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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: December 31, 1998
IAT MULTIMEDIA, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 000-22101 13-3920210
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification)
incorporation)
Geschaftshaus Wasserschloss CH-5300 Vogelsang-Turgi,
Aarestrasse 17 Switzerland
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. 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.
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Pursuant to an Exchange Agreement dated as of December 31, 1998, by
and among IAT Multimedia, Inc. ("IAT"), JNC Opportunity Fund Ltd. and JNC
Strategic Fund Ltd. ("Strategic"), Strategic agreed to exchange the 198,255
shares of IAT Common Stock it purchased from IAT in a private placement on June
19, 1998 for 2,000 shares of IAT's Series B Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock"). IAT issued the 2,000 shares of
Preferred Stock to Strategic effective as of January 7, 1999. The 2,000 shares
of Preferred Stock are convertible into 198,255 shares of IAT Common Stock,
subject to adjustment for certain events including stock splits,
recapitalizations, mergers or consolidations of IAT. The Preferred Stock is
convertible into IAT Common Stock at the option of Strategic at any time and, at
the option of IAT, at any time on or after December 30, 1999 or earlier, in the
event the closing sales price of the IAT Common Stock as reported by the Nasdaq
National Market attains certain levels during certain periods of time. In
addition, any shares of Preferred Stock not converted by January 7, 2002 will
automatically be converted into shares of IAT Common Stock. The Preferred Stock
has no voting rights, has a liquidation preference of $1.00 per share and is
redeemable by IAT under certain circumstances. Pursuant to the Exchange
Agreement, IAT agreed to register for resale the 198,255 shares of IAT Common
Stock issuable upon conversion of the Preferred Stock.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
3.2(a) - Amended and Restated Certificate of Incorporation
10.56 - Exchange Agreement dated as of December 31, 1998 by
and among the Registrant, JNC Opportunity Fund
Ltd. and JNC Strategic Fund Ltd.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IAT MULTIMEDIA, INC.
By: /s/ Klaus Grissemann
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Klaus Grissemann
Chief Financial Officer and Secretary
Dated: January 11, 1999
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
IAT MULTIMEDIA, INC.
(Under Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
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IAT Multimedia, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
1. The name of the Corporation is IAT Multimedia, Inc. The Certificate
of Incorporation of the Corporation was filed with the Secretary of State of
the State of Delaware on September 27, 1996 under the name IAT Holdings, Inc.
2. This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Section 242 and 245 of the
General Corporation Law of the State of Delaware.
3. The Certificate of Incorporation, as amended and restated, is
hereby amended and restated, to read in its entirety as follows:
ARTICLE ONE
The name of the Corporation is IAT Multimedia, Inc. (the "Corporation").
ARTICLE TWO
The registered office of the Corporation is to be located at 1013
Centre Road, City of Wilmington, County of New Castle, State of Delaware. The
name of its registered agent at that address is Corporation Service Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE FOUR
A. Classes of Stock. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is 60,000,000; 50,000,000 shall be Common Stock, par value $.01 per share, and
10,000,000 shall be Preferred Stock, par value $.01 per share.
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B. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
and the rights of series of Preferred Stock which may from time to time come
into existence, the holders of the Common Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any assets of the
Corporation legally available therefor, such dividends as may be declared from
time to time by the Board of Directors.
2. Voting Rights. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the by-laws of the Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
C. Preferred Stock.
1. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock may be issued from time to time in one or more series. The
Board of Directors of the Corporation is hereby expressly authorized to
provide, by resolution or resolutions duly adopted by it prior to issuance, for
the creation of each such series and to fix the designation and the powers,
preferences, rights, qualifications, limitations and restrictions relating to
the shares of each such series. The authority of the Board of Directors with
respect to each series of Preferred Stock shall include, but not be limited to,
determine the following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value if different from the par value
thereof;
(b) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of such
voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, and the preference or
relation which such dividends shall bear to the dividends payable on any shares
of stock of any other class or any other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable upon shares of such series upon,
and the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any distribution of the assets,
of the Corporation;
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(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund, and, if so, the extent to and the
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for retirement or other
corporate purposes and the terms and provisions relating to the operation
thereof;
(g) whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of
Preferred Stock or any other securities, and, if so, the price or prices or the
rate or rates of conversion or exchange and the method, if any, or adjusting
the same, and any other terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or the
making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or shares of stock of any
other class or any other series of Preferred Stock;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock,
including additional shares of such series or of any other series of Preferred
Stock or of any other class;
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations and
restrictions, thereof.
The powers, preferences and relative, participating, optional and
other special rights of each such series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series any time outstanding. All shares of any one
series of Preferred Stock shall be identical in all respects with all other
shares of such series, except that shares of any one series issued at different
times may differ as to the dates from which dividends thereof shall be
cumulative.
2. Series B Convertible Preferred Stock.
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as Series B Convertible Preferred Stock and
the number of shares so designated shall be 2,000 (which shall not be subject
to increase without the consent of the holders of the Series B Convertible
Preferred Stock (each, a "Holder" and collectively, the "Holders"). Each share
of Series B Convertible Preferred Stock shall have a par value of $.01 and a
stated value of $1,000 (the "Stated Value").
Section 2. Voting Rights. Except as otherwise provided herein and
as otherwise required by law, the Series B Convertible Preferred Stock shall
have no voting rights. However, so long as any shares of Series B Convertible
Preferred Stock are outstanding, the
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Corporation shall not, without the affirmative vote of the Holders of all of
the shares of the Series B Convertible Preferred Stock then outstanding, alter
or change adversely the powers, preferences or rights given to the Series B
Convertible Preferred Stock.
Section 3. Liquidation. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary (a
"Liquidation"), the Holders shall, before any distribution or payment shall be
made to the holders of any Junior Securities, be entitled to receive out of the
assets of the Corporation, whether such assets are capital or surplus, for each
share of Series B Convertible Preferred Stock an amount equal to the sum of (a)
$1.00, and (b) the amount which, assuming full conversion of the Series B
Convertible Preferred Stock and after taking into account the distribution
pursuant to clause (a), would be distributable to the holders of the Common
Stock into which such share of Series B Convertible Preferred Stock is then
convertible, and if the assets of the Corporation shall be insufficient to pay
in full such amounts, then the entire assets to be distributed to the Holders
shall be distributed among the Holders ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Corporation or the effectuation by the
Corporation of a transaction or series of related transactions in which more
than 33% of the voting power of the Corporation is disposed of, or a
consolidation or merger of the Corporation with or into any other corporation
or corporations shall not be treated as a Liquidation, but instead shall be
subject to the provisions of Section 4. The Corporation shall mail written
notice of any such Liquidation, not less than 45 days prior to the payment date
stated therein, to each record Holder.
Section 4. Conversion.
(a)(i) Conversions at Option of Holder. Each share of Series B
Convertible Preferred Stock shall be convertible into shares of Common Stock
(subject to the limitations set forth in Section 4(a)(iv) hereof) at the
Conversion Ratio (as defined in Section 6) at the option of the Holder, at any
time and from time to time, from and after the Original Issue Date. Holders
shall effect conversions by surrendering the certificate or certificates
representing the shares of Series B Convertible Preferred Stock to be converted
to the Corporation, together with the form of conversion notice attached hereto
as Exhibit A (a "Holder Conversion Notice"). Each Holder Conversion Notice
shall specify the number of shares of Series B Convertible Preferred Stock to
be converted and the date on which such conversion is to be effected, which
date may not be prior to the date the Holder delivers such Holder Conversion
Notice by facsimile (the "Holder Conversion Date"). If no Holder Conversion
Date is specified in a Holder Conversion Notice, the Holder Conversion Date
shall be the date that the Holder Conversion Notice is deemed delivered
hereunder. If the Holder is converting less than all shares of Series B
Convertible Preferred Stock represented by the certificate or certificates
tendered by the Holder with the Holder Conversion Notice, or if a conversion
hereunder cannot be effected in full for any reason, the Corporation shall
promptly deliver to such Holder (in the manner and within the time set forth in
Section 4(b)) a certificate representing the number of shares of Series B
Convertible Preferred Stock as have not been converted.
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(ii) Conversions at the Option of the Corporation. Subject to the
provisions of this paragraph (ii), each share of Series B Convertible Preferred
Stock shall be convertible, in whole or in part, into shares of Common Stock at
the Conversion Ratio at the option of the Corporation (x) at any time and from
time to time on or after December 30, 1999 or (y) prior thereto, at any time
that the closing sales price of the Common Stock, as reported on NASDAQ, for
any fifteen (15) consecutive Trading Days ending no later than five (5) Trading
Days prior to the date of the Corporation Conversion Notice (as defined below)
has exceeded the Conversion Price. Notwithstanding the foregoing, the
Corporation shall not be permitted to deliver requests for the conversion of
shares of Series B Convertible Preferred Stock if there are not sufficient
shares of Common Stock authorized and reserved for issuance upon such
conversion. The Corporation shall exercise its right to require conversions by
delivering to the Holder the form of conversion notice attached hereto as
Exhibit B (a "Corporation Conversion Notice"). Each Corporation Conversion
Notice shall specify the number of shares of Series B Convertible Preferred
Stock to be converted and the date on which such conversion is to be effected,
which date may not be prior to the date such Corporation Conversion Notice is
deemed to have been delivered hereunder (a "Corporation Conversion Date"). If
no Corporation Conversion Date is specified in a Corporation Conversion Notice,
the Corporation Conversion Date shall be the date that such Corporation
Conversion Notice is deemed delivered hereunder. Subject to Section 4(b)
hereof, each Corporation Conversion Notice, once given, shall be irrevocable. A
Holder Conversion Date, a Corporation 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
Corporation Conversion Notice are sometimes referred to as a "Conversion
Notice." Notwithstanding anything to the contrary contained herein, a
conversion pursuant to this paragraph (ii) shall not be subject to the
provisions of Section 4(a)(iv)(A).
(iii) Automatic Conversion. Subject to the provisions in this
paragraph (iii), all outstanding shares of Series B Convertible Preferred Stock
for which conversion notices have not previously been received or for which
redemption has not been made or required hereunder shall be automatically
converted on the third anniversary of the Original Issue Date 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 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 Corporation shall have defaulted on its covenants
and obligations hereunder or under the Exchange Agreement, the Purchase
Agreement or Registration Rights Agreement. 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 paragraph (iii) shall not be
subject to the provisions of Section 4(a)(iv)(A).
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(iv) Certain Conversion Restrictions.
(A) The Holder agrees not to convert shares of Series B Convertible
Preferred Stock 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 shares of Series B Convertible Preferred Stock held by such
Holder after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in this
Section applies and, to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which shares
of Series B Convertible Preferred Stock are convertible shall be in the sole
discretion of the Holder. The provisions of this Section 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 Corporation. Other Holders shall be unaffected by
any such waiver.
(B) The Holder agrees not to convert shares of Series B Convertible
Preferred Stock 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 9.999% of the then issued
and outstanding shares of Common Stock, including shares issuable upon
conversion of the shares of Series B Convertible Preferred Stock held by such
Holder after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in this
Section applies and, to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which shares
of Series B Convertible Preferred Stock are convertible shall be in the sole
discretion of the Holder. The provisions of this Section 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 Corporation. Other Holders shall be unaffected by
any such waiver.
(b) Not later than three (3) Trading Days after a Conversion Date,
the Corporation 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 shares of Series B Convertible Preferred Stock,
and (ii) one or more certificates representing the number of shares of Series B
Convertible Preferred Stock not converted, provided, however, that the
Corporation shall not be obligated to issue certificates evidencing the shares
of the Common Stock issuable upon conversion of the shares of Series B
Convertible Preferred Stock until certificates evidencing the shares of Series
B Convertible Preferred Stock are delivered for conversion to the Corporation
or the Holder notifies the Corporation that such certificates have been
mutilated, lost, stolen or destroyed and provides a bond (or other adequate
security) reasonably satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith. If such
certificate or certificates are not delivered to or as directed by the Holder
by the third (3rd) Trading Day after the later of a Conversion Date or the date
of compliance with the delivery
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requirements contained in the proviso of the preceding sentence, the Holder
shall be entitled by written notice to the Corporation at any time on or before
its receipt of such certificate or certificates thereafter, to rescind such
conversion (whether subject to a Conversion Notice or a conversion pursuant to
Section 4(a)(iii)), in which event the Corporation shall immediately return the
certificates evidencing the shares of Series B Convertible Preferred Stock
tendered for conversion.
(c)(i) The conversion price for each share of Series B Convertible
Preferred Stock in effect on any Conversion Date shall be $10.088 (the
"Conversion Price").
(ii) If the Corporation, at any time while any shares of Series B
Convertible Preferred Stock are outstanding, shall (a) pay a stock dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities or pari passu securities payable in shares of Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of shares,
(c) combine outstanding shares of Common Stock into a smaller number of shares,
or (d) issue by reclassification and exchange of the Common Stock any shares of
capital stock of the Corporation, then the Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding before such event and of which the denominator shall be the
number of shares of Common Stock outstanding after such event. Any adjustment
made pursuant to this Section 4(c)(ii) 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 Corporation, at any time while any shares of Series B
Convertible Preferred Stock are outstanding, shall issue rights, warrants or
options to all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Per Share Market Value at the record date mentioned below, 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 such rights, warrants or options, plus the number of shares of
Common Stock which the aggregate offering price of the total number of shares
so offered would purchase at such Per Share Market Value, 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
offered for subscription or purchase. 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, warrant or
option to purchase shares of Common Stock the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Section 4(c)(iii), if any
such right, warrant or option shall expire and shall not have been exercised,
the Conversion Price shall immediately upon such expiration shall be recomputed
and effective immediately upon such expiration shall be increased to the price
which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section 4 upon the
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issuance of other rights or warrants) had the adjustment of the Conversion
Price made upon the issuance of such rights, warrants, or options been made on
the basis of offering for subscription or purchase only that number of shares
of Common Stock actually purchased upon the exercise of such rights, warrants
or options actually exercised.
(iv) If the Corporation, at any time while shares of Series B
Convertible Preferred Stock are outstanding, shall distribute to all holders of
Common Stock (and not to Holders) evidences of its indebtedness or assets or
rights or warrants to subscribe for or purchase any security (excluding those
referred to in Sections 4(c)(ii)-(iv) above), then in each such case the
Conversion Price at which each share of Series B Convertible Preferred Stock
shall thereafter be convertible shall be determined by multiplying the
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
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value 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 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 Corporation, if the Holders of a majority in interest of the Series B
Convertible Preferred Stock dispute such valuation, 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 Corporation) (an "Appraiser") selected in good faith by the
Holders of a majority in interest of the shares of Series B Convertible
Preferred Stock then outstanding; and provided, further, that the Corporation,
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 the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned above.
(v) 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 shall have the right thereafter
to convert the then outstanding shares of Series B Convertible Preferred Stock
and any other amounts then owing thereunder 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 shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the
Corporation into which the then outstanding shares of Series B Convertible
Preferred Stock and any other amounts then owing thereunder could have been
converted immediately prior to such reclassification or share exchange would
have been entitled.
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(vi) In case of any merger or consolidation of the Corporation with
or into another Person, then a Holder shall have the right thereafter to
convert its shares of Series B Convertible Preferred Stock into the shares of
stock and other securities, cash and property receivable upon or deemed to be
held by holders of Common Stock following such merger or consolidation and such
Holder shall be entitled, upon such event or series of related events, to
receive such amount of securities, cash and property as the shares of Common
Stock into which such shares of Series B Convertible Preferred Stock could have
been converted immediately prior to such merger or consolidation would have
been entitled. The terms of any such merger or consolidation shall include such
terms so as continue to give the Holders of Series B Convertible Preferred
Stock the right to receive the securities, cash and property set forth in this
Section upon any conversion following such event. This provision shall
similarly apply to successive such events.
(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 Conversion Price is adjusted pursuant to
Sections 4(c)(ii)-(iv) the Corporation shall promptly mail to each Holder, a
notice setting forth the Conversion Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment.
(ix) If (A) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock; (B) the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; (C) the
Corporation 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
Corporation shall be required in connection with any reclassification of the
Common Stock of the Corporation, any consolidation or merger to which the
Corporation is a party, any sale or transfer of all or substantially all of the
assets of the Corporation, of any compulsory share of exchange whereby the
Common Stock is converted into other securities, cash or property; (E) the
Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation; or (F) the
Corporation shall make any tender or other offer or exchange pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, stock, cash or property of the Corporation; then, and in each
case, the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of Series B Convertible
Preferred Stock, and shall cause to be mailed to the Holders at their last
addresses as they shall appear upon the stock books of the Corporation, 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
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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, 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 shares of Series B Convertible
Preferred Stock during the 20-day period commencing the date of such notice to
the effective date of the event triggering such notice.
(d) The Corporation covenants that it will at all times reserve and
keep available out of its authorized and unissued shares of Common Stock solely
for the purpose of issuance upon conversion of Series B Convertible Preferred
Stock, 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 Common Stock as shall (subject to any additional
requirements of the Corporation 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 all outstanding shares of
Series B Convertible Preferred Stock. The Corporation covenants that all shares
of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid, nonassessable and freely tradeable,
subject to the legend requirements of Section 3.1 (b) of the Purchase
Agreement.
(e) Upon a conversion hereunder the Corporation shall not be
required to issue stock certificates representing fractions of shares of 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 Corporation elects not, or is unable, to make such a cash payment, the
Holder of a share of Series B Convertible Preferred Stock 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 Common Stock on conversion of
Series B Convertible Preferred Stock 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
Corporation 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 shares of
Series B Convertible Preferred Stock so converted.
(g) Shares of Series B Convertible Preferred Stock converted into
Common Stock or redeemed in accordance with the terms hereof shall be canceled
and may not be reissued.
(h) Any and all notices or other communications or deliveries to be
provided by the Holders, 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 Corporation, at 221 East
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<PAGE>
61st Street, New York, NY 10021 (facsimile number (212) 754-4044), attention
Jacob Agam, or such other address or facsimile number as the Corporation may
specify for such purposes by notice to the Holders delivered in accordance with
this Section, with a copy to Bachner, Tally, Polevoy & Misher LLP, 380 Madison
Avenue, New York, NY 10017 (facsimile number (212) 682-5729), attention Steven
Skolnick. Any and all notices or other communications or deliveries to be
provided by the Corporation 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, addressed to
each Holder at the facsimile telephone number or address of such Holder
appearing on the books of the Corporation, 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 Redemption.
(a) The Corporation shall have the right, exercisable at any time
upon 20 Trading Days' notice (an "Optional Redemption Notice") to the Holders
of the Series B Convertible Preferred Stock given at any time after the
Original Issue Date to redeem all or any portion of the shares of Series B
Convertible Preferred Stock which have not previously been converted or
redeemed, at a price equal to the Optional Redemption Price (as defined below).
The entire Optional Redemption Price shall be paid in cash. Holders may convert
(and the Corporation shall honor such conversions in accordance with the terms
hereof) any shares of Series B Convertible Preferred Stock, including shares
subject to an Optional Redemption Notice, during the period from the date
thereof through the 20th Trading Day after the receipt of an Optional
Redemption Notice.
(b) If any portion of the Optional Redemption Price shall not be
paid by the Corporation by the 20th Trading Day after the delivery of an
Optional Redemption Notice, interest shall accrue thereon at the rate of 15%
per annum (to accrue daily) until the Optional Redemption Price plus all such
interest is paid in full. In addition, if any portion of the Optional
Redemption Price remains unpaid after the date due, the Holder of the Series B
Convertible Preferred Stock subject to such redemption may elect, by written
notice to the Corporation given at any time thereafter, to either (i) demand
conversion of all or any portion of the shares of Series B Convertible
Preferred Stock for which such Optional Redemption Price, plus interest
thereof, has not been paid in full (the "Unpaid Redemption Shares"), in which
event the Per Share Market Value for such shares shall be the lower of the Per
Share Market Value calculated on the date the
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<PAGE>
Optional Redemption Price was originally due and the Per Share Market Value as
of the Holder's written demand for conversion, or (ii) invalidate ab initio
such redemption, notwithstanding anything herein contained to the contrary. If
the Holder elects option (i) above, the Corporation shall within three (3)
Trading Days of its receipt of such election deliver to the Holder the shares
of Common Stock issuable upon conversion of the Unpaid Redemption Shares
subject to such Holder conversion demand and otherwise perform its obligations
hereunder with respect thereto; or, if the Holder elects option (ii) above, the
Corporation shall promptly, and in any event not later than three (3) Trading
Days from receipt of Holder's notice of such election, return to the Holder all
of the Unpaid Redemption Shares.
(c) The "Optional Redemption Price" shall equal the sum of (i) the
product of (A) the number of shares of Series B Convertible Preferred Stock to
be redeemed and (B) the product of (1) the average Per Share Market Value for
the five (5) Trading Days immediately preceding (x) the date of the Optional
Redemption Notice or (y) the date of payment in full by the Corporation of the
Optional Redemption Price, whichever is greater, and (2) the Conversion Ratio
calculated on the date of the Optional Redemption Notice, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such shares
of Series B Convertible Preferred Stock.
Section 6. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, the numerator of
which is Stated Value (including any accrued but unpaid late fees thereon), and
the denominator of which is the Conversion Price at such time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agreement" means the Exchange Agreement, dated as of the
Original Issue Date, by and among the Corporation, JNC Opportunity Fund Ltd.
and the original Holder, as amended, modified or supplemented from time to time
in accordance with its terms.
"Junior Securities" means the Common Stock and all other equity
securities of the Corporation which are junior in rights and liquidation
preference to the Series B Convertible Preferred Stock.
"NASDAQ" shall mean the Nasdaq National Market.
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<PAGE>
"Original Issue Date" shall mean the date of the first issuance of
any shares of the Series B Convertible Preferred Stock regardless of the number
of transfers of any particular shares of Series B Convertible Preferred Stock
and regardless of the number of certificates which may be issued to evidence
such Series B Convertible Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the NASDAQ or on
the 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 on a Subsequent
Market, the closing bid price for a shares 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 are not then publicly traded the fair market value of a Common
Share as determined by an Appraiser selected in good faith by the Holders of a
majority of the shares of the Series B Convertible Preferred Stock.
"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 Securities Purchase Agreement, dated
as of June 19, 1998, among the Corporation, JNC Opportunity Fund Ltd. and the
original Holder hereof, as amended by the Exchange Agreement and as may be
further amended, modified or supplemented from time to time in accordance with
its terms.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 19, 1998, among the Corporation, JNC Opportunity
Fund Ltd. and the original Holder hereof, as amended by the Exchange Agreement
and as may be further amended, modified or supplemented from time to time in
accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Market" means each of the New York Stock Exchange,
American Stock Exchange or the Nasdaq SmallCap Market.
"Trading Day" means (a) a day on which the Common Stock is traded
on the NASDAQ or on the Subsequent Market on which the Common Stock is then
listed or quoted, as the case may be, or (b) if the Common Stock s not listed
on the NASDAQ or on 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
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<PAGE>
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); 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 Securities Registration Statement" means a registration
statement that meets the requirements of the Registration Rights Agreement and
registers the resale of all Underlying Shares by the recipient thereof, who
shall be named as a "selling stockholder" thereunder.
"Underlying Shares" means, collectively, the shares of Common Stock
into which the Shares are convertible and the shares of Common Stock issuable.
ARTICLE FIVE
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The election of directors need not be by written ballot, unless
the by-laws so provide.
(2) The Board of Directors shall have power without the assent or
vote of the stockholders to make, alter, amend, change, add to or repeal the
by-laws of the Corporation.
ARTICLE SIX
The Corporation shall indemnify and advance expenses to the fullest
extent permitted by Section 145 of the General Corporation Law of Delaware, as
amended from time to time, each person who is or was a director or officer of
the Corporation and the heirs, executors and administrators of such a person.
ARTICLE SEVEN
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on application in a summary way
of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or
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<PAGE>
receivers appointed for the Corporation under the provisions of Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the Corporation under the
provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or a class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
ARTICLE EIGHT
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
ARTICLE NINE
No director of this Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit.
IN WITNESS WHEREOF, IAT Multimedia, Inc. has caused this Certificate
to be signed by its proper officer, this 6th day of January, 1999.
IAT MULTIMEDIA, INC.
By: /s/ Klaus Grisseman
----------------------------------
Klaus Grisseman
Chief Financial Officer
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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 shares of Series B
Convertible Preferred Stock)
The undersigned hereby elects to convert the number of shares of Series B
Convertible Series B Convertible Preferred Stock indicated below, into shares
of Common Stock, par value $.01 per share (the "Common Stock"), of IAT
Multimedia, Inc. (the "Corporation") 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 Corporation 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
----------------------------------------
Number of shares of Series B Convertible
Preferred Stock 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
NOTICE OF CONVERSION AT
THE ELECTION OF THE CORPORATION
The undersigned in the name and on behalf of IAT Multimedia, Inc. (the
"Corporation") hereby notifies the addressee hereof that the Corporation hereby
elects to exercise its right to convert [ ] shares of its Series B Convertible
Series B Convertible Preferred Stock (the "Series B Convertible Preferred
Stock") held by the Holder into shares of Common Stock, $.01 par value (the
"Common Stock") of the Corporation 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
Corporation 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
----------------------------------------
Number of shares of Series B Convertible
Preferred Stock to be Converted
----------------------------------------
Number of shares of Common Stock to be
Issued
----------------------------------------
Applicable Conversion Price
----------------------------------------
Name of Holder
----------------------------------------
Address of Holder
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<PAGE>
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT, dated as of December 31, 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
collectively referred to herein as the "Purchasers."
WHEREAS, the Company and the Purchasers are parties to a Securities
Purchase Agreement, dated as of June 19, 1998 (the "Purchase Agreement"),
pursuant to which, among other things, for a purchase price of $2,000,000, the
Company issued and sold to Strategic 198,255 shares (the "Shares") of the
Company's common stock, par value $.01 per share (the "Common Stock"); and
WHEREAS, the Company and Strategic have agreed to exchange (the "Exchange")
the Shares for 2,000 shares of the Company's to be created Series B Convertible
Preferred Stock, par value $.01 per share with a stated value of $1,000 per
share (the "Preferred Stock"), which shares shall be convertible into shares of
Common Stock and which have the rights, preferences and privileges set forth in
the Certificate of Designation of the Company in the form attached hereto as
Exhibit A, which the Company will file with the Delaware Secretary of State as
soon as practicable after the execution of this Exchange Agreement (the
"Certificate of Designation").
NOW THEREFORE, in consideration of the mutual covenants contained in this
Exchange Agreement and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and Purchasers, intending to be
legally bound, agree as follows:
Capitalized terms used but not defined herein that are defined in the
Purchase Agreement shall have the respective meaning ascribed to them in the
Purchase Agreement.
1. Exchange. Upon receipt of evidence satisfactory to Strategic of the
acceptance for filing of the Certificate of Designation by the Delaware
Secretary of State (the date of such receipt, the "Exchange Date"), the Company
will deliver to Strategic stock certificates representing an aggregate of 2,000
shares of the Preferred Stock, registered in the name of Strategic
(collectively, the "Preferred Shares"), and Strategic shall deliver to the
Company the original stock certificate evidencing its ownership of the Shares,
together with a completed stock power therefor.
2. Registration. No later than January 10, 1999, the Company shall prepare
and file with the Commission a supplement (the "Supplement") to the Company's
effective Registration Statement on Form S-3 (Registration No. 333-64111) (the
"Registration Statement") in order to provide that the Registration Statement
covers resales by Strategic of the shares of Common Stock issuable to Strategic
upon conversion of the Preferred Shares. The Company will provide Strategic with
a copy of the proposed Supplement no less than one (1) Business Day prior to the
filing thereof with the Commission.
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<PAGE>
3. Purchase Agreement and Registration Rights Agreement. The Purchase
Agreement and the Registration Rights Agreement shall be deemed amended to the
extent required to provide for the Exchange. The term "Common Shares" in the
Registration Rights Agreement shall hereafter refer to the shares of Common
Stock issuable upon conversion of the Preferred Shares. Other than as expressly
amended hereby, the Purchase Agreement and the Registration Rights Agreement are
not amended and remain in full force and effect. The provisions of Section 3.1
of the Purchase Agreement shall apply with respect to the Preferred Shares.
4. Representation and Warranties of the Company.
The Company hereby represents and warrants as follows:
(a) The execution, delivery and performance by the Company of this Exchange
Agreement and the consummation of the transactions contemplated hereby (i) are
within the power of Company and (ii) have been duly authorized by all necessary
actions on the part of Company. Upon issuance, the Preferred Shares shall have
been duly authorized and issued and the Common Stock issuable upon conversion
thereof will be validly issued, fully paid and non-assessable, free and clear of
all Liens.
(b) This Exchange Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of Company,
enforceable against the Company in accordance with its terms.
(c) The execution, delivery and performance of this Exchange Agreement by
the Company and the consummation by the Company of the transactions contemplated
thereby do not and will not conflict or violate any provision of its certificate
of incorporation, bylaws or other charter documents of the Company, each as
amended through the date hereof.
(d) The Company has paid no commission or other remuneration directly or
indirectly to any person for soliciting the Exchange.
5. Representation and Warranties of Strategic. Strategic hereby reaffirms
the representations and warranties given by it in Section 2.2 of the Purchase
Agreement and further represents and warrants as follows:
(a) The execution, delivery and performance by Strategic of this Exchange
Agreement and the consummation of the transactions contemplated hereby (i) are
within the power of Strategic, (ii) do not violate the charter or offering
documents of Strategic, and (iii) have been duly authorized by all necessary
actions on the part of Strategic.
(b) This Exchange Agreement has been duly executed and delivered by
Strategic and constitutes a legal, valid and binding obligation of Strategic,
enforceable against Strategic in accordance with its terms.
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<PAGE>
6. Indemnification. Strategic shall 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 defined in the Registration Rights Agreement)
based upon or arising out of any misrepresentation or breach of any
representation or warranty made by Strategic in this Agreement. To the extent
that the foregoing undertaking by Strategic is found unenforceable for any
reason, Strategic shall make the maximum contribution to the payment and
satisfaction of such undertaking which is permissible under applicable law.
7. Governing Law. This Exchange 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 laws thereof. Each of the
Company and the Purchasers 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 Purchasers 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 the Purchase 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.
8. Execution. This Exchange Agreement may be executed in 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
IAT MULTIMEDIA, INC.
By: /s/ Klaus Grissemann
--------------------------------------------
Name:
Title:
JNC STRATEGIC FUND LTD.
By: Encore Capital Management, L.L.C., its
Investment Advisor
By: /s/ Neil T. Chau
--------------------------------------------
Neil T. Chau, Managing Member
JNC OPPORTUNITY FUND LTD. (solely to agree,
consent and acknowledge the amendment to the Purchase
Agreement and Registration Rights Agreement resulting from
the execution of this Exchange Agreement.)
By: Encore Capital Management, L.L.C., its
Investment Advisor
By: /s/ Neil T. Chau
-------------------------------------------
Neil T. Chau, Managing Member
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