and the
Series B Closing, then on the Series B Closing Date such Underlying Securities
Registration Statement shall be effective, not subject to any actual or
threatened stop order and not be subject to any actual or threatened
suspension;
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court of governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by the
Transaction Documents relating to the issuance or conversion of any of the
Securities;
(f) Adverse Changes. Since the Series A Closing there shall not
occurred any event or series of events which have had or could reasonably be
expected to result in a Material Adverse Effect and no material adverse change
in the condition (financial or otherwise) or prospects of the Company shall
have occurred which is not disclosed in the Disclosure Materials;
(g) Litigation. No material litigation shall have been instituted or
threatened against the Company;
(h) Management. In the reasonable judgment of the Purchaser, there
have been no substantial changes in the senior management of the Company;
-18-
<PAGE>
(i) No Suspension from Trading in or Delisting of Common Stock. The
trading in the Common Stock shall not have been suspended or delisted from the
NASDAQ (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company) at any time
since the Series A Closing Date;
(j) Change of Control. No Change of Control in the Company shall have
occurred. "Change of Control" means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 33% of
the voting securities of the Company, (ii) a replacement of more than one-half
of the members of the Company's board of directors which is not approved by
those individuals who are members of the board of directors on the date hereof
in one or a series of related transactions, (iii) the merger of the Company
with or into another entity, consolidation or sale of all or substantially all
of the assets of the Company in one or a series of related transactions or (iv)
the execution by the Company of an agreement to which the Company is a party or
by which it is bound, providing for any of the events set forth above in (i),
(ii) or (iii);
(k) Legal Opinion. The Company shall have delivered to the Escrow
Agent the opinion of the Company's outside counsel, in substantially the form
attached hereto as Exhibit D dated the Series B Closing Date;
(l) Required Approvals. All Required Approvals shall have been
obtained;
(m) Shares of Common Stock. On the Series B Closing Date, the Company
shall have duly reserved the number of Underlying Shares required by this
Agreement to be reserved for issuance upon conversion of Series B Debentures
and as payment of interest thereon;
(n) Delivery of Series B Debentures and Series B Warrants. The Company
shall have delivered to the Escrow Agent the Series B Debentures and Series B
Warrants to be issued and sold at the Series B Closing, registered in the name
of the appropriate Purchasers, each in form satisfactory to the Escrow Agent;
(o) Transfer Agent Instructions. Transfer Agent Instructions, dated
the Series B Closing Date, shall have been delivered to and acknowledged in
writing by the Company's transfer agent; and
(p) Certain Acquisitions. The Company shall have consummated, or shall
simultaneously consummate, an acquisition of a non-Affiliated Person which (i)
had a positive EBITDA in its most recently completed fiscal quarter and (ii)
had revenues equal to or greater than DM 100 million in its most recently
completed fiscal year; and
(q) Officer's Certificate. The Company shall deliver to the Escrow
Agent an Officer's Certificate dated the Series B Closing Date and signed by an
executive officer of the
-19-
<PAGE>
Company confirming the Company's satisfaction of the conditions set forth in
Section 4.1(b) and (c) as of the Series B Closing Date.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. At the Series A Closing, the Company shall pay
$15,000 to the Escrow Agent, in connection with the preparation and negotiation
of the Transaction Documents, and $10,000 to Encore or its designee for due
diligence expenses. Otherwise, each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, except as set forth in
the Registration Rights Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Debentures
pursuant hereto.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Debentures, the Escrow Agreements and the Warrants contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 8:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: c/o Orinda Capital International, Inc.
221 East 61st Street
New York, NY 10021
Facsimile No.: (212) 754-4044
Attn: Jacob Agam
-20-
<PAGE>
With copies to: Baker & McKenzie
805 Third Avenue
New York, NY 10022
Facsimile No.: (212) 759-9133
Attn: Francis Fitzpatrick
If to Opportunity: JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House, 20 Reid Street
Hamilton HM11, Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
If to Strategic: JNC Strategic Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House, 20 Reid Street
Hamilton HM11, Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
With copies to (for Encore Capital Management, L.L.C.
communications to 12007 Sunrise Valley Drive, Suite 460
either Purchaser): Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Managing Member
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
or to such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and the Purchasers; or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
-21-
<PAGE>
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company. This
provision shall not limit the Purchasers' right to transfer Securities or
transfer or assign rights under the Transaction Documents in accordance with
applicable law and the Transaction Documents.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to Encore who is an intended beneficiary
of, and entitled to enforce, Sections 3.11, 3.12, 5.1 and 5.11 is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any Transaction Document), and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive each Closing and the delivery and conversion or
exercise (as the case may be) of the Debentures and Warrants.
5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature page were an original thereof.
-22-
<PAGE>
5.11 Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency
or stock market or trading facility with respect to the transactions
contemplated hereby and no party hereto shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law or by the Commission or the
Nasdaq Stock Market (as the case may be), in which such case the disclosing
party shall provide the other parties with prior notice of such public
statement, filing or other communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of a Purchaser or Encore, or
include the name of a Purchaser or Encore in any filing with the Commission, or
any regulatory agency, trading facility or stock market without the prior
written consent of Encore, except to the extent such disclosure (but not any
disclosure as to the controlling Persons thereof) is required by law or by the
Commission or the Nasdaq Stock Market, Inc., in which case the Company shall
provide the Purchasers and Encore with prior notice of such disclosure. If
there is a dispute as to whether disclosure of controlling persons of the
Purchasers or Encore is required by applicable law, the Commission or the
Nasdaq Stock Market, Inc. (as evidenced either by a letter from a governmental
or regulatory authority of competent jurisdiction or a written rule promulgated
thereunder) the failure to make such disclosure at the request of Purchaser of
Encore, as the case may be, shall not constitute a default under the other
provisions hereof.
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchasers
(severally and not jointly) agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action
for specific performance of any such obligation the defense that a remedy at
law would be adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
------------------------------
Name: Jacob Agam
Title: Chief Executive Officer
JNC OPPORTUNITY FUND LTD.
By: /s/ Thomas H. Davis
------------------------------
Name: Thomas H. Davis
Title: Director
JNC STRATEGIC FUND LTD.
By: /s/ Thomas H. Davis
------------------------------
Name: Thomas H. Davis
Title: Director
<PAGE>
SCHEDULE 2.1(a)
SUBSIDIARIES
Name Place of Incorporation
- ---- ----------------------
IAT AG Switzerland
IAT Deutschland GmbH Germany
Interaktive Medien Systeme
FSE Computer-Handel GmbH & Co. KG Germany
FSE Computer Handel
Verwaltungsgesellschaft GmbH Germany
IAT Communication Systems GmbH Germany
IAT Communication AG Switzerland
<PAGE>
SCHEDULE 2.1(c)
CAPITAL STOCK
Preferred stock, $.01 par value, authorized 500,000 shares, none outstanding
Common stock, $.01 par value, authorized 20,000,000 shares, 9,751,949
(including 50,000 shares of treasury stock and 498,285 escrowed shares).
Options to purchase shares of common stock:
500,000 shares pursuant to 1996 Qualified Stock Option Plan options as
set forth in attachment
Warrants to certain investors to purchase 2,348,485 shares of Common Stock
Warrants to the IPO underwriter to purchase 335,000 shares of Common Stock
Warrants to Century Cities Securities to purchase 100,000 shares of Common
Stock
The warrants and options are subject to anti-dilution provisions.
Except as disclosed in the Company's SEC Documents and filings by investors
pursuant to the Securities Exchange Act of 1934, as amended, the Company does
not know of Persons or groups of related persons who beneficially own (as
determined pursuant to Rule 13d-3 promulgated under the Exchange Act) or has
the right to acquire by agreement with or by obligation binding upon the
Company beneficial ownership of in excess 5% of the Common Stock.
<PAGE>
Stock options in addition to Underwriters' and Investors' Warrants
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Option Description of Vesting
Date of Grant Price $ Period
------------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
R. Hallauer Retainment Agreement 50,000 8/15/97 6. retainment agreement
Retainment Agreement 25,000 8/15/97 6. retainment agreement
------
(Board Resolution 04/21/98) 75,000
A. Wasserman Consulting Agreement 40,000 7/18/97 5. consultant agreement
Consulting Agreement 30,000 7/18/97 5. consultant agreement
Board Resolution 04/21/98 25,000 4/21/98 6. immediate
------
95,000
V. Vogt Spinoff Agreement 16,666 3/24/98 5. the spinoff agreement
16,666 3/24/98 5. the spinoff agreement
16,666 3/24/98 5. the spinoff agreement
Board Resolution 04/21/98 25,000 4/21/98 6. immediate
------
75,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Option Description of Vesting
Date of Grant Price $ Period
------------- ------- -------------------------
<S> <C> <C> <C> <C> <C>
K. Grissemann Board Resolution 04/21/98 50,000 4/21/98 6. immediate (to be defined)
V. Walker Board Resolution 04/21/98 50,000 4/21/98 6. immediate (to be defined)
A. Simmet Board Resolution 04/21/98 25,000 4/21/98 6. immediate (to be defined)
FSE Board Resolution 04/21/98 25,000 4/21/98 6. immediate (to be defined)
employees
Value Retainment Agreement 10,000 2/5/98 average immediate
Management price
& Research, 2/9/98
London 4.25
Value Retainer Agreement 80,000 3/27/98 average the agreement
Management price
& Research, 2/9/98
Luxemburg 4.25
Andreas Beyer Investor Relations 25,000 no formal agreement yet
New Board 20,000 no formal agreement yet
Members ------
TOTAL 530,000
</TABLE>
- 2 -
<PAGE>
SCHEDULE 2.1(k)
PAYMENTS ON CAPITAL STOCK, ETC.
The Company distributed cash or other property to its stockholders or officers
or directors in connection with the Spinoffs and the acquisition of FSE as
described in the SEC Documents. As described in Schedule 2.1(c), the Company
has issued stock options outside of its existing stock option plans.
<PAGE>
SCHEDULE 2.1(p)
SENIOR INDEBTEDNESS
Approximately $2,748,623 in accounts payable and other current liabilities at
March 31, 1998.
Approximately $1,045,704 in indebtedness to stockholders, at June 17, 1998.
Approximately $322,582 in deferred taxes at March 31, 1998.
<PAGE>
SCHEDULE 2.1(r)
COMPLIANCE WITH NASDAQ
After the filing to the Company's annual report on Form 10-K for the year ended
December 31, 1997, the Company received an oral inquiry from the NASDAQ with
respect to the filing certain reports on form 10b-17 with the NASDAQ regarding
certain issuances of stock. Such reports were filed with the NASDAQ on June 17,
1998. Copies of such reports are attached hereto.
While the Company has not received any notice from the NASDAQ, it is currently
late with holding its annual meeting of stockholders. The Company expects to
submit its proxy materials to the SEC within 7 days and to hold its annual
meeting of stockholders as soon thereafter as practicable.
<PAGE>
NASDAQ NATIONAL MARKET NOTIFICATION FORM
FOR LISTING OF ADDITIONAL SHARES
And Notification Pursuant to SEC Rule 10b-17*
*This form is not to be used for notification of a cash dividend/distribution.
For such issuance, please use "The Nasdaq Stock Market(TM) Cash
Dividend/Distribution Form." Please see "Information & Instructions" for
further details.
PART 1: GENERAL CORPORATE INFORMATION
COMPLETE CORPORATE NAME: IAT Multimedia, Inc.
-------------------------------------------------------
CONTACT NAME: Klaus Grissemann
------------------------------------------------------------------
TELEPHONE: (011)(41)(56)223-5022 FACSIMILE: (011)(41)(56)223-5023
---------------------------------------------------------------------
TRANSFER AGENT: American Stock Transfer & Trust Company
----------------------------------------------------------------
TELEPHONE: (212) 936-5100 FACSIMILE: (718) 259-1144
---------------------------------------------------------------------
PART II: SECURITY INFORMATION
NASDAQ(R) ISSUE SYMBOL: IATA CUSIP/CINS NUMBER: 44920210
--------------------------------------------------------
SECURITY CLASS AND DESCRIPTION: Common Stock $0.01 per value
------------------------------------------------
Include per or stated value, warrant expiration date, components of units, face
amount and interest rate on convertible debt, and other relevant information.
TOTAL SHARES OUTSTANDING BEFORE THE PLAN(S)/ISSUANCE(S): 9,600,000
-----------------------
Treasury stock should be excluded in determination of Total Shares Outstanding.
TYPE OF PLAN(S)/ISSUANCE(S): Please check appropriate line(s) and complete
applicable section(s) in Part III. For all plans/issuances, pertinent
supporting documentation is required.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
( ) Public Offering ( ) Underwriter Fees ( ) Preferred Stock Conversion ( ) Employee Stock Purchase Plan
( ) Rights Offering ( ) Private Placement ( ) Warrant Exercise ( ) Employee Savings or 401(k)
( ) Subscription Offering ( ) Acquisition/Merger ( ) Stock Split Plan
( ) Exchange Offering ( ) Placement Fees ( ) Stock Dividend ( ) Amendment to Existing Plan
( ) Regulation S Offering ( ) Recapitalization ( ) Stock Option Plan (X) Professional Services Agreement
(x) Private Offering ( ) Debt Conversion ( ) Dividend Reinvestment ( ) Litigation or Settlement
Plan ( ) Other: Please specify
</TABLE>
MAXIMUM NUMBER OF SHARES TO BE OFFERED PURSUANT TO THE ACTION(S): 5,000 shares
-------------
For each action, identify the source and number of shares. Note: The aggregate
number of shares listed in the categories below should equal the maximum number
of shares to be offered pursuant to the action(s). Please attach a separate
sheet, if necessary.
<TABLE>
<CAPTION>
<S> <C>
Shares offered by Company: 5,000 Shares offered by selling shareholders:
------------------ -------------
Treasury shares: Shares purchased on the open market:
---------------------------- ----------------
Other - Specify source:
----------------------------------------------------------------------------
</TABLE>
DATE OF APPROVAL FOR THE ACTION(S) BY THE BOARD OF DIRECTORS: June 18, 1997
------------------
DATE OF APPROVAL FOR THE ACTION(S) BY SHAREHOLDERS (IF APPLICABLE):
------------
AMOUNT OF FEE PAYMENT ENCLOSED (IF APPLICABLE):$
-------------------------------
Authorization by Company Corporate Officer
SIGNATURE: /s/ Klaus Grissemann DATE: 05/20/98
--------------------------------- ----------------------------
NAME (PRINT): Klaus Grissemann TITLE: Chief Financial Officer
------------------------------ ----------------------------
<PAGE>
NASDAQ NATIONAL MARKET NOTIFICATION FORM
FOR LISTING OF ADDITIONAL SHARES
And Notification Pursuant to SEC Rule 10b-17*
*This form is not to be used for notification of a cash dividend/distribution.
For such issuance, please use "The Nasdaq Stock Market(TM) Cash Dividend/
Distribution Form." Please see "Information & Instructions" for further details.
PART 1: GENERAL CORPORATE INFORMATION
COMPLETE CORPORATE NAME: IAT Multimedia, Inc.
-------------------------------------------------------
CONTACT NAME: Klaus Grissemann
-----------------------------------------------------------------
TELEPHONE: (011)(41)(56)223-5022 FACSIMILE: (011)(41)(56)223-5023
---------------------------------------------------------------------
TRANSFER AGENT: American Stock Transfer & Trust Company
---------------------------------------------------------------
TELEPHONE: (212) 936-5100 FACSIMILE: (718)259-1144
---------------------------------------------------------------------
PART II: SECURITY INFORMATION
NASDAQ(R) ISSUE SYMBOL: IATA CUSIP/CINS NUMBER: 44920210
----------------------- --------------
SECURITY CLASS AND DESCRIPTION: Common Stock $0.01 per value
-----------------------------------------------
Include per or stated value, warrant expiration date, components of units, face
amount and interest rate on convertible debt, and other relevant information.
TOTAL SHARES OUTSTANDING BEFORE THE PLAN(S)/ISSUANCE(S): 9,555,000
----------------------
Treasury stock should be excluded in determination of Total Shares Outstanding.
TYPE OF PLAN(S)/ISSUANCE(S): Please check appropriate line(s) and complete
applicable section(s) in Part III. For all plans/issuances, pertinent
supporting documentation is required.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
( ) Public Offering ( ) Underwriter Fees ( ) Preferred Stock Conversion ( ) Employee Stock Purchase Plan
( ) Rights Offering ( ) Private Placement ( ) Warrant Exercise ( ) Employee Savings or 401(k)
( ) Subscription Offering (X) Acquisition/Merger ( ) Stock Split Plan
( ) Exchange Offering ( ) Placement Fees ( ) Stock Dividend ( ) Amendment to Existing Plan
( ) Regulation S Offering ( ) Recapitalization ( ) Stock Option Plan ( ) Professional Services Agreement
(x) Private Offering ( ) Debt Conversion ( ) Dividend Reinvestment ( ) Litigation or Settlement
Plan ( ) Other: Please specify
</TABLE>
MAXIMUM NUMBER OF SHARES TO BE OFFERED PURSUANT TO THE ACTION(S): 146,949 shares
--------------
For each action, identify the source and number of shares. Note: The aggregate
number of shares listed in the categories below should equal the maximum number
of shares to be offered pursuant to the action(s). Please attach a separate
sheet, if necessary.
<TABLE>
<CAPTION>
<S> <C>
Shares offered by Company: 146,949 Shares offered by selling shareholders:
------------ ------------------
Treasury shares: Shares purchased on the open market:
---------------------- ---------------------
Other - Specify source:
---------------------------------------------------------------------------------
</TABLE>
DATE OF APPROVAL FOR THE ACTION(S) BY THE BOARD OF DIRECTORS: November 7, 1997
------------------
DATE OF APPROVAL FOR THE ACTION(S) BY SHAREHOLDERS (IF APPLICABLE):
------------
AMOUNT OF FEE PAYMENT ENCLOSED (IF APPLICABLE): $
--------------------------------
Authorization by Company Corporate Officer
SIGNATURE: /s/ Klaus Grissemann DATE: 05/20/98
--------------------------------- ---------------------------
NAME (PRINT): Klaus Grissemann TITLE: Chief Financial Officer
------------------------------ ---------------------------
<PAGE>
SCHEDULE 6(b)
REGISTRATION RIGHTS
<TABLE>
<CAPTION>
Type Holder Common Stock Warrants Options
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
D, P* Vertical Financial 890,152 690,152
D, P* Avi Suriel 94,697 94,697
D, P* Behala Anstadt 296,402 296,402
D, P* Henilia 297,347 297,347
D, P* Lupin 296,402 296,402
D, P* Viktor Vogt 250,000 75,000
D, P* Arnold Wasserman 95,000
D, P* Reiner Hallauer 75,000
D, P* K-D Sipple 707,059 200,000
D, P* Walther Glas GmbH 890,750 50,000
and Volker Walther
D, P* Royce (IPO undw) 335,000
P Ballin Consulting 10,000
other option holders 235,000
D, P Century City Securities 150,000
--------------------------------------------------
3,732,809 2,360,000 530,000 6,622,809
</TABLE>
*Such registration rights are more fully described in the Company's filings
with the Securities and Exchange Commission, including the documents
attached to such filings as exhibits.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 19, 1998, by and among IAT Multimedia, Inc., a Delaware
corporation (the "Company"), JNC Opportunity Fund Ltd., a Cayman Islands
corporation ("Opportunity"), and JNC Strategic Fund Ltd., a Cayman islands
corporation ("Strategic"). Opportunity and Strategic are each a "Purchaser" and
are, collectively the "Purchasers."
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof between the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used
with respect to any Person, means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
New York generally are authorized or required by law or other government
actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means the shares of Common Stock issued to Strategic
on the Series A Closing Date pursuant to the Purchase Agreement.
"Common Stock" means the Company's common stock, par value $.01 per
share.
<PAGE>
"Debentures" means the Series A Debentures and the Series B
Debentures.
"Effectiveness Date" means the 270th day following the Series A
Closing Date.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 75th day following the Series A Closing Date;
provided, that if the Registration Statement filed after the Series A Closing
is not permitted to become effective covering the Underlying Shares issuable
upon conversion of Series B Debentures and as payment of interest thereon and
upon exercise of the Series B Warrants, "Filing Date" with respect to a
Registration Statement covering such Underlying Shares shall mean the 75th day
following the Series B Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Purchasers' Warrants" shall mean the Series A Warrants and Series B
Warrants.
"Registrable Securities" means (A) the shares of Common Stock issuable
upon (i) conversion in full of the Debentures, (ii) payment of interest in
respect of the Debentures, assuming
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<PAGE>
all such interest is paid in shares of Common Stock and that the Debentures
remain outstanding for three years, and (iii) exercise of the Warrants, and (B)
the Common Shares; provided, however that in order to account for the fact that
the number of shares of Common Stock issuable upon conversion of the Debentures
(together with the payment of interest thereon) is determined in part upon the
market price of the Common Stock prior to the time of conversion, Registrable
Securities contemplated by clauses (i) and (ii) above shall include, and the
initially filed Registration Statement shall cover not less than 3,099,433
shares of Common Stock. The Company shall be required to file additional
Registration Statements to include coverage of 130% of the number of Underlying
Shares issuable upon conversion in full of the then outstanding principal
amount of Debentures (and as payment of interest thereon in shares of Common
Stock during the remaining term thereof) to the extent the sum of (i) the
number of the shares of Common Stock into which the Debentures are convertible
(together with the payment of interest thereon), but subject to any cap
thereon, and (ii) the number of shares of Common Stock issuable upon exercise
in full of the Warrants, and (iii) the Common Shares, exceeds the number of
shares of Common Stock initially registered in accordance with the immediately
prior sentence. The Company shall have fifteen (15) days to file such
additional Registration Statements after notice of the requirement thereof,
which the Holders may give at such time when the number of shares of Common
Stock as are issuable upon conversion of Debentures (together with the payment
of interest thereon) and upon exercise of the Warrants, exceeds 85% of the
number of shares of Common Stock to be registered in a Registration Statement
hereunder.
"Registration Statement" means the registration statement and any
additional registration statements contemplated by Section 2(a), including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Series A Debentures" means the Company's Series A 5% Convertible
Debentures issued pursuant to the Purchase Agreement.
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<PAGE>
"Series B Debentures" means the Company's Series B 5% Convertible
Debentures issued pursuant to the Purchase Agreement.
"Series A Warrants" shall have the meaning set forth in the Purchase
Agreement.
"Series B Warrants" shall have the meaning set forth in the Purchase
Agreement.
"Special Counsel" means one special counsel to the Holders, for which
the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Warrants" means (i) the Purchasers' Warrants and (ii) the Common
Stock Purchase Warrant issued to Century City Securities in connection with the
transactions contemplated by the Purchase Agreement.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering all Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if otherwise
directed by the Holders of a majority in interest of the applicable Registrable
Securities in accordance herewith or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith). The
Registration Statement shall state, to the extent permitted by Rule 416 under
the Securities Act, that it also covers such indeterminate number of shares of
Common Stock as may be required to effect conversion of the Debentures (and
payment of interest thereon) or exercise of the Warrants, in each case to
prevent dilution resulting from stock splits, stock dividends or similar
events, or by reason of changes in the Conversion Price (as defined in the
Debentures) in accordance with the terms of the Debentures or by reason of
changes in the Exercise Price (as defined in the Warrants) in accordance with
the terms of the Warrants. The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
Effectiveness Date, and shall (subject to the provisions of Section 3(p)) use
its best efforts to keep such Registration Statement continuously effective
under the Securities Act until the date which is three years after the date
that such Registration Statement is declared effective by the Commission or
until such earlier date when all Registrable Securities covered by such
Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent (the "Effectiveness Period"),
provided, however, that the Company shall not be deemed to have used its best
efforts to keep the Registration Statement effective during the Effectiveness
Period if it voluntarily takes any action (subject to the provisions of Section
3(p)) that
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would result in the Holders not being able to sell the Registrable Securities
covered by such Registration Statement during the Effectiveness Period, unless
such action is in accordance with the provisions of Section 3(p) or is required
under applicable law or the Company has filed a post-effective amendment to the
Registration Statement and the Commission has not declared it effective.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected in the form of an Underwritten Offering. In such
event, and, if the managing underwriters advise the Company and such Holders in
writing that in their opinion the amount of Registrable Securities proposed to
be sold in such Underwritten Offering exceeds the amount of Registrable
Securities which can be sold in such Underwritten Offering, there shall be
included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Company. No Holder may participate in any
Underwritten Offering hereunder unless such Holder (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or,
in connection with an Underwritten Offering hereunder, such other form agreed
to by the Company and by the Holders of Registrable Securities) which shall
contain the "Plan of Distribution" attached hereto as Annex A (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than four (4) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall, (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all
such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders, their Special Counsel and such managing underwriters,
and (ii) cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such Holders and such underwriters,
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the
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<PAGE>
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Holders of a majority of the Registrable Securities, their
Special Counsel, or any managing underwriters, shall reasonably object on a
timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant
to Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to the
Registration Statement; and (iv) comply with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period
in accordance with the intended methods of disposition by the Holders thereof
set forth in the Registration Statement as so amended or in such Prospectus as
so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters immediately (and, in the case of
(i)(A) below, not less than four (4) Business Days prior to such filing) and
(if requested by any such Person) confirm such notice in writing no later than
one (1) Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (B) when the Commission notifies the Company whether
there will be a "review" of such Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company
shall provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspen sion of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact
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<PAGE>
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated
in such Prospectus supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action pursuant to this
Section 3(e) that would, in the opinion of counsel for the Company, violate
applicable law or be materially detrimental to the business prospects of the
Company.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and any
underwriters, without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request; and the Company hereby consents to the use
of such Prospectus and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders, any
underwriters and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any
and all other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or subject the Company to
any material tax in any such jurisdiction where it is not then so subject.
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<PAGE>
(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least two (2)
Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on the Nasdaq National Market
("NASDAQ") and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Enter into such agreements (including an underwriting agreement in
form, scope and substance as is customary in Underwritten Offerings) and take
all such other actions in connection therewith (including those reasonably
requested by any managing underwriters and the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities, and whether or not an underwriting
agreement is entered into, (i) make such representations and warranties to such
Holders and such underwriters as are customarily made by issuers to
underwriters in underwritten public offerings, and confirm the same if and when
requested; (ii) in the case of an Underwritten Offering obtain and deliver
copies thereof to each Holder and the managing underwriters, if any, of
opinions of counsel to the Company and updates thereof addressed to each Holder
and each such underwriter, in form, scope and substance reasonably satisfactory
to any such managing underwriters and Special Counsel to the selling Holders
covering the matters customarily covered in opinions requested in Underwritten
Offerings and such other matters as may be reasonably requested by such Special
Counsel and underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, use its
best reasonable efforts to obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to the Company in form and substance as are
customary in connection with Underwritten Offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification provisions
and procedures no less favorable to the selling Holders and the under
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<PAGE>
writers, if any, than those set forth in Section 5 (or such other provisions
and procedures acceptable to the managing underwriters, if any, and holders of
a majority of Registrable Securities participating in such Underwritten
Offering); and (v) deliver such documents and certificates as may be reason
ably requested by the Holders of a majority of the Registrable Securities being
sold, their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to
clause 3(l)(i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company.
(m) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that any information that
is determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential
by such Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by
such Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission.
(o) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
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Section 3(c) and (ii) it and its officers, directors or Affiliates, if any,
will comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 3(j), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Pro spectus or Registration Statement.
(p) If there is a significant business opportunity (including but not
limited to the acquisition or disposition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or other similar
transaction) available to the Company which the Company's Board of Directors
reasonably determines not to be in the Company's best interest to disclose,
then the Company may suspend the effectiveness of a Registration Statement for
a period not to exceed 20 Business Days in the aggregate during the
Effectiveness Period.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company, except as and to the extent specified in
Section 4(b), shall be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with the NASDAQ or any subsequent market
on which the Common Stock is then listed for trading, and (B) in compliance
with state securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriters, if any, or the Holders of a
majority of Registrable Securities may designate)), (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders, up to $10,000, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Com pany shall be responsible
for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation,
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all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder, which, to the extent in excess of
the rates charged for such items in the Company's initial public offering for
the Common Stock, shall be paid for by the Holders..
(b) If the Holders require an Underwritten Offering pursuant to the
terms hereof, the Company shall be responsible for all costs, fees and expenses
in connection therewith, except for the fees and disbursements of (i) the
Underwriters (including any underwriting commissions and discounts applicable
to the shares to be sold by the Holders) and (ii) legal counsel and accountants
of such Underwriters (of which the Holders offering shares in such Underwritten
Offering will be responsible for a pro rata share). By way of illustration
which is not intended to diminish from the provisions of Section 4(a), the
Holders shall not be responsible for, and the Company shall be required to pay
the fees or disbursements incurred by the Company (including by its legal
counsel and accountants) in connection with, the preparation and filing of a
Registration Statement and related Prospectus for such offering, the
maintenance of such Registration Statement in accordance with the terms hereof,
the listing of the Registrable Securities in accordance with the requirements
hereof, and printing expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including any underwriters retained by such Holder
in connection with the offer and sale of Registrable Securities), brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto, or (ii) in the case of the occurrence of
an event of the type specified in Section 3(c)(ii) - (vi), the use by the
Holder of an outdated or defective
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Prospectus after the Company has notified the Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by the Holder of
the Advice contemplated in Section 3(o). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
by such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus, or in any amendment or supplement thereto. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the payment of
all fees and expenses incurred in connection with defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ one (1) separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(3) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party,
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<PAGE>
and such Indemnified Party shall have been advised by one separate counsel that
a conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within thirty
(30) days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled
to indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limita tions set forth in Section 5(c), any reasonable
attorneys' or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allo cation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding
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exceeds the amount of any damages that such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company,
as the case may be, in addition to being entitled to exercise all rights
granted by law and under this Agreement, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of
any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions
hereof. Except as and to the extent specified in Schedule 6(b) hereto, neither
the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then
outstanding Registrable Securities, the Company shall not grant to any Person
the right to request the Company to register any securities of the Company
under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Underlying Shares, the Company shall determine
to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be
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<PAGE>
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each holder of Registrable
Securities written notice of such determination and, if within ten (10) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered; provided,
however, that the Company shall not be required to register any Registrable
Securities pursuant to this Section 6(d) that are eligible for sale pursuant to
Rule 144(k) of the Commission.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 8:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: IAT Multimedia, Inc.
221 East 61st Street
New York, NY 10021
Facsimile No.: (212) 754-4044
Attn: Jacob Agam
With copies to: Baker & McKenzie
805 Third Avenue
New York, NY 10022
Facsimile No.: (212) 759-9133
Attn: Francis Fitzpatrick
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<PAGE>
If to Opportunity: JNC Opportunity Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House, 20 Reid Street
Hamilton HM11, Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
If to Strategic: JNC Strategic Fund Ltd.
c/o Olympia Capital (Cayman) Ltd.
Williams House, 20 Reid Street
Hamilton HM11, Bermuda
Facsimile No.: (441) 295-2305
Attn: Director
With copies to (for Encore Capital Management, L.L.C.
communications to 12007 Sunrise Valley Drive, Suite 460
either Purchaser): Reston, VA 20191
Facsimile No.: (703) 476-7711
Attn: Managing Member
With copies to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Eric L. Cohen
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock
transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any Affiliate of such Holder, any
other Holder or Affiliate of any other Holder of all or a portion of the
Debentures, the Warrants, the Common Shares or the Registrable Securities if:
(i) the Holder agrees in writing
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<PAGE>
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement.
In the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(j) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed
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<PAGE>
the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
-------------------------------
Name: Jacob Agam
Title: Chief Executive Officer
JNC OPPORTUNITY FUND LTD.
By: /s/ Thomas H. Davis
-------------------------------
Name: Thomas H. Davis
Title: Director
JNC STRATEGIC FUND LTD.
By: /s/ Thomas H. Davis
-------------------------------
Name: Thomas H. Davis
Title: Director
<PAGE>
Annex A
PLAN OF DISTRIBUTION
The Selling Stockholders, their pledgees, donees, transferees or other
successors-in-interest, may, from time to time, sell all or a portion of the
shares of Common Stock being registered hereunder (the "Shares") in privately
negotiated transactions or otherwise, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices. The Shares may be sold by the Selling
Stockholders by one or more of the following methods, without limitation: (a)
block trades in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction, (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus, (c) an exchange distribution in accordance with the rules of the
applicable exchange, (d) ordinary brokerage transactions and transactions in
which the broker solicits purchasers, (e) privately negotiated transactions,
(f) short sales, (g) a combination of any such methods of sale and (h) any
other method permitted pursuant to applicable law.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in
securities of the Company or derivatives thereof, and may sell and deliver the
Shares in connection therewith or in settlement of securities loans. If the
Selling Stockholders engage in such transactions, the applicable conversion
price may be affected. From time to time the Selling Stockholders may pledge
their Shares pursuant to the margin provisions of its customer agreements with
its brokers. Upon a default by the Selling Stockholders, the broker may offer
and sell the pledged Shares from time to time.
In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate in such
sales. Brokers or dealers may receive commissions or discounts from the Selling
Stockholders (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated which are not
expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the Selling Stockholders to sell a specified
number of such Shares at a stipulated price per share, and, to the extent such
broker-dealer is unable to do so acting as agent for a Selling Stockholder, to
purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer commitment to the Selling Stockholders. Broker-dealers who
acquire Shares as principal may thereafter resell such Shares from time to time
in transactions (which may involve block transactions and sales to and through
other broker-dealers, including transactions of the nature described above) in
the over-the-counter market or otherwise at prices and on terms then prevailing
at the time of sale, at prices then related to the then-current market price or
in negotiated transactions and, in connection with such resales, may pay to or
receive from the purchasers of such Shares commissions as described above. The
Selling Stockholders may also sell the Shares in accordance with Rule 144 under
the Securities Act, rather than pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in sales of the Shares may be deemed
to be "underwriters" within the meaning of the
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<PAGE>
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
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<PAGE>
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. A-1 $3,000,000
IAT MULTIMEDIA, INC.
SERIES A 5% CONVERTIBLE DEBENTURE
DUE JUNE 19, 2001(1)
THIS DEBENTURE is the sole duly authorized issued debenture(2) of IAT
Multimedia, Inc., a Delaware corporation, having a principal place of business
at Geschaftshaus Wasserschloss Aarestrasse 17, CH-5300 Vogelsang-Turgi,
Switzerland (the "Company"), designated as its Series A 5% Convertible
Debentures, due June 19, 2001(3) (the "Debentures"), in an aggregate principal
amount of $3,000,000. All references to $ and dollars shall be to US$ or United
States dollars.
FOR VALUE RECEIVED, the Company promises to pay to JNC Opportunity
Fund Ltd., or registered assigns (the "Holder"), the principal sum of Three
Million Dollars ($3,000,000), on or prior to June 19, 2001(4) or such earlier
date as the Debentures are required to be repaid as provided hereunder (the
"Maturity Date") and to pay interest to the Holder on the principal sum at the
rate of 5% per annum, payable quarterly in arrears commencing June 30, 1998(5),
but in no event later than the earlier to occur of a Conversion Date (as
defined below) for such principal amount or the Maturity Date. Interest shall
accrue daily commencing on the Original Issue Date (as defined in Section 6)
until payment in full of the principal sum, together with all accrued and
unpaid interest and other amounts which may become due hereunder, has been made
except that interest shall cease to accrue if the Per Share Market Value (as
defined in Section 6) shall be equal to or greater than $13.50 for 30
consecutive Trading Days (as defined in Section 6) during any calendar quarter.
Interest shall be calculated on the basis of a 360-day year and for the actual
number of days elapsed.
- --------------
(1) Adjust for Series B Debentures.
(2) Adjust for Series B Debentures.
(3) Adjust for Series B Debentures.
(4) Adjust for Series B Debentures.
(5) Adjust for Series B Debentures.
<PAGE>
Interest hereunder will be paid to the Person (as defined in Section 6) in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures (the "Debenture Register"). All
overdue, accrued and unpaid interest and other amounts due hereunder shall bear
interest at the rate of 15% per annum (to accrue daily) from the date such
interest is due hereunder through and including the date of payment. The
principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address of the Holder
last appearing on the Debenture Register, except that interest due on the
principal amount (but not overdue interest) may, at the Company's option, be
paid in shares of Common Stock (as defined in Section 6) calculated based upon
the Conversion Price (as defined below) on the date such interest was due. All
amounts due hereunder other than such interest shall be paid in cash.
Notwithstanding anything to the contrary contained herein, the Company may not
issue shares of Common Stock in payment of interest on the principal amount if:
(i) the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes, or held as treasury stock, is insufficient to pay
interest hereunder in shares of Common Stock; (ii) if such interest is due on
or after the earlier of (x) the date that an Underlying Securities Registration
Statement (as defined in Section 6) is declared effective by the Commission (as
defined in Section 6) and (y) the Effectiveness Date (as defined under the
Registration Rights Agreement), such shares are not either registered for
resale pursuant to an Underlying Securities Registration Statement or freely
transferable without volume restrictions pursuant to Rule 144(k) promulgated
under the Securities Act, as determined by counsel to the Company pursuant to a
written opinion letter addressed and in form and substance reasonably
acceptable to the Holder and the transfer agent for such shares; (iii) such
shares are not listed or quoted on the Nasdaq National Market ("NASDAQ") or on
the New York Stock Exchange, American Stock Exchange or the Nasdaq SmallCap
Market (each, a "Subsequent Market"); or (iv) unless the recipient shall have
waived the restriction of this clause (iv), the issuance of such shares would
result in the recipient thereof beneficially owning more than 4.999% of the
issued and outstanding shares of Common Stock as determined in accordance with
Rule 13d-3 under the Exchange Act; provided, that any interest not payable in
shares of Common Stock because of this clause (iv) may be deferred (without
being deemed overdue) until such time as the recipient notifies the Company
either of its waiver of the restriction set forth in this clause (iv) or that
such restriction is no longer applicable for such interest payment. Payment of
interest on the principal amount in shares of Common Stock is further subject
to the provisions of Section 4(a)(ii).
This Debenture is subject to the following additional provisions:
Section 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same but shall not be issuable in
denominations of less than integral multiplies of Fifty Thousand Dollars
($50,000) unless such amount represents the full principal balance of
Debentures outstanding to such Holder. No service charge will be made for such
registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due
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<PAGE>
presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the Person (as defined in Section 6) in whose
name this Debenture is duly registered on the Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative
or governmental body):
(i) any default in the payment of the principal of, interest on or
liquidated damages in respect of, this Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether
on the applicable quarterly interest payment date, a Conversion Date or the
Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, the Purchase Agreement or the Registration Rights Agreement, and
such failure or breach shall not have been remedied within 15 days after
the date on which notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries shall commence, or there
shall be commenced against the Company or any such subsidiary a case under
any applicable bankruptcy or insolvency laws as now or hereafter in effect
or any successor thereto, or the Company commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or
any subsidiary thereof or there is commenced against the Company or any
subsidiary thereof any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 90 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 90 days; or the Company
or any subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition or adjustment of
its debts; or the Company or any subsidiary thereof shall by any act or
failure to act indicate its consent to, approval of or acquiescence in any
of the foregoing; or any corporate or other action is taken by the Company
or any subsidiary thereof for the purpose of effecting any of the
foregoing;
-3-
<PAGE>
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement or other
instrument under which there may be issued, or by which there may be
secured or evidenced any indebtedness of the Company in an amount exceeding
two hundred fifty thousand dollars ($250,000), whether such indebtedness
now exists or shall hereafter be created and such default shall result in
such indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable;
(v) the Common Stock shall be delisted from the NASDAQ or shall be
suspended from trading on the NASDAQ without resuming trading and/or being
relisted thereon or on a Subsequent Market or having such suspension
lifted, as the case may be, within three (3) days;
(vi) the Company shall be a party to any Change of Control Transaction
(as defined in Section 6), shall agree to sell or dispose all or in excess
of 50% of its assets in one or more transactions (whether or not such sale
would constitute a Change of Control Transaction), or shall redeem more
than a de minimis number of shares of Common Stock or other equity
securities of the Company (other than redemptions of Underlying Shares(6));
(vii) an Underlying Securities Registration Statement shall not have
been declared effective by the Commission on or prior to the Effectiveness
Date;
(viii) an Event (as hereinafter defined) shall not have been cured to
the satisfaction of the Holder prior to the expiration of thirty (30) days
from the Event Date (as defined below) relating thereto (other than an
Event resulting from a failure of an Underlying Securities Registration
Statement to be declared effective by the Commission on or prior to the
Effectiveness Date); or
(ix) the Company shall fail for any reason to deliver certificates to
a Holder prior to the twelfth (12th) day after the Conversion Date pursuant
to Section 4(b) or the Company shall provide notice to the Holder,
including by way of public announcement, at any time, of its intention not
to comply with requests for conversions of any Debentures in accordance
with the terms hereof; or
(x) the Company shall fail for any reason to deliver the payment in
cash pursuant to a Buy-In within seven (7) days after notice is deemed
delivered hereunder.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become, immediately
due and payable in cash. The aggregate amount payable upon an Event of Default
shall be equal to the sum of (i) the Mandatory Prepayment Amount plus (ii) the
product of (A) the number
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(6) Adjust for Series B Debentures to permit redemption of Series A
Debenture Underlying Shares.
-4-
<PAGE>
of Underlying Shares issued in respect of conversions hereunder or as payment
of interest hereunder, in either case, within thirty (30) days of the date of a
declaration of an Event of Default and then held by the Holder and (B) the Per
Share Market Value on the date prepayment is due or the date the full
prepayment price is paid, whichever is greater. Interest shall accrue on the
prepayment amount hereunder from the seventh day after such amount is due
(being the date of an Event of Default) through the date of payment in full
thereof at the rate of 15% per annum. All Debentures and Underlying Shares for
which the full repayment price hereunder shall have been paid in accordance
herewith shall be promptly surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) Conversion at Option of Holder. This Debenture shall be
convertible into shares of Common Stock at the option of the Holder, in whole
or in part but subject to the limitations set forth herein, at any time and
from time to time, after the Original Issue Date; provided, that the Holder may
not resell Underlying Shares issued upon conversions of Debentures under this
Section 4(a)(i) until the 270th day after the Original Issue Date. During any
30-day period thereafter, the number of Underlying Shares issued upon
conversions under this Section 4(a)(i) that the Holder shall be permitted to
resell shall be limited to the greater of (x) the number of Underlying Shares
issuable upon conversion of $1,000,000 of Debentures (measured by the
Conversion Price on the applicable Conversion Date, as defined below) and (y)
25% of the average of the daily trading volume of Common Stock during such
30-day period. The number of shares of Common Stock issuable upon a conversion
hereunder shall be determined by dividing the outstanding principal amount of
this Debenture to be converted, plus all accrued but unpaid interest thereon,
by the Conversion Price (as defined below). The Holder shall effect conversions
by surrendering the Debentures (or such portions thereof) to be converted,
together with the form of conversion notice attached hereto as Exhibit A (a
"Holder Conversion Notice") to the Company. Each Holder Conversion Notice shall
specify the principal amount of Debentures to be converted and the date on
which such conversion is to be effected, which date may not be prior to the
date such Holder Conversion Notice is deemed to have been delivered hereunder
(a "Holder Conversion Date"). If no Holder Conversion Date is specified in a
Holder Conversion Notice, the Holder Conversion Date shall be the date that
such Holder Conversion Notice is deemed delivered hereunder. Subject to Section
4(b), each Holder Conversion Notice, once given, shall be irrevocable. If the
Holder is converting less than all of the principal amount represented by the
Debenture(s) tendered by the Holder with the Holder Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall honor such conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the time set forth in
Section 4(b)) a new Debenture for such principal amount as has not been
converted.
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<PAGE>
(ii) Conversion at the Option of the Company. Subject to the
provisions of this paragraph, this Debenture shall be convertible into shares
of Common Stock at the option of the Company, in whole or in part, at any time
and from time to time, after the date that the Commission declares effective an
Underlying Securities Registration Statement. The number of shares of Common
Stock issuable upon a conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be converted, plus all
accrued but unpaid interest thereon, by the Conversion Price, as subject to
adjustment as provided hereunder. Notwithstanding the foregoing, the Company
shall not be permitted to deliver requests for the conversion of Debentures if
(a)(1) an Underlying Securities Registration Statement is not then effective or
(2) the Holder is permitted to resell Underlying Shares pursuant to Rule 144(k)
promulgated under the Securities Act, without volume restrictions, as evidenced
by an opinion letter of counsel to the Company and reasonably acceptable to the
Holder and the transfer agent for the Common Stock; (b) there are not
sufficient shares of Common Stock authorized and reserved for issuance upon
such conversion; or (c) the Company shall have defaulted on its covenants and
obligations hereunder or under the Purchase Agreement or Registration Rights
Agreement and such default shall be continuing or the Company shall have failed
to timely deliver Underlying Shares upon conversions hereunder which failure to
deliver Underlying Shares shall not have been cured within five (5) days after
such delivery was due. The Company shall exercise its right to require
conversions by delivering to the Holder the form of conversion notice attached
hereto as Exhibit B (a "Company Conversion Notice"). Each Company Conversion
Notice shall specify the principal amount of Debentures to be converted and the
date on which such conversion is to be effected, which date may not be prior to
the date such Company Conversion Notice is deemed to have been delivered
hereunder (a "Company Conversion Date"). If no Company Conversion Date is
specified in a Company Conversion Notice, the Company Conversion Date shall be
the date that such Company Conversion Notice is deemed delivered hereunder.
Subject to Section 4(b) hereof, each Company Conversion Notice, once given,
shall be irrevocable. If the Company is requiring conversion of less than all
of the principal amount represented by the Debenture(s) tendered by the Holder
in response to such Company Conversion Notice, or if a conversion hereunder
cannot be effected in full for any reason, the Company shall honor such
conversion to the extent permissible hereunder and shall promptly deliver to
such Holder (in the manner and within the time set forth in Section 4(b)) a new
Debenture for such principal amount as has not been converted. Notwithstanding
anything to the contrary contained herein, a conversion pursuant to this
Section shall not be subject to the provisions of Section 4(a)(iv)(A). A Holder
Conversion Date, a Company Conversion Date and the date that a conversion under
Section 4(a)(iii) is required are each sometimes referred to herein as the
"Conversion Date" and a Holder Conversion Notice and a Company Conversion
Notice are sometimes referred to as a "Conversion Notice."
(iii) Automatic Conversion. Subject to the provisions in this
paragraph, the principal amount of Debentures for which Conversion Notices have
not previously been received or for which prepayment has not been made or
required hereunder shall be automatically converted on the second anniversary
of the date that the Commission declares effective an Underlying Securities
Registration Statement, at the Conversion Price on such date. The conversion
contemplated by this paragraph shall not occur if (a) neither (1) an Underlying
Securities Registration Statement is then effective nor (2) the Holder is
permitted to resell Underlying Shares pursuant to Rule 144(k) promulgated under
the Securities Act, without volume restrictions, as evidenced by an opinion
letter of counsel to the
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<PAGE>
Company and reasonably acceptable to the Holder and the transfer agent for the
Common Stock; (b) there are not sufficient shares of Common Stock authorized
and reserved for issuance upon such conversion; and (c) the Company shall have
defaulted on its covenants and obligations hereunder or under the Purchase
Agreement or Registration Rights Agreement and such default shall be
continuing. Any days after the date that the Underlying Securities Registration
Statement is declared effective by the Commission for which the Holder is not
permitted to resell Underlying Shares thereunder shall be added to the days
before which the conversion under this paragraph shall be triggered.
Notwithstanding anything to the contrary contained herein, a conversion
pursuant to this Section shall not be subject to the provisions of Section
4(a)(iv)(A).
(iv) Certain Conversion Restrictions
(A) The Holder agrees not to convert Debentures to the extent
such conversion would result in the Holder beneficially owning (as determined
in accordance with Section 13(d) of the Exchange Act and the rules thereunder)
in excess of 4.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Debentures held by such Holder
after application of this Section. To the extent that the limitation contained
in this Section applies, the determination of whether Debentures are
convertible (in relation to other securities owned by a Holder) and of which
portion of the principal amount of such Debentures are convertible shall be in
the sole discretion of the Holder, and the submission of Debentures for
conversion shall be deemed to be the Holder's determination of whether such
Debentures are convertible (in relation to other securities owned by the
Holder) and of which portion of such Debentures are convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of the Holder to convert
Debentures at such time as such conversion will not violate the provisions of
this Section. The provisions of this Section will not apply to any conversion
pursuant to Section 4(a)(ii) or 4(a)(iii) of this Debenture, and may be waived
by a Holder (but only as to itself and not to any other Holder) upon not less
than 75 days prior notice to the Company (in which case, the Holder shall make
such filings with the Commission, including under Rule 13D or 13G, as are
required by applicable law), and the provisions of this Section shall continue
to apply until such 75th day (or later, if stated in the notice of waiver).
Other Holders shall be unaffected by any such waiver.
(B) Notwithstanding anything to the contrary contained herein,
the principal amount of Debentures subject to conversion pursuant to Sections
4(a)(ii) and 4(a)(iii) shall not exceed the principal amount of Debentures
that, when converted, would result in an issuance to the Holder of a number of
shares of Common Stock which, when added to all other shares of Common Stock
beneficially owned by the Holder at the time of such conversion (as determined
in accordance with Section 16(a) of the Exchange Act), would result in the
Holder beneficially owning in excess of 9.999% of the then issued and
outstanding shares of Common Stock (as determined in accordance with Section 16
(a) of the Exchange Act). Any portion of the principal amount of the Debentures
for which conversion shall not be permitted because of this Section shall occur
from time to time thereafter (at the option of the Company), at the Conversion
Price at the time of such subsequent conversion, to the extent that the
resulting issuance of Underlying Shares would not then result in a violation of
this Section.
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<PAGE>
(C) Notwithstanding anything to the contrary contained herein, if
(x) the Common Stock is listed for trading on the NASDAQ or the Nasdaq SmallCap
Market and (y) the Company shall not have previously obtained the vote of
shareholders (the "Shareholder Approval"), if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market (or any successor
entity) to approve the issuance of shares of Common Stock in excess of the
Issuable Maximum (as defined below) in a private placement whereby shares of
Common Stock are deemed to have been issued at a price that is less than the
greater of book value or fair market of the Common Stock, then the maximum
number of shares of Common Stock issuable upon conversion of Debentures and the
Company's Series B 5% Convertible Debentures ("Series B Debentures")(7), if
any, that are issued pursuant to the Purchase Agreement, and, in each case, as
payment of interest thereon, at a conversion price that is less than the
closing sales price of the Common Stock on the Series A Closing Date, is
1,939,419, subject to adjustment as a result of stock splits, combinations,
reclassifications and other similar events (such number of shares of Common
Stock, the "Issuable Maximum"). If on any Conversion Date, the Company would be
required to issue a number of shares of Common Stock that, when added to all
other shares of Common Stock previously issued in respect of conversions of
Debentures and Series B Debentures, and as payment of interest thereon, would
exceed the Issuable Maximum, then the Company shall issue to the Holder upon
such a conversion a number of shares of Common Stock equal to the Issuable
Maximum and, with respect to the remainder of the principal amount of
Debentures and Series B Debentures, if any, then held by such Holder for which
a conversion in accordance with the Conversion Price would result in a issuance
of shares of Common Stock in excess of the Issuable Maximum (the "Excess
Principal"), the Company shall have the option, exercisable by written notice
to the Holders delivered within seven (7) days after the triggering Conversion
Date, to use its best efforts to obtain the Shareholder Approval applicable to
such issuance (without penalty or stepped up interest unless such Shareholder
Approval is not obtained in a timely fashion hereunder) as soon as possible,
but in any event not later than the 90th day after the date of such notice. If
the Company does not deliver timely a notice of its election to seek the
Shareholder Approval under this Section or shall, if it shall have delivered
such a notice, fail to obtain the Shareholder Approval in the time period
provided in the immediately prior sentence, then the Holders representing 50%
of the then outstanding aggregate principal amount of Debentures and Series B
Debentures(8) shall have the option to declare any such notice by the Company,
if given, to be null and void ab initio and require the Company to pay cash to
the Holders in an amount equal to the sum of (1) 130% of the Excess Principal
and (2) all other amounts, accrued and unpaid interest, costs, expenses and
liquidated damages due in respect of such Debentures and the Series B
Debentures. Interest shall accrue on the prepayment price under this Section at
the rate of 15% per annum commencing the Conversion Date that would result in
the issuance of Underlying Shares in excess of the Issuable Maximum but for the
provisions hereof, and shall continue to accrue until such prepayment price,
plus all such accrued interest, shall have been paid in full. The prepayment
price, plus all interest thereon, shall be due and payable on the earlier to
occur of the date that is 22 months following the (x) date that the Commission
declares effective an Underlying Securities Registration Statement and (y) the
Effectiveness Date.
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(7) With applicable changes for Series B Debentures.
(8) With applicable changes for Series B Debentures.
-8-
<PAGE>
(b) (i) Not later than three Trading Days after the Conversion Date,
the Company will deliver or cause to be delivered to the Holder (i) a
certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those required by Section 3.1(b) of the
Purchase Agreement) representing the number of shares of the Common Stock being
acquired upon the conversion of Debentures, (ii) Debentures in a principal
amount equal to the principal amount of Debentures not converted; (iii) a bank
check in the amount of all accrued and unpaid interest (if the Company has
elected to pay accrued interest in cash), together with all other amounts then
due and payable in accordance with the terms hereof, in respect of Debentures
tendered for conversion, and (iv) if the Company has elected and is permitted
hereunder to pay accrued interest in shares of the Common Stock, certificates,
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1(b) of the Purchase Agreement), representing such
number of shares of the Common Stock as equals such interest divided by the
Conversion Price calculated on the Conversion Date; provided, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
the Common Stock issuable upon conversion of the principal amount of Debentures
until Debentures are delivered for conversion to the Company or the Holder
notifies the Company that such Debenture has been mutilated, lost, stolen or
destroyed and complies with Section 9 hereof. If such certificate or
certificates, including for purposes hereof, any shares of the Common Stock to
be issued on the Conversion Date on account of accrued but unpaid interest
hereunder, are not delivered to or as directed by the Holder by the third
Trading Day after a Conversion Date, the Holder shall be entitled by written
notice to the Company at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion (whether subject to a
Holder Conversion Notice, a Company Conversion Notice or a conversion pursuant
to Section 4(a)(iii)), in which event the Company shall immediately return the
Debentures tendered for conversion. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section, including for
purposes hereof, any shares of the Common Stock to be issued on the Conversion
Date on account of accrued but unpaid interest hereunder, by the third Trading
Day after the Conversion Date, the Company shall pay to such Holder, in cash,
as liquidated damages and not as a penalty, $2,500 for each day thereafter
until the Company delivers such certificates (such amount shall be also be due
for each Trading Day after the date that the Holder may rescind such conversion
until such date as the Holder shall have received the return of the principal
amount of Debentures relating to such rescission).
(ii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), including for purposes hereof, any shares of
Common Stock to be issued on the Conversion Date on account of accrued but
unpaid interest hereunder, by the third Trading Day after the Conversion Date,
and if after such the third Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by such Holder of the Underlying Shares which the Holder anticipated
receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash
to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the aggregate principal amount of Debentures for which such
conversion was not timely honored. For example, if the Holder purchases shares
of Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 aggregate principal amount of
Debentures, the Company shall be
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<PAGE>
required to pay the Holder $1,000. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the Buy-In.
(c)(i) The conversion price (the "Conversion Price") in effect on any
Conversion Date shall be the lesser of (A) 120% of the Average Price calculated
on the Original Issue Date (the "Initial Conversion Price")(9), and (B) 87%
(the "Discount Rate") of the average of the five lowest Per Share Market Values
during the 15 Trading Days immediately preceding the Conversion Date; provided,
that such 15 Trading Day period shall be extended for the number of Trading
Days during such period in which (A) trading in the Common Stock is suspended
by the NASDAQ or a Subsequent Market on which the Common Stock is then listed,
or (B) after the date declared effective by the Commission, the Underlying
Securities Registration Statement is not effective, or (C) after the date
declared effective by the Commission, the Prospectus included in the Underlying
Securities Registration Statement may not be used by the Holder for the resale
of Underlying Shares. If (a) an Underlying Securities Registration Statement is
not filed on or prior to the Filing Date (as defined under the Registration
Rights Agreement) (if the Company files such Underlying Securities Registration
Statement without affording the Holder the opportunity to review and comment on
the same as required by Section 3(a) of the Registration Rights Agreement, the
Company shall not be deemed to have satisfied this clause (a) until the
Purchasers shall have had four (4) Business Days to review and approve such
Underlying Securities Registration Statement or, if the Purchasers shall have
comments on such Underlying Securities Registration Statement, an amendment
including such comments shall have been filed with the Commission), or (b) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 12d1-2 promulgated under the Exchange Act, within five (5)
days of the date that the Company is notified (orally or in writing, whichever
is earlier) by the Commission that an Underlying Securities Registration
Statement will not be "reviewed," or not subject to further review, or (c) the
Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effective Date, or (d) such Underlying Securities
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the "Effectiveness Period" (as defined in the
Registration Rights Agreement), without being succeeded within ten (10) days by
an amendment to such Underlying Securities Registration Statement or by a
subsequent Underlying Securities Registration Statement filed with and declared
effective by the Commission, or (e) the Common Stock shall be delisted or
suspended from trading on the NASDAQ or on any Subsequent Market for more than
three (3) Business Days, (f) the conversion rights of the Holders are suspended
for any reason or (g) an amendment to the Underlying Securities Registration
Statement is not filed by the Company with the Commission within ten (10) days
of the Commission's notifying the Company that such amendment is required in
order for the Underlying Securities Registration Statement to be declared
effective (any such failure or breach being referred to as an "Event," and for
purposes of clauses (a), (c), (f) the date on which such Event occurs, or for
purposes of clause (b) the date on which such five (5) day period is exceeded,
or for purposes of clauses (d) and (g) the date which such 10 day-period is
exceeded, or for purposes of clause (e) the date on which such three (3)
Business Day-period is exceeded, being referred to as "Event Date"), then each
of the Initial Conversion Price and the Discount Rate shall be decreased by
2.0% on the Event Date and each monthly anniversary thereof until the earlier
to
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(9) $13.45 for the Series A Debentures.
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<PAGE>
occur of the second month anniversary after the Event Date and such time as the
applicable Event is cured (i.e., the Discount Rate would be lowered to 85% as
of the Event Date and 83% as of the one month anniversary of such Event Date).
Commencing on the second month anniversary after the Event Date, the Holder
shall have the option to either (x) require further cumulative 2.0% discounts
to continue or (y) require the Company to pay to the Holder 2.0% of the
aggregate principal amount of Debentures then held by such Holder, in cash, as
liquidated damages and not as a penalty, on the first day of each monthly
anniversary of the Event Date, until such time as the applicable Event is
cured. Any decrease in the Initial Conversion Price and the Discount Rate
pursuant to this Section shall remain in effect notwithstanding the fact that
the Event causing such decrease has been subsequently cured and further monthly
decreases have ceased. The provisions of this Section are not exclusive and
shall in no way limit the Company's obligations under the Registration Rights
Agreement.
(ii) If the Company, at any time while any Debentures are outstanding,
(a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of the
Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of the Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to Holders of Debentures) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share Market
Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock (excluding treasury shares,
if any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of the Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the
Common Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would
purchase at such Per Share Market Value. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such rights or warrants. However, upon the expiration of any right or warrant
to purchase shares of the Common Stock the issuance of which resulted in an
adjustment in the Initial Conversion Price pursuant to this Section, if any
such right or warrant shall expire and shall not have been exercised, the
Initial Conversion Price shall immediately upon such expiration be recomputed
and effective immediately upon such expiration be increased to the price which
it would have been (but reflecting any other adjustments in the Initial
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<PAGE>
Conversion Price made pursuant to the provisions of this Section 4 after the
issuance of such rights or warrants) had the adjustment of the Initial
Conversion Price made upon the issuance of such rights or warrants been made on
the basis of offering for subscription or purchase only that number of shares
of the Common Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
(iv) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while
Debentures are outstanding, shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that is convertible into or
exchangeable for shares of Common Stock ("Common Stock Equivalents") entitling
any Person to acquire shares of Common Stock at a price per share less than the
Conversion Price, then the Conversion Price shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of shares of Common Stock or such
Common Stock Equivalents plus the number of shares of Common Stock which the
offering price for such shares of Common Stock or Common Stock Equivalents
would purchase at the Conversion Price, and the denominator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior
to such issuance plus the number of shares of Common Stock so issued or
issuable, provided, that for purposes hereof, all shares of Common Stock that
are issuable upon exercise or exchange of Common Stock Equivalents shall be
deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such shares of Common Stock
or Common Stock Equivalents are issued.
(v) If the Company, at any time while Debentures are outstanding,
shall distribute to all holders of the Common Stock (and not to Holders of
Debentures) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market
Value of the Common Stock on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; provided, however, that in
the event of a distribution exceeding ten percent (10%) of the net assets of
the Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the holders of a majority in interest of Debentures
then outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the holders of
Debentures of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
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(vi) In case of any reclassification of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder of this Debenture shall have the
right thereafter to, at its option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts
then owing hereunder in respect of this Debenture only into the shares of stock
and other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock
of the Company into which the then outstanding principal amount, together with
all accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) All calculations under this Section 4 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(viii) Whenever the Initial Conversion Price is adjusted pursuant to
any of Section 4(c)(ii) - (v), the Company shall promptly mail to each Holder
of Debentures a notice setting forth the Initial Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
(ix) If (A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock
of the Company, any consolidation or merger to which the Company is a party,
any sale or transfer of all or substantially all of the assets of the Company,
of any compulsory share of exchange whereby the Common Stock is converted into
other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of the Company; then, and in each case, the Company shall cause to be filed at
each office or agency maintained for the purpose of conversion of the
Debentures, and shall cause to be mailed to the Holders of Debentures at their
last addresses as they shall appear upon the stock books of the Company, at
least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders
of the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
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transfer or share exchange; provided, however, that the failure to mail such
notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
Holders are entitled to convert Debentures during the 20-day period commencing
the date of such notice to the effective date of the event triggering such
notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of the Common Stock solely
for the purpose of issuance upon conversion of the Debentures and payment of
interest on the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of
such shares set forth in the Purchase Agreement) be issuable (taking into
account the adjustments and restrictions of Section 4(c)) upon the conversion
of the outstanding principal amount of the Debentures and payment of interest
hereunder. The Company covenants that all shares of the Common Stock that shall
be so issuable shall, upon issue, be duly and validly authorized, issued and
fully paid, nonassessable and, if the Underlying Securities Registration
Statement has been declared effective under the Securities Act, registered for
public sale in accordance with such Underlying Securities Registration
Statement.
(e) Upon a conversion hereunder the Company shall not be required to
issue stock certificates representing fractions of shares of the Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the Per Share Market Value at such time. If the
Company elects not, or is unable, to make such a cash payment, the holder shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(f) The issuance of certificates for shares of the Common Stock on
conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(g) Any and all notices or other communications or deliveries to be
provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed to
the Company, at 221 East 61st Street, New York, NY 10021 (facsimile number
(212) 754-4044), attention Jacob Agam, or such other address or facsimile
number as the Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section, with a copy to Baker & McKenzie, 805
Third Avenue, New York, NY 10022 (facsimile number (212) 759-9133), attention
Francis Fitzpatrick. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid,
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<PAGE>
addressed to each Holder of the Debentures at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no such
facsimile telephone number or address appears, at the principal place of
business of the holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 8:00 p.m.
(New York City time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 8:00 p.m. (New York City time) on
any date and earlier than 11:59 p.m. (New York City time) on such date, (iii)
four days after deposit in the United States mail, (iv) the Business Day
following the date of mailing, if send by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
Section 5. Optional Prepayment.
(a) The Company shall have the right to prepay, exercisable at any
time upon twenty (20) days prior written notice to the Holders of the
Debentures to be prepaid and accompanied by any waiver required by holders of
senior indebtedness of the Company for such prepayment (the "Optional
Prepayment Notice"), from funds legally available therefor at the time of such
prepayment, all or any portion of the outstanding principal amount of the
Debentures which have not previously been repaid or for which Conversion
Notices have not previously been delivered hereunder, at a price equal to the
Optional Prepayment Price (as defined below). Any such prepayment by the
Company shall be in cash and shall be free of any claim of subordination. The
Holders shall have the right to tender, and the Company shall honor, Conversion
Notices delivered prior to the expiration of the twentieth (20th) day after
receipt by the Holders of an Optional Prepayment Notice for such Debentures
(such date, the "Optional Prepayment Date").
(b) If any portion of the Optional Prepayment Price shall not be paid
by the Company by the second Business Day following the Optional Prepayment
Date, the Optional Prepayment Price shall be increased by 15% per annum (to
accrue daily) until paid (which amount shall be paid as liquidated damages and
not as a penalty). In addition, if any portion of the optional Prepayment Price
remains unpaid through the expiration of the Optional Prepayment Date, the
Holder subject to such prepayment may elect by written notice to the Company to
either (x) demand conversion in accordance with the formula and the time period
therefor set forth in Section 4 of any portion of the principal amount of
Debentures for which the Optional Prepayment Price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid Prepayment Principal
Amount"), in which event the applicable Per Share Market Value shall be the
lower of the Per Share Market Value calculated on the Optional Prepayment Date
and the Per Share Market Value as of the Holder's written demand for
conversion, or (y) invalidate ab initio such optional redemption,
notwithstanding anything herein contained to the contrary. If the Holder elects
option (x) above, the Company shall within three (3) Trading Days such election
is deemed delivered hereunder to the Holder the shares of Common Stock issuable
upon conversion of the Unpaid Prepayment Principal Amount subject to such
conversion demand and otherwise perform its obligations hereunder with respect
thereto; or, if the Holder elects option (y) above, the Company shall promptly,
and in any event not later than three Trading Days from receipt of notice of
such election, return to the Holder new Debentures for
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<PAGE>
the full Unpaid Prepayment Principal Amount. If, upon an election under option
(x) above, the Company fails to deliver the shares of Common Stock issuable
upon conversion of the Unpaid Prepayment Principal Amount within the time
period set forth in this Section, the Company shall pay to the Holder in cash,
as liquidated damages and not as a penalty, $2,500 per day until the Company
delivers such Common Stock to the Holder.
Section 6. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Average Price" on any date means the average Per Share Market Value
for the five (5) Trading Days immediately preceding such date.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in
excess of 33% of the voting securities of the Company, (ii) a replacement of
more than one-half of the members of the Company's board of directors which is
not approved by those individuals who are members of the board of directors on
the date hereof in one or a series of related transactions, (iii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company's
securities continue to hold at least 33% of such securities following such
transaction or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $.01 par value per share, of
the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Mandatory Prepayment Amount" for any Debentures shall equal the sum
of (i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided by the Conversion Price on (x) the date the
Mandatory Prepayment Amount is demanded or otherwise due or (y) the date the
Mandatory Prepayment Amount is paid in full, whichever is less, multiplied by
the Average Price on (x) the date the Mandatory Prepayment Amount is demanded
or (y) the date the Mandatory Prepayment Amount is paid in full, whichever is
greater, and (ii) all other amounts, costs, expenses and liquidated damages due
in respect of such Debentures.
"Optional Prepayment Price" for any Debentures shall equal the sum of
(i) the principal amount of Debentures to be prepaid, plus all accrued and
unpaid interest thereon, divided
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<PAGE>
by the Conversion Price on (x) the Optional Prepayment Date or (y) the date the
Optional Prepayment Price is paid in full, whichever is less, multiplied by the
Average Price on (x) the Optional Prepayment Date or (y) the date the Optional
Prepayment Price is paid in full, whichever is greater, and (ii) all other
amounts, expenses, costs and liquidated damages due in respect of such
principal amount.
"Original Issue Date" shall mean the date of the first issuance of the
Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the NASDAQ or on such
Subsequent Market on which the Common Stock is then listed or quoted, or if
there is no such price on such date, then the closing bid price on the NASDAQ
or on such Subsequent Market on the date nearest preceding such date, or (b) if
the Common Stock is not then listed or quoted on the NASDAQ or a Subsequent
Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the
Holders of a majority in interest of the principal amount of Debentures then
outstanding.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Purchase Agreement" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, between the Company and the
original Holders of Debentures, as amended, modified or supplemented from time
to time in accordance with its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Original Issue Date, between the Company and the
original Holders of Debentures, as amended, modified or supplemented from time
to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ or on such Subsequent Market on which the Common Stock is then
listed or quoted, or (b) if the Common Stock is not listed on the NASDAQ or a
Subsequent Market, a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c) if the
Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices);
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<PAGE>
provided, however, that in the event that the Common Stock is not listed or
quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any
day except Saturday, Sunday and any day which shall be a legal holiday or a day
on which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"Underlying Securities Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and liquidated
damages (if any) on, this Debenture at the time, place, and rate, and in the
coin or currency, herein prescribed. This Debenture is a direct obligation of
the Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. The Company may only
voluntarily prepay the outstanding principal amount on the Debentures in
accordance with Section 5 hereof.
Section 8. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 9. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holders hereby irrevocably
submit to the non-exclusive jurisdiction of the state and federal courts
sitting in the City of New York, borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is
not personally subject to the jurisdiction of any such court, or that such
suit, action or proceeding is improper. Each of the Company and the Holder
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by receiving a copy thereof
sent to the Company at the address in effect for notices to it under this
instrument and agrees that such service shall constitute good and sufficient
service of process and
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<PAGE>
notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.
Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Debenture. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Debenture on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Debenture.
Any waiver must be in writing.
Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
Section 13. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
-----------------------------
Name: Jacob Agam
Title: Jacob Agam
Attest:
By:
--------------------------
Name:
Title:
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<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF THE HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. A-1 into shares of
common stock, $.01 par value per share (the "Common Stock"), of IAT Multimedia,
Inc. (the "Company") according to the conditions hereof, 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 and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
----------------------------------------------
Date to Effect Conversion
----------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------
Name
----------------------------------------------
Address
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of IAT Multimedia, Inc. (the
"Company") hereby notifies the addressee hereof that the Company hereby elects
to exercise its right to Series A 5% Debentures Due June 19, 2001
("Debentures") held by the Holder into shares of Common Stock, par value $.01
per share (the "Common Stock") of the Company according to the terms hereof, as
of the date written below. No fee will be charged to the Holder for any
conversion hereunder, except for such transfer taxes, if any which may be
incurred by the Company if shares are to be issued in the name of a person
other than the person to whom this notice is addressed.
Conversion calculations:
----------------------------------------------
Date to Effect Conversion
----------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Signature
----------------------------------------------
Name
----------------------------------------------
Address
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<PAGE>
Exhibit B
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH SUCH SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
IAT MULTIMEDIA, INC.
WARRANT
Dated: June 19, 1998
IAT Multimedia, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, [ ], or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company up to a total of [ ] shares of Common Stock, $.01 par value per
share (the "Common Stock"), of the Company (each such share, a "Warrant Share"
and all such shares, the "Warrant Shares") at an exercise price equal to $13.45
per share (as adjusted from time to time as provided in Section 9, the
"Exercise Price"), at any time and from time to time from and after the date
hereof and through and including June 19, 2003 (the "Expiration Date"), and
subject to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company shall
not be affected by notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly completed and signed, to the Transfer Agent
or to the Company at the office specified in or pursuant to Section 3(b)
together with the legal opinion of counsel to the Holder which is reasonably
satisfactory to the Company to the effect that such transfer is exempt from the
registration
<PAGE>
requirements of the Securities Act of 1933 as amended (the "Securities Act").
Upon any such registration or transfer, a new warrant to purchase Common Stock,
in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations
of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such
New Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 5:30 P.M., Eastern time, at any time and from time to time
on or after the date hereof to and including the Expiration Date. At 5:30 P.M.,
Eastern time on the Expiration Date, the portion of this Warrant not exercised
prior thereto shall be and become void and of no value. Prior to the Expiration
Date, the Company may not call or otherwise redeem this Warrant without the
prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 12
and upon payment of the Exercise Price cash multiplied by the number of Warrant
Shares that the Holder intends to purchase hereunder, in lawful money of the
United States of America, in cash or by certified or official bank check or
checks, all as specified by the Holder in the Form of Election to Purchase, the
Company shall promptly (but in no event later than 3 business days after the
Date of Exercise) issue or cause to be issued and cause to be delivered to or
upon the written order of the Holder and in such name or names as the Holder
may designate, a certificate for the Warrant Shares issuable upon such
exercise, free of restrictive legends other than as required by applicable law
or the provisions of this Warrant. Any person so designated by the Holder to
receive Warrant Shares shall be deemed to have become holder of record of such
Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from
time to time, for a portion of the number of Warrant Shares. If less than all
of the Warrant Shares which may be purchased under this Warrant are exercised
at any time, the Company shall issue or cause
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<PAGE>
to be issued, at its expense, a New Warrant evidencing the right to purchase
the remaining number of Warrant Shares for which no exercise has been evidenced
by this Warrant.
4. Piggyback Registration Rights. Subsequent to the 270th day from the
date hereof and at any time during the term of this Warrant the Company may not
file any registration statement with the Securities and Exchange Commission
(other than registration statements of the Company filed on Form S-8 or Form
S-4, each as promulgated under the Securities Act pursuant to which the Company
is registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction including supplements
thereto, but not additionally filed registration statements in respect of such
securities) at any time when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, unless the Company provides the Holder with not less
than 20 days notice of its intention to file such registration statement and
provides the Holder the option to include any or all of the applicable Warrant
Shares therein. The piggyback registration rights granted to the Holder
pursuant to this Section shall continue until all of the Holder's Warrant
Shares have been sold in accordance with an effective registration statement or
upon the Expiration Date. The Company will pay all registration expenses in
connection therewith.
5. Demand Registration Rights. Subsequent to the 270th day from the
date hereof and at any time during the term of this Warrant when the Warrant
Shares are not registered pursuant to an effective registration statement that
names the Holder as a selling stockholder thereunder, the Holder may make a
written request for the registration under the Securities Act (a "Demand
Registration"), of all of the Warrant Shares (the "Registrable Securities"),
and the Company shall use its best efforts to effect such Demand Registration
as promptly as possible, but in any case within 90 days thereafter. Any request
for a Demand Registration shall specify the aggregate number of Registrable
Securities proposed to be sold and shall also specify the intended method of
disposition thereof. The right to cause a registration of the Registrable
Securities under this Section 5 shall be limited to one such registration. In
any registration initiated as a Demand Registration, the Company will pay all
of its registration expenses in connection therewith. A Demand Registration
shall not be counted as a Demand Registration hereunder until the registration
statement filed pursuant to the Demand Registration has been declared effective
by the Securities and Exchange Commission and maintained continuously effective
for a period of at least 360 days or such shorter period when all Registrable
Securities included therein have been sold in accordance with such registration
statement, provided, however that any days on which such registration statement
is not effective or on which the Holder is not permitted by the Company or any
governmental authority to sell Warrant Shares under such registration statement
shall not count towards such 360-day period.
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the
registration of any certificates for Warrant Shares or Warrants in a name other
than that of the Holder, and the Company shall not be required to issue or
cause to be issued or deliver or cause to be delivered the certificates for
Warrant Shares unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid. The
Holder
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<PAGE>
shall be responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and/or
substitution (as applicable) for and upon cancellation hereof, or in lieu of
and substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants for a
New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges as
the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of
this entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and
nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9. Upon each such adjustment of the
Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(a) If the Company, at any time while this Warrant is outstanding, (i)
shall pay a stock dividend (except scheduled dividends paid on outstanding
preferred stock as of the date hereof which contain a stated divided rate) or
otherwise make a distribution or distributions on shares of its Common Stock
(as defined below) or on any other class of capital stock and not the Common
Stock) payable in shares of Common Stock, (ii) subdivide outstanding shares of
Common Stock into a larger number of shares, or (iii) combine outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding after such event. Any
adjustment made pursuant to this Section shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination, and shall apply to
successive subdivisions and combinations.
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<PAGE>
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property equal to the amount of Warrant
Shares such Holder would have been entitled to had such Holder exercised this
Warrant immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange. The terms of any such consolidation, merger,
sale, transfer or share exchange shall include such terms so as to continue to
give to the Holder the right to receive the securities or property set forth in
this Section 9(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
9(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Company's independent certified public accountants that
regularly examines the financial statements of the Company (an "Appraiser").
(d) If, at any time while this Warrant is outstanding, the Company
shall issue or cause to be issued rights or warrants to acquire or otherwise
sell or distribute shares of Common Stock to all holders of Common Stock for a
consideration per share less than the Exercise Price then in effect, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to the
price (calculated to the nearest cent) determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issuance, and (ii) the number of shares of Common
Stock which the aggregate consideration received (or to be received, assuming
exercise or conversion in full of such rights, warrants and convertible
securities) for the issuance of such additional shares of Common Stock would
purchase at the Exercise Price, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately after the
issuance of such additional shares. Such adjustment shall be made successively
whenever such an issuance is made.
(e) For the purposes of this Section 9, the following clauses shall
also be applicable:
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<PAGE>
(i) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe
for or purchase Common Stock or securities convertible or exchangeable into
shares of Common Stock, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 9 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(g) Whenever the Exercise Price is adjusted pursuant to Section 9(c)
above, the Holder, after receipt of the determination by the Appraiser, shall
have the right to select an additional appraiser (which shall be a nationally
recognized accounting firm), in which case the adjustment shall be equal to the
average of the adjustments recommended by each of the Appraiser and such
appraiser. The Holder shall promptly mail or cause to be mailed to the Company,
a notice setting forth the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Such adjustment
shall become effective immediately after the record date mentioned above.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock
of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall
be required in connection with any reclassification
of the Common Stock of the Company, any consolidation
or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets
of the Company, or any compulsory share
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<PAGE>
exchange whereby the Common Stock is converted into
other securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the affairs
of the Company,
then the Company shall cause to be mailed to each Holder at their last
addresses as they shall appear upon the Warrant Register, at least 10 calendar
days prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 11, be
issuable on the exercise of this Warrant, the Company shall pay an amount in
cash equal to the Exercise Price multiplied by such fraction.
11. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (Eastern time) on a business day, (ii) the business
day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern time) on any date and earlier than 11:59
p.m. (Eastern time) on such date, (iii) the business day following the date of
mailing, if sent by nationally recognized overnight courier service with
instructions to deliver by next Business Day, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to Orinda Capital
International, Inc., 221 East 61st Street, New York, NY 10021, Facsimile No.:
(212) 754-4044, Attention: Jacob Agam, or (ii) if to the Holder, to the Holder
at the address or facsimile number appearing on the Warrant Register or such
other address or facsimile number as the Holder may provide to the Company in
accordance with this Section 11.
12. Warrant Agent.
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<PAGE>
(a) The Company shall serve as warrant agent under this Warrant. Upon
ten (10) days' notice to the Holder, the Company may appoint a new warrant
agent.
(b) Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's
last address as shown on the Warrant Register.
13. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Warrant may be amended only in writing signed by the Company and the Holder.
(b) Subject to Section 13(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to
the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a
part of this Warrant and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
IAT MULTIMEDIA, INC.
By: /s/ Jacob Agam
------------------------------
Name: Jacob Agam
Title: Jacob Agam
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<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of
Common Stock under the foregoing Warrant)
To [ ]:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of IAT
Multimedia, Inc. and, encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise
Price (as defined in the Warrant) for the number of shares of Common Stock to
which this Form of Election to Purchase relates, together with any applicable
taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
-----------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right to
purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated: , Name of Holder:
--------------------- ----
(Print)
----------------------------
(By:)
------------------------------
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
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<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________ the right represented by the
within Warrant to purchase ____________ shares of Common Stock of IAT
Multimedia, Inc. to which the within Warrant relates and appoints
________________ attorney to transfer said right on the books of IAT
Multimedia, Inc. with full power of substitution in the premises.
Dated:
- ---------------, ----
-----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
-----------------------------------
Address of Transferee
-----------------------------------
-----------------------------------
In the presence of:
- --------------------------
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<PAGE>
IAT MULTIMEDIA, INC.
Geschafthaus Wasserschloss
Aarestrasse 17
CH-5300 Vogelsang-Turgi
Switzerland
Contact Klaus Grisseman CFO: 011-41 56 223 5022
FOR IMMEDIATE RELEASE
IAT MULTIMEDIA OBTAINS $17 MILLION FUNDING IN PRIVATE PLACEMENT
FOR ACQUISITIONS AND WORKING CAPITAL
Vogelsang-Turgi, Switzerland, June 23, 1998.
IAT Multimedia, Inc. (Nasdaq National Market: IATA) today
announced that it has entered into an agreement to sell up to $17 million of
its common stock and convertible debentures in a private placement facility.
Such facility provides that the Company may borrow in two tranches, the first,
completed today, consisted of the issuance of 198,255 share of its common stock
and $3 million of its 5% convertible debentures due 2001 in exchange for $5
million in cash. The second tranche will consist of up to $12 million in
additional convertible debentures and is conditioned on the Company's prior or
simultaneous consummation of an acquisition meeting certain criteria, among
other things. Warrants to purchase up to 300,000 shares of common stock are
also issuable pursuant to the facility. The private placement was arranged by
Century City Securities, Inc.
The Company has undertaken to register with the Securities
and Exchange Commission within 75 days the shares of common stock issued today
and subsequently issuable upon conversion of the debentures and exercise of the
warrants. However, the investors may not resell the shares issued upon
conversion at their option for a period of 9 months from the date of issuance
and thereafter resales by the investors are subject to certain volume
limitations. The debentures are convertible into shares of common stock of the
Company at the option of the holders and the Company (subject to certain
limitations) and automatically on the second anniversary of the effectiveness
of the registration statement for the underlying shares.
"This is an important step for IAT," commented Jacob Agam,
IAT's Chairman. "Now the Company is positioned to take advantage of these
additional funds and consummate potential acquisition opportunities without
delay."
The private placement was made to accredited investors in
reliance on Section 4(2) of the Securities Act of 1933 and Regulation D
promulgated thereunder. The securities offered have not been registered under
the Securities Act of 1933 and may not be
<PAGE>
offered or sold in the United States absent registration or an applicable
exemption from registration requirements. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such state.
The statements in this press release contain forward-looking statements which
are subjected to risks and uncertainties. Such statements, including those
regarding, among other things, the Company's strategy, the ability of the
Company to raise necessary financing, are dependent on a number of factors,
including market conditions and availability of financing, only some of which
are within the Company's control.
This press release is not an offer to sell or solicitation of an offer to buy
securities. Any such offer may only be made pursuant to an effective
registration statement.
<PAGE>
Dr. Erich Weber and Mr. Robert Weiss Join the Board of
IAT Multimedia, Inc.
Vogelsang-Turgi, Switzerland, June 24, 1998.
IAT Multimedia, Inc. (Nasdaq National Market: IATA) today announced
the appointment of two new members of the Board of Directors, Robert Weiss and
Dr. Erich Weber. Robert Weiss, age 51, is a highly regarded, European-based PC
specialist, with 25 years of experience in the technology and professional
computing industry. He is a senior consultant to various high- profile, leading
PC companies, and publishes on the industry. Dr. Erich Weber, 56, is an expert
in data processing and related software, as well as co-founder and member of
the Board of Directors of a Swiss EDP-consulting firm. Messrs. Weiss and Weber
replace Reiner Hallauer and Arnold Wasserman who both recently resigned.
Mr. Agam, IAT's Chairman, commented: "We are excited about Mr. Weiss
and Dr. Weber joining IAT's Board of Directors. The specific experience,
relationship and skills they bring will be invaluable for IAT at this stage
when we are readying ourselves for the integration of potential acquisition
targets into our company."
IAT markets in Germany high-performance personal computers assembled
according to customer specifications and sold under the trade name "Trinology,"
as well as components and peripherals for PCs. IAT also licenses its
state-of-the-art, customizable proprietary visual communications technology
designed to enable users to participate in real time, multi-point video
conferencing and providing improved features and functionality over competing
technology.
The statements made in this press release contain forward-looking statements
which are subjected to risks and uncertainties. Such statements, including
those regarding, among other things, the Company's strategy, the ability of the
Company to raise necessary financing, are dependent on a number of factors,
including market conditions and availability of financing, only some of which
are within the Company's control.
This press release is not an offer to sell or solicitation of an offer to buy
securities. Any such offer may only be made pursuant to an effective
registration statement.
# # #
