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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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): April 28, 2000
GlobalMedia.com
(Exact Name of Registrant as Specified in Its Charter)
Nevada
(State or Other Jurisdiction of Incorporation)
0-23491 91-1842480
(Commission File Number) (IRS Employer Identification No.)
400 Robson Street, Vancouver, BC Canada V6B 2B4
(Address of Principal Executive Offices) (Zip Code)
(604) 688-9994
(Registrant's Telephone Number, Including Area Code)
Global Media Corp.
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On April 28, 2000, GlobalMedia.com (the "Company") and RGC International
Investors, LDC (the "Investor") entered into a Securities Purchase Agreement
which provides for the sale and issuance in two separate closings of two new
series of convertible preferred stock of the Company. In the first closing
pursuant to the Securities Purchase Agreement, which occurred on April 28, 2000,
the Company issued and sold to the Investor, for an aggregate purchase price of
$5,000,000, 5,000 shares of Series B Convertible Preferred Stock (the "Series B
Preferred Stock") and five year warrants to purchase an aggregate of 388,500
shares of Common Stock at a purchase price of $7.0785 per share (the "Series B
Warrants") (collectively, the "First Closing"). The Series B Preferred Stock and
Series B Warrants were sold in a private placement pursuant to Regulation D
under the Securities Act of 1933, as amended.
The Securities Purchase Agreement also provides for the issuance and sale to the
Investor of 5,000 shares of the Company's Series C Convertible Preferred Stock
(the "Series C Preferred Stock" and, together with the Series B Preferred Stock,
the "Preferred Stock"), and the issuance to Investor of warrants to purchase
additional shares of Common Stock in connection therewith (the "Series C
Warrants" and, together with the Series B Warrants, the "Warrants")
(collectively, the "Second Closing"), subject to certain conditions being
satisfied, none of which are within the control of the Investor. Such conditions
are more specifically set forth in Section 7 of the Securities Purchase
Agreement, a copy of which is filed as Exhibit 99.1. The price of the Series C
Preferred Stock and Series C Warrants will be based on the market price of the
Common Stock at the time of the Second Closing.
The Series B Preferred Stock is convertible from time to time at the option of
the Investor into shares of the Company's Common Stock based upon the lesser of
a fixed conversion price of $6.435 or a variable conversion price based on the
future market price of the Common Stock. As described in the Certificate of
Designations, Preferences and Rights of the Series B Preferred Stock (the
"Series B Certificate of Designations"), the variable conversion price is equal
to 100% (or 80% in the event the Company's Common Stock is delisted from the
Nasdaq Stock Market) of the average of seven consecutive lowest closing bid
prices during the 35 trading day period immediately prior to conversion.
At the time of conversion of each share of Series B Preferred Stock, the
Investor also has the option to purchase, at a per share price equal to the
conversion price in effect at the time of conversion, a number of additional
shares of Common Stock equal to the number of shares into which the Series B
Preferred Stock is being converted (the "Investment Options"). The exercise in
full of the Investment Options could result in an additional $5,000,000 being
invested by the Investor, for a total of $10,000,000. To the extent not
previously converted and subject to certain conditions and limitations as set
forth in the Series B Certificate of Designations, the Series B Preferred Stock
will automatically convert into Common Stock on April 28, 2003.
The terms of the Series B Preferred Stock are set forth in the Series B
Certificate of Designations which was filed with the Nevada Secretary of
State on April 28, 2000 and a copy of which is filed as Exhibit 99.2.
2
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The Series B Preferred Stock does not have voting rights and the Series C
Preferred Stock will not have voting rights, except that the holders of each
such class will have voting rights with regard to issues directly affecting the
class.
Pursuant to a Registration Rights Agreement entered between the Company and the
Investor, the Company is obligated to file with the Securities and Exchange
Commission, no later than June 14, 2000, a Registration Statement to register
for resale the shares of the Company's Common Stock which may be acquired upon
conversion of, and exercise of the Investment Options relating to, the Preferred
Stock and upon exercise of the Warrants.
The Company's press release, dated May 2, 2000, announcing the transactions
contemplated by the Securities Purchase Agreement, as well as the Securities
Purchase Agreement dated as of April 28, 2000 between the Company and the
Investor, the Series B Certificate of Designations, the Series B Warrant, and
the Registration Rights Agreement are filed as exhibits to this Current Report
on Form 8-K. This summary description of the transactions and the press release
are qualified in their entirety by reference to the documents filed as exhibits
hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) Exhibits
99.1 Securities Purchase Agreement dated April 28, 2000 by and
among GlobalMedia.com and RGC International Investors, LDC.
99.2 Certificate of Designations, Preferences and Rights of Series
B Convertible Preferred Stock of GlobalMedia.com
99.3 Stock Purchase Warrant dated April 28, 2000 from
GlobalMedia.com to RGC International Investors, LDC.
99.4 Registration Rights Agreement dated April 28, 2000 by and
among GlobalMedia.com and RGC International Investors, LDC.
99.5 Press Release announcing transaction, dated May 2, 2000.
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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.
GlobalMedia.com
(Registrant)
Date: May 12, 2000 By: /s/ Michael Metcalfe
-----------------------------------
Michael Metcalfe
Chairman of the Board
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EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of April
28, 2000, by and among GlobalMedia.com, a Nevada corporation, with
headquarters located at 400 Robson Street, Vancouver, British Columbia V6B
2B4, Canada ("COMPANY"), and each of the purchasers set forth on the
signature pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 under Regulation D ("REGULATION D") as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 ACT");
B. The Company has authorized two new series of preferred stock, the
first designated as Series B Convertible Preferred Stock (the "SERIES B
PREFERRED STOCK"), having the rights, preferences and privileges set forth in
the Certificate of Designations, Rights and Preferences attached hereto as
EXHIBIT "A-1" (the "SERIES B CERTIFICATE OF DESIGNATION") and the second
designated as Series C Convertible Preferred Stock (the "SERIES C PREFERRED
STOCK"), having the rights, preferences and privileges set forth in the
Certificate of Designations, Rights and Preferences attached hereto as
EXHIBIT "A-2" (the "SERIES C CERTIFICATE OF DESIGNATION" and, collectively
with the Series B Certificate of Designation, the "CERTIFICATES OF
DESIGNATION") ;
C. The Preferred Shares (as defined below) are convertible into
shares of common stock, $0.001 par value per share, of the Company (the
"COMMON STOCK"), upon the terms and subject to the limitations and conditions
set forth in the Certificates of Designation;
D. The Company has (i) authorized the issuance to the Buyers of
warrants, in the form attached hereto as EXHIBIT "B-1", to purchase an
aggregate of Three Hundred Eighty-Eight Thousand, Five Hundred (388,500)
shares of Common Stock, upon the terms and conditions and subject to the
limitations and conditions set forth in the Warrants dated April 28, 2000,
issuable in connection with the Series B Preferred Stock (the "SERIES B
WARRANTS") and (ii) authorized the issuance to the Buyers of warrants, in the
form attached hereto as "EXHIBIT B-2," to acquire a number of shares of
Common Stock equal to 50% multiplied by the quotient equal to $5,000,000
divided by the average of the Closing Bid Prices (as defined in the
Certificates of Designation) for the five (5) consecutive Trading Days (as
defined in the Certificates of Designation) ending one (1) Trading prior to
the Closing Date (as defined below) with respect to the Second Closing (as
defined below) (the "SERIES C WARRANTS" and, together with the Series B
Warrants, the "WARRANTS"). The shares of Common Stock issuable upon exercise
of or otherwise pursuant to the Warrants are referred to herein collectively
as the "WARRANT SHARES."
E. The Buyers desire to purchase and the Company desires to issue
and sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Five Thousand (5,000) shares of Series B Preferred Stock
(together with any shares of Series B Preferred Stock issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto in
accordance with the terms thereof, the "SERIES B PREFERRED SHARES") and an
aggregate of Five Thousand (5,000)
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shares of Series C Preferred Stock (together with any shares of Series C
Preferred Stock issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, the
"SERIES C PREFERRED SHARES" and, collectively with the Series B Preferred
Shares, the "PREFERRED SHARES"), and (ii) Series B Warrants to purchase Three
Hundred Eighty-Eight Thousand, Five Hundred (388,500) shares of Conversion
Stock and Series C Warrants to purchase a number of shares of Common Stock as
determined above, for an aggregate purchase price of Ten Million Dollars
($10,000,000);
F. Each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, the number of Preferred Shares and Warrants as is
set forth immediately below its name on the signature pages hereto;
G. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement, in the form attached hereto as EXHIBIT "C" (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
NOW THEREFORE, the Company and each of the Buyers severally
(and not jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES
AND WARRANTS.
a. PURCHASE OF PREFERRED SHARES AND WARRANTS. On each
Closing Date (as defined below), the Company shall issue and sell to each
Buyer and each Buyer severally agrees to purchase from the Company such
number of Preferred Shares and Warrants for the aggregate purchase price with
respect to such applicable Closing (as defined below) as is set forth
immediately below such Buyer's name on the signature pages hereto. The
issuance, sale and purchase of the Preferred Shares and Warrants shall take
place at two (2) closings (each a "CLOSING"), the first of which is
hereinafter referred to as the "FIRST CLOSING" and the second of which is
referred to as the "SECOND CLOSING." The aggregate number of Series B
Preferred Shares to be issued at the First Closing is Five Thousand (5,000)
and the aggregate number of Series B Warrants to be issued at the First
Closing is 388,500, for an aggregate purchase price of Five Million Dollars
($5,000,000) (the "FIRST CLOSING PURCHASE PRICE") and the aggregate number of
Series C Preferred Shares to be issued at the Second Closing is Five Thousand
(5,000) and the aggregate number of Series C Warrants to be issued at the
Second Closing shall be determined by multiplying 50% by the quotient of
$5,000,000 divided by the average of the Closing Bid Prices for the five (5)
consecutive Trading Days ending one (1) Trading Day prior to the Closing Date
(as defined below) with respect to the Second Closing, for an aggregate
purchase price of Five Million Dollars ($5,000,000) (the "SECOND CLOSING
PURCHASE PRICE" and, collectively with the First Closing Purchase Price, the
"PURCHASE PRICE"). Subject to the satisfaction (or waiver) of the conditions
thereto set forth in Section 6 and Section 7 below, (i) at the First Closing,
the Company shall issue and sell to each Buyer and each Buyer shall purchase
from the Company the number of Series B Preferred Shares and Series B
Warrants which such Buyer is purchasing hereunder and as set forth below such
Buyer's name on the signature pages hereto and (ii) at the Second Closing,
the Company shall issue and sell to each Buyer and each
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Buyer shall purchase from the Company the number of Series C Preferred Shares
and Series C Warrants as is set forth below such Buyer's name on the
signature pages hereto.
b. FORM OF PAYMENT. On each Closing Date (as defined
below), (i) each Buyer shall pay the applicable Purchase Price for the
Preferred Shares and Warrants to be issued and sold to it at the applicable
Closing by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against delivery
of duly executed certificates representing such number of Preferred Shares
and Warrants which such Buyer is purchasing and (ii) the Company shall
deliver such certificates duly executed on behalf of the Company, to the
Buyer, against delivery of such applicable Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or
waiver) of the conditions thereto set forth in Section 6 and Section 7 below,
the date and time of the issuance and sale of the Preferred Shares pursuant
to this Agreement (the "CLOSING DATE") shall be (i) in the case of the First
Closing, 12:00 noon Eastern Standard Time on April 28, 2000 and (ii) in the
case of Second Closing, as soon as practicable (but no later than 12:00 noon
Eastern Standard Time on the fifth (5th) business day) following the
satisfaction (or waiver) of the conditions to the Second Closing set forth in
Sections 6 and 7 below (but in no event later than the fifth (5th) business
day following the satisfaction of the condition set forth in Section
7(b)(ii)) or, in each case, such other mutually agreed upon time. Each
closing shall occur on the applicable Closing Date at the offices of Ballard
Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia,
Pennsylvania 19103, or at such other location as may be agreed to by the
parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company solely as
to such Buyer that:
a. INVESTMENT PURPOSE. As of the date hereof, the
Buyer is purchasing the Preferred Shares and the shares of Common Stock
issuable upon conversion of or otherwise pursuant to the Preferred Shares
(including, without limitation, (i) such additional shares of Common Stock as
are issuable as a result of the events described in Articles V, VI.D(b) or
VI.E of the Certificates of Designation and Section 2(c) of the Registration
Rights Agreement and (ii) the shares of Common Stock issuable pursuant to the
investment options described in Article VI.G of the Certificates of
Designation (the "INVESTMENT OPTIONS")) (such shares of Common Stock being
collectively referred to herein as the "CONVERSION SHARES") and the Warrants
and the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants (the "WARRANT SHARES" and, collectively with the
Preferred Shares, Warrants, Investment Options and Conversion Shares, the
"SECURITIES") for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; PROVIDED, HOWEVER, that by
making the representations herein, the Buyer does not agree to hold any of
the Securities for any minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
(an "ACCREDITED INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that
the Securities are being offered and sold to it in reliance upon specific
exemptions from the
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registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer
and its advisors, if any, have been afforded the opportunity to ask questions
of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant
degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that (i)
except as provided in the Registration Rights Agreement, the sale or re-sale
of the Securities has not been and is not being registered under the 1933 Act
or any applicable state securities laws, and the Securities may not be
transferred unless (a) the Securities are sold pursuant to an effective
registration statement under the 1933 Act, (b) the Buyer shall have delivered
to the Company an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Securities to be sold or transferred may
be sold or transferred pursuant to an exemption from such registration, (c)
the Securities are sold or transferred to an "affiliate" (as defined in Rule
144 promulgated under the 1933 Act (or a successor rule) ("RULE 144")) of the
Buyer who agrees to sell or otherwise transfer the Securities only in
accordance with this Section 2(f) and who is an Accredited Investor or (d)
the Securities are sold pursuant to Rule 144; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any
re-sale of such Securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein
to the contrary, the Securities may be pledged as collateral in connection
with a BONA FIDE margin account or other lending arrangement.
g. LEGENDS. The Buyer understands that the Preferred
Shares and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares and Warrant
Shares, may bear a
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restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
"The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended or any state securities laws.
The securities may not be sold, transferred or
assigned in the absence of an effective
registration statement for the securities under
said Act and applicable state securities laws, or
an opinion of counsel, in form, substance and
scope customary for opinions of counsel in
comparable transactions, that registration is not
required under said Act or unless sold pursuant
to and in compliance with Rule 144 under said
Act."
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without
registration under the 1933 Act and such sale or transfer is effected or (c)
such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 (which shall consist of the
documentation customarily executed by a seller and its broker, if any, in
connection with a proposed sale under Rule 144). The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable federal and state
securities law requirements, including prospectus delivery requirements, if
any.
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the
Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and
this Agreement constitutes, and upon execution and delivery by the Buyer of
the Registration Rights Agreement, such agreement will constitute, valid and
binding agreements of the Buyer enforceable in accordance with their terms.
i. RESIDENCY. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and
each of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority
(corporate and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used, operated and
conducted. SCHEDULE 3(a) sets forth a list of all of the Subsidiaries of the
Company and the jurisdiction in which each is
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incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material
Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect
on (i) the Securities, (ii) the business, operations, assets, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as
a whole, or (iii) on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"Subsidiaries" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to file and
perform its obligations under the Certificates of Designation, consummate the
transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement, the Registration Rights Agreement and the Warrants by the
Company, the filing of the Certificates of Designation and the consummation
by it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Preferred Shares and the Warrants and the
issuance and reservation for issuance of the Conversion Shares issuable upon
conversion of or otherwise pursuant to the Preferred Shares (including upon
exercise of the Investment Options contained therein) and the Warrant Shares
issuable upon exercise of or otherwise pursuant to the Warrants) have been
duly authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes, and upon execution and delivery
by the Company of the Registration Rights Agreement and the Warrants and upon
the execution and filing of the Certificates of Designation, each of such
agreements and instruments will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms.
c. CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists of (i) 200,000,000 shares of
Common Stock of which 23,553,486 shares are issued and outstanding, 7,897,975
shares are reserved for issuance pursuant to the Company's stock option
plans, 5,580,892 shares are reserved for issuance pursuant to securities
(other than Preferred Shares and the Warrants) exercisable for, or
convertible into or exchangeable for shares of Common Stock and 9,264,843 (2x
currently required) shares are reserved for issuance upon conversion of or
otherwise pursuant to the Preferred Shares (including upon exercise of the
Investment Options) and exercise of or otherwise pursuant to the Warrants
(subject to adjustment pursuant to the Company's covenant set forth in
Section 4(h) below); and (ii) 100,000,000 shares of preferred stock, 8,500 of
which are designated as Series A Convertible Preferred Stock, 4,175 of which
are issued and outstanding. All of such outstanding shares of capital stock
are, or upon issuance will be, duly authorized, validly issued, fully paid
and nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances imposed through the actions or failure
to act of the Company. Except as disclosed in SCHEDULE 3(c), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings,
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claims or other commitments or rights of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for any shares
of capital stock of the Company or any of its Subsidiaries, or arrangements
by which the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of its
Subsidiaries, (ii) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any
of its or their securities under the 1933 Act (except the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares, the Warrants, the Conversion Shares or
Warrant Shares. The Company has furnished to the Buyer true and correct
copies of the Company's Articles of Incorporation as in effect on the date
hereof ("ARTICLES OF INCORPORATION"), the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the material rights
of the holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company's
Chief Executive or Chief Financial Officer on behalf of the Company as of the
Closing Date.
d. ISSUANCE OF SHARES. Upon the filing of the
Certificates of Designation, the Preferred Shares will be duly authorized,
and upon issuance in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances with respect to the issue thereof and shall
not be subject to preemptive rights or other similar rights of stockholders
of the Company and will not impose personal liability upon the holder
thereof. The Conversion Shares and Warrant Shares are duly authorized and
reserved for issuance, and, upon conversion of or otherwise pursuant to the
Preferred Shares and exercise of or otherwise pursuant to the Warrants in
accordance with the terms thereof and exercise of the Investment Options in
accordance with Article VI.G of the Certificates of Designation, will be
validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights
or other similar rights of stockholders of the Company and will not impose
personal liability upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of or otherwise pursuant to
the Preferred Shares (including upon exercise of the Investment Options
contained in the Certificates of Designation) and upon issuance of the
Warrant Shares upon exercise of or otherwise pursuant to the Warrants. The
Company's directors and executive officers have studied and fully understand
the nature of the Securities being sold hereunder. The Company further
acknowledges that its obligation to issue Conversion Shares and Warrant
Shares upon conversion of or otherwise pursuant to the Preferred Shares
(including upon exercise of the Investment Options) or exercise of or
otherwise pursuant to the Warrants in accordance with this Agreement, the
Certificates of Designation and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company. Taking the
foregoing into account, the Company's Board of Directors has determined, in
its good faith business judgment, that the issuance of the Securities
hereunder and under the Certificates of Designation and the Warrants and the
consummation of the transactions contemplated hereby and thereby are in the
best interest of the Company and its stockholders.
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f. SERIES OF PREFERRED STOCK. The terms, designations,
powers, preferences and relative participating and optional or special
rights, and the qualifications, limitations and restrictions of each series
of preferred stock of the Company (other than the Preferred Shares) are as
stated in the Articles of Incorporation, filed on or prior to the date
hereof, and the Bylaws. The terms, designations, powers, preferences and
relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of the Preferred Shares will be
as stated in the Certificates of Designation.
g. NO CONFLICTS. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation,
the filing of the Certificates of Designation and the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Conversion
Shares (including those issuable upon exercise of the Investment Options) and
Warrant Shares) will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its Subsidiaries is in violation of its
Articles of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company
or any of its Subsidiaries in default) under, and neither the Company nor any
of its Subsidiaries has taken any action or failed to take any action that
would give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company
or any of its Subsidiaries is a party or by which any property or assets of
the Company or any of its Subsidiaries is bound or affected, except for
possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries,
if any, are not being conducted, and shall not be conducted so long as a
Buyer owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity except where such violation would not
have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants in accordance with the terms hereof or thereof or
to issue and sell the Preferred Shares and Warrants in accordance with the
terms hereof and to issue the Conversion Shares upon conversion of or
otherwise pursuant to the Preferred Shares (including upon exercise of the
Investment Options) and the Warrant Shares upon exercise of or otherwise
pursuant to the Warrants. Except as disclosed in SCHEDULE 3(g),
<PAGE>
all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is not in
violation of the listing requirements of the Nasdaq National Market
("NASDAQ"), and does not reasonably anticipate that the Common Stock will be
delisted by Nasdaq in the foreseeable future. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise
to any of the foregoing.
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as
disclosed in SCHEDULE 3(h), since July 31, 1999, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to each Buyer true and complete copies of the SEC Documents, except
for such exhibits and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of
the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, 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. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have
been amended or updated in subsequent filings prior to the date hereof). As
of their respective dates, the financial statements of the Company included
in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to July 31, 1999 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
i. ABSENCE OF CERTAIN CHANGES. Since July 31, 1999,
there has been no material adverse change and no material adverse development
in the assets, liabilities, business, properties, operations, financial
condition, results of operations or prospects of the Company or any of its
Subsidiaries.
<PAGE>
j. ABSENCE OF LITIGATION. There is no action, suit,
claim, proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its Subsidiaries, threatened against
or affecting the Company or any of its Subsidiaries, or their officers or
directors in their capacity as such, that could have a Material Adverse
Effect. SCHEDULE 3(j) contains a complete list and summary description of any
pending or threatened proceeding against or affecting the Company or any of
its Subsidiaries, without regard to whether it would have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
k. PATENTS, COPYRIGHTS, ETC.
(i) The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and
copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to conduct its
business as now operated (and, except as set forth in SCHEDULE 3(k) hereof,
to the best of the Company's knowledge, as presently contemplated to be
operated in the future); there is no claim or action by any person pertaining
to, or proceeding pending, or to the Company's knowledge threatened, which
challenges the right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(k) hereof, to the best of
the Company's knowledge, as presently contemplated to be operated in the
future); to the best of the Company's knowledge, the Company's or its
Subsidiaries' current and intended products, services and processes do not
infringe on any Intellectual Property or other rights held by any person; and
the Company is unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of their Intellectual Property.
(ii) All of the Company's computer software and
computer hardware, and other similar or related items of automated,
computerized or software systems that are used or relied on by the Company in
the conduct of its business or that were, or currently are being, sold or
licensed by the Company to customers (collectively, "INFORMATION
TECHNOLOGY"), are Year 2000 Complaint. For purposes of this Agreement, the
term "YEAR 2000 COMPLIANT" means, with respect to the Company's Information
Technology, that the Information Technology is designed to be used prior to,
during and after the calendar Year 2000 A.D., and the Information Technology
used during each such time period will accurately receive, provide and
process date and time data (including, but not limited to, calculating,
comparing and sequencing) from, into and between the 20th and 21st centuries,
including the years 1999 and 2000, and leap-year calculations, and will not
malfunction, cease to function, or provide invalid or incorrect results as a
result of the date or time data, to the extent that other information
technology, used in combination with the Information Technology, properly
exchanges date and time data with it.
l. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor any of
<PAGE>
its Subsidiaries is a party to any contract or agreement which in the
judgment of the Company's officers has or is expected to have a Material
Adverse Effect.
m. TAX STATUS. Except as set forth on SCHEDULE 3(m),
the Company and each of its Subsidiaries has made or filed all federal, state
and foreign income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on
such returns, reports and declarations, except those being contested in good
faith and has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
state or local tax. Except as set forth on SCHEDULE 3(m), none of the
Company's tax returns is presently being audited by any taxing authority.
n. CERTAIN TRANSACTIONS. Except as set forth on
SCHEDULE 3(n) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of
stock options disclosed on SCHEDULE 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
o. DISCLOSURE. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in
all material respects and the Company has not omitted to state any material
fact necessary in order to make the statements made herein or therein, in
light of the circumstances under which they were made, not misleading. No
event or circumstance has occurred or exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company
under the 1933 Act).
p. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this
Agreement and the transactions contemplated hereby. The
<PAGE>
Company further acknowledges that no Buyer is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and that any statement
made by any Buyer or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyers'
purchase of the Securities and has not been relied upon by the Company, its
officers or its directors in any way. The Company further represents to each
Buyer that the Company's decision to enter into this Agreement has been based
solely on the independent evaluation by the Company and its representatives.
q. NO INTEGRATED OFFERING. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities to the
Buyers. The issuance of the Securities to the Buyers will not be integrated
with any other issuance of the Company's securities (past, current or future)
(including the Company's Series A Convertible Preferred Stock and Warrants
issued in connection therewith) for purposes of any stockholder approval
provisions applicable to the Company or its securities.
r. NO BROKERS. The Company has taken no action which
would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments relating to this Agreement or the
transactions contemplated hereby, except for dealings with Broadmark Capital
Corporation, whose commissions and fees will be paid for by the Company.
s. PERMITS; COMPLIANCE. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and
to carry on its business as it is now being conducted (collectively, the
"COMPANY PERMITS") except for any Company Permits the failure of which to
possess would not have a Material Adverse Effect, and there is no action
pending or, to the knowledge of the Company, threatened regarding suspension
or cancellation of any of the Company Permits. Neither the Company nor any of
its Subsidiaries is in conflict with, or in default or violation of, any of
the Company Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect. Since July 31, 1999, neither the Company nor
any of its Subsidiaries has received any notification from any governmental
agency or authority with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations
would not have a Material Adverse Effect.
t. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE 3(t), there
are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations
of Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and
<PAGE>
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the
Company's knowledge, threatened in connection with any of the foregoing. The
term "ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of chemicals,
pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored,
used or disposed of in compliance with applicable law, no Hazardous Materials
are contained on or about any real property currently owned, leased or used
by the Company or any of its Subsidiaries, and no Hazardous Materials were
released on or about any real property previously owned, leased or used by
the Company or any of its Subsidiaries during the period the property was
owned, leased or used by the Company or any of its Subsidiaries, except in
the normal course of the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in SCHEDULE 3(t), there
are no underground storage tanks on or under any real property owned, leased
or used by the Company or any of its Subsidiaries that are not in compliance
with applicable law.
u. TITLE TO PROPERTY. The Company and its Subsidiaries
have good and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them which is material
to the business of the Company and its Subsidiaries, in each case free and
clear of all liens, encumbrances and defects except such as are described in
SCHEDULE 3(u) or such as would not have a Material Adverse Effect. Any real
property and facilities held under lease by the Company and its Subsidiaries
are held by them under valid, subsisting and enforceable leases with such
exceptions as would not have a Material Adverse Effect.
v. INSURANCE. The Company and each of its Subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company believes to
be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
w. INTERNAL ACCOUNTING CONTROLS. The Company and each
of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally
<PAGE>
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
x. FOREIGN CORRUPT PRACTICES. Neither the Company, nor
any of its Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in the course
of his actions for, or on behalf of, the Company, used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
y. SOLVENCY. The Company (both before and after giving
effect to the transactions contemplated by this Agreement) is solvent (I.E.,
its assets have a fair market value in excess of the amount required to pay
its probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead it to
reasonably conclude that the Company would not have the ability to, nor does
it intend to take any action that would impair its ability to, pay its debts
from time to time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with respect to
its most recent fiscal year end and does not anticipate or know of any basis
upon which its auditors might issue a qualified opinion in respect of its
current fiscal year.
z. NO INVESTMENT COMPANY. The Company is not, and upon
the issuance and sale of the Securities as contemplated by this Agreement,
the Warrants and the Certificates of Designation will not be, an "investment
company" required to be registered under the Investment Company Act of 1940
(an "INVESTMENT COMPANY"). The Company is not controlled by an Investment
Company.
aa. FORM SB-2 OR FORM S-1 ELIGIBILITY. The Company is
currently eligible to register the resale of its Common Stock on a
registration statement on Form SB-2 or Form S-1 under the 1933 Act. There
exist no facts or circumstances of which the Company is aware that would
prohibit or delay the preparation and filing of a registration statement on
either Form SB-2 or Form S-1 with respect to the Registrable Securities (as
defined in the Registration Rights Agreement) within the time periods
referred to therein.
bb. NO GENERAL SOLICITATION. Neither the Company nor
any distributor participating on the Company's behalf in the transactions
contemplated hereby, if any, nor any person acting for the Company, or any
such distributor, has conducted any "general solicitation," as such term is
defined in Regulation D, with respect to any of the Securities being offered
hereby.
<PAGE>
4. COVENANTS.
cc. BEST EFFORTS. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7
of this Agreement.
dd. FORM D; BLUE SKY LAWS. The Company agrees to file
a Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities
or "blue sky" laws of the states of the United States (or to obtain an
exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date.
ee. REPORTING STATUS; ELIGIBILITY TO USE FORM SB-2 OR
FORM S-1. The Company represents and warrants that it meets the requirements
for use of Form SB-2 or Form S-1 for registration of the sale by the Buyers
of the Registrable Securities (as defined in the Registration Rights
Agreement). The Company's Common Stock is registered under Section 12(g) of
the 1934 Act. So long as any Buyer beneficially owns any of the Securities,
the Company shall timely file all reports required to be filed with the SEC
pursuant to the 1934 Act, and the Company shall not terminate its status as
an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination. The
Company further agrees to take all necessary action to meet the "registrant
eligibility" requirements set forth in the general instructions to Form S-3
as soon as practicable after the date hereof and thereafter to take all
necessary actions to maintain such eligibility.
ff. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Preferred Shares and the Warrants and from the
exercise of the Warrants in the manner set forth in SCHEDULE 4(d) attached
hereto and made a part hereof and shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its currently existing
direct or indirect Subsidiaries).
gg. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST REFUSAL.
Subject to the exceptions described below, the Company will not, without the
prior written consent of Rose Glen Capital Management, L.P. ("ROSE GLEN"),
negotiate or contract with any party to obtain additional equity financing
(including debt financing with an equity component) during the period (the
"LOCK-UP PERIOD") beginning on the Closing Date and ending one hundred twenty
(120) days from the date the Registration Statement (as defined in the
Registration Rights Agreement) required pursuant to Section 2(a) of the
Registration Rights Agreement is declared effective (the "EFFECTIVE DATE")
(plus any days following the Effective Date in which sales cannot be made
thereunder); PROVIDED, that in the event that the Second Closing does not
occur within thirty (30) days of the Effective Date, the Lock-up Period will
end ninety (90) days from the Effective Date; and PROVIDED, FURTHER, that
Rose Glen will not withhold its consent with respect to a transaction by the
Company which involves the issuance of up to $15,000,000 of Common Stock at a
price per share equal to not less than 80% of the average of the Closing Bid
Prices (as defined in the Certificates of Designation) of the Common Stock
for the five (5) consecutive Trading Days (as defined in the Certificate of
Designation) preceding the Closing
<PAGE>
Date with respect to the First Closing (but in no event less than $6.10),
with warrants to purchase a number of shares of Common Stock not to exceed
20% multiplied by the quotient equal to the aggregate purchase price paid for
such Common Stock purchased divided by such five-day average Closing Bid
Price, with such warrants having an exercise price of not less than 125% of
such five-day average Closing Bid Price (but in no event less than $8.00). In
addition, subject to the exceptions described below, the Company will not
conduct any equity financing (including debt with an equity component)
("FUTURE OFFERINGS") during the period beginning on the Closing Date and
ending two hundred forty (240) days after the end of the Lock-up Period,
unless it shall have first delivered to Rose Glen, at least fifteen (15)
business days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, and attaching to such notice a
binding term sheet or letter of intent (each, a "TERM SHEET") (which term
sheet may be subject to customary conditions to closing, including
satisfactory due diligence and agreement on definitive documentation)
executed by the Company and the other party to such proposed Future Offering
(which Term Sheet shall contain reasonably sufficient information regarding
the terms and conditions of such proposed Future Offering such that Rose Glen
is able to make an informed decision as to whether it will exercise its right
of first refusal hereunder), and providing Rose Glen an option during the ten
(10) day period following delivery of such notice to purchase its pro rata
share (based on the ratio that the number of Preferred Shares purchased by it
(or its affiliate) hereunder bears to the aggregate number of Preferred
Shares purchased hereunder) of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this sentence and the preceding sentence are
collectively referred to as the "CAPITAL RAISING LIMITATIONS"). In the event
the terms and conditions of a proposed Future Offering are amended in any
respect after delivery of the notice to Rose Glen concerning the proposed
Future Offering, the Company shall deliver a new notice to Rose Glen
describing the amended terms and conditions of the proposed Future Offering
and Rose Glen thereafter shall have an option during the ten (10) day period
following delivery of such new notice to purchase its pro rata share of the
securities being offered on the same terms as contemplated by such proposed
Future Offering, as amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future Offering. The
Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership, joint
venture, alliance or similar strategic transaction (the primary purpose of
which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company. The Capital
Raising Limitations also shall not apply to the issuance of securities upon
exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof or to the grant of
additional options or warrants, or the issuance of additional securities,
under any Company stock option or restricted stock plan approved by the
stockholders of the Company.
hh. EXPENSES. The Company shall pay to Rose Glen at
the Closing a non-accountable expense allowance equal to Twenty-Five Thousand
Dollars ($25,000) (Five Thousand Dollars ($5,000) of which has been
previously paid by the Company) for all expenses incurred by it in connection
with the negotiation, preparation, execution, delivery and performance of
this Agreement and the other agreements to be executed in connection
herewith, including, without limitation, attorneys' and consultants' fees and
expenses and travel expenses.
<PAGE>
ii. FINANCIAL INFORMATION. The Company agrees to send
the following reports to each Buyer until such Buyer transfers, assigns, or
sells all of the Securities: (i) within ten (10) days after the filing with
the SEC, a copy of its Annual Report on Form 10-K (or Form 10-KSB), its
Quarterly Reports on Form 10-Q (or Form 10-QSB) and any Current Reports on
Form 8-K; (ii) within one (1) day after release, copies of all press releases
issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
with the making available or giving to the stockholders of the Company,
copies of any notices or other information the Company makes available or
gives to such stockholders.
jj. RESERVATION OF SHARES. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion the
outstanding Preferred Shares and issuance of the Conversion Shares in
connection with the Preferred Shares (based on the lesser of the Variable
Conversion Price in effect from time to time and the Fixed Conversion Price
in effect from time to time (each as defined in the Certificates of
Designation)) and as otherwise required by the Certificates of Designation
(including sufficient shares to provide for the full exercise of the
Investment Options) and the full exercise of the Warrants and issuance of the
Warrant Shares in connection therewith (based on the Exercise Price (as
defined in the Warrants) of the Warrants in effect from time to time). The
Company shall not reduce the number of shares of Common Stock reserved for
issuance upon conversion of or otherwise pursuant to the Preferred Shares
(including upon exercise of the Investment Options) and upon exercise of or
otherwise pursuant to the Warrants without the consent of each Buyer. The
Company shall use its best efforts at all times to maintain the number of
shares of Common Stock so reserved for issuance at no less than two (2) times
the number that is then actually issuable upon full conversion of the
Preferred Shares and exercise of the Investment Options thereunder (based on
the lesser of the Variable Conversion Price in effect from time to time and
the Fixed Conversion Price in effect from time to time (each as defined in
the Certificates of Designation)) and full exercise of the Warrants (based on
the Exercise Price (as defined in the Warrants) of the Warrants in effect
from time to time). If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the number of Conversion Shares
issued and issuable upon conversion of or otherwise pursuant to the Preferred
Shares (based on the lesser of the Variable Conversion Price in effect from
time to time and the Fixed Conversion Price in effect from time to time (each
as defined in the Certificates of Designation) and assuming the full exercise
of the Investment Options thereunder) and the aggregate number of Warrant
Shares issued and issuable upon exercise of the Warrants (based on the
Exercise Price (as defined in the Warrants) of the Warrants in effect from
time to time), the Company will promptly take all corporate action necessary
to authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case
of an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of
shares.
kk. LISTING. The Company shall promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares
of Common Stock are then listed (subject to official notice of issuance) and,
so long as any Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and Warrant Shares from time to time issuable upon
conversion of or otherwise pursuant to the
<PAGE>
Preferred Shares (including upon exercise of the Investment Options under the
Preferred Shares) and all of the Warrant Shares from time to time issuable
upon exercise of or otherwise pursuant to the Warrants. The Company will
obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on the Nasdaq, the Nasdaq SmallCap
Market ("NASDAQ SMALLCAP"), the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX"), and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the National Association of Securities Dealers ("NASD") and such
exchanges, as applicable. The Company shall promptly provide to each Buyer
copies of any notices it receives from Nasdaq and any other exchanges or
quotation systems on which the Common Stock is then listed regarding the
continued eligibility of the Common Stock for listing on such exchanges and
quotation systems.
ll. CORPORATE EXISTENCE. So long as a Buyer
beneficially owns any Preferred Shares or Warrants, the Company shall
maintain its corporate existence and shall not merge, consolidate or sell all
or substantially all of the Company's assets, except in the event of a merger
or consolidation or sale of all or substantially all of the Company's assets,
where (i) the successor or acquiring entity and, if an entity different from
the successor or acquiring entity, the entity whose securities into which the
Preferred Shares shall become convertible pursuant to Section VI.C(b) of the
Certificates of Designation in such transaction assumes the Company's
obligations hereunder and under the agreements and instruments entered into
in connection herewith and (ii) the entity whose securities into which the
Preferred Shares shall become convertible pursuant to Section VI.C(b) of the
Certificates of Designation is a publicly traded corporation whose Common
Stock is listed for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
mm. NO INTEGRATION. The Company shall not make any
offers or sales of any security (other than the Securities) under
circumstances that would require registration of the Securities being offered
or sold hereunder under the 1933 Act or cause the offering of Securities to
be integrated with any other offering of securities by the Company for the
purpose of any stockholder approval provision applicable to the Company or
its securities
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Conversion
Shares and Warrant Shares in such amounts as specified from time to time by
each Buyer to the Company upon conversion of or otherwise pursuant to the
Preferred Shares (including upon exercise of the Investment Options) or
exercise of or otherwise pursuant to the Warrants in accordance with the
terms thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to
registration of the Conversion Shares and Warrant Shares under the 1933 Act
or the date on which the Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, all such
certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and
stop transfer instructions to give effect to Section 2(f) hereof (in the case
of the Conversion Shares and Warrant Shares, prior to registration of the
Conversion Shares and Warrant Shares under the 1933 Act or the date on which
the Conversion Shares or Warrant Shares may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular
date that can then be immediately sold), will be given by the Company to its
transfer agent and that the
<PAGE>
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any
way the Buyer's obligations and agreement set forth in Section 2(g) hereof to
comply with all applicable federal and state securities laws, including
prospectus delivery requirements, if any, upon re-sale of the Securities. If
a Buyer provides the Company with (i) an opinion of counsel, in form,
substance and scope customary for opinions in comparable transactions, to the
effect that a public sale or transfer of such Securities may be made without
registration under the 1933 Act and such sale or transfer is effected or (ii)
the Buyer provides reasonable assurances that the Securities can be sold
pursuant to Rule 144 (which shall consist of the documentation customarily
executed by a seller and its broker, if any, in connection with a proposed
sale under Rule 144), the Company shall permit the transfer, and, in the case
of the Conversion Shares and Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates, free from any restrictive legend, in
such name and in such denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Preferred Shares
and Warrants to a Buyer at each of the First Closing and the Second Closing
is subject to the satisfaction, at or before the Closing Date in respect of
such applicable Closing, of each of the following conditions thereto,
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
a. With respect to the First Closing and the Second
Closing:
(i) The applicable Buyer shall have executed
this Agreement and the Registration Rights Agreement and delivered the same
to the Company.
(ii) The applicable Buyer shall have delivered
the applicable Purchase Price in accordance with Section 1(b) above.
(iii) The Series B Certificate of Designation
shall have been accepted for filing with the Secretary of State of the State
of Nevada.
(iv) The representations and warranties of the
applicable Buyer shall be true and correct in all material respects as of the
date when made and as of the applicable Closing Date as though made at that
time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of
such date), and the applicable Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the applicable Closing Date.
(v) No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental authority
of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this Agreement.
<PAGE>
b. With respect to the Second Closing:
(i) The Series C Certificate of Designation
shall have been accepted for filing with the Secretary of State of the State
of Nevada.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares and the
Warrants at each of the First Closing and the Second Closing is subject to
the satisfaction, at or before the Closing Date in respect of such applicable
Closing, of each of the following conditions, provided that these conditions
are for such Buyer's sole benefit and may be waived by such Buyer at any time
in its sole discretion:
a. With respect to the First Closing and the Second
Closing:
(i) The Company shall have executed this
Agreement and the Registration Rights Agreement and delivered the same to the
Buyer.
(ii) The Company shall have delivered to such
Buyer duly executed certificates (in such denominations as the Buyer shall
request) representing the Preferred Shares and duly executed Warrants
purchased at such Closing in accordance with Section 1(b) above.
(iii) The Series B Certificate of Designation
shall have been accepted for filing with the Secretary of State of the State
of Nevada, and a copy thereof certified by such Secretary of State shall have
been delivered to such Buyer.
(iv) The Irrevocable Transfer Agent
Instructions, in form and substance satisfactory to a majority-in-interest of
the Buyers, shall have been delivered to and acknowledged in writing by the
Company's Transfer Agent.
(v) The representations and warranties of the
Company shall be true and correct in all material respects as of the date
when made and as of the applicable Closing Date as though made at such time
(except for representations and warranties that speak as of a specific date,
which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at
or prior to the applicable Closing Date. The Buyer shall have received a
certificate or certificates, executed by the chairman of the board, chief
executive officer, president or chief financial officer of the Company, dated
as of the applicable Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer including, but not
limited to certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating to the
transactions contemplated hereby.
(vi) No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental authority
of competent jurisdiction or any self-regulatory organization
<PAGE>
having authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(vii) The Conversion Shares and the Warrant
Shares shall have been authorized for quotation on Nasdaq and trading in the
Common Stock on Nasdaq shall not have been suspended by the SEC or Nasdaq.
(viii) The Buyer shall have received opinions of
the Company's counsel, dated as of the applicable Closing Date, in form,
scope and substance reasonably satisfactory to the Buyer and in substantially
the same form as EXHIBIT "D-1" and "EXHIBIT D-2" attached hereto.
(ix) The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the applicable
Closing Date.
(x) No material adverse change or development
in the business, operations, properties, prospects, financial condition or
operations of the Company shall have occurred since the date hereof.
b. With respect to the Second Closing:
(i) The Series C Certificate of Designation
shall have been accepted for filing with the Secretary of State of the State
of Nevada.
(ii) The Registration Statement (as defined in
the Registration Rights Agreement) shall have been declared effective and no
stop order shall have issued in respect thereof.
(iii) The number of shares of Common Stock issued
or issuable upon conversion of the Preferred Shares (including upon exercise
of the Investment Options and including the Preferred Shares (and Investment
Options) issuable at the Second Closing) shall not exceed 50% of the Maximum
Share Amount (as defined in the Certificates of Designation); PROVIDED,
HOWEVER, that this condition to the Second Closing shall not be applicable in
the event that the Stockholder Approval (as defined in Article VI. A(b) of
the Certificates of Designation) has been obtained by the Company prior to
the date of the Second Closing; PROVIDED, FURTHER, HOWEVER, that in no event
(irrespective of whether the Stockholder Approval has been obtained) shall
the number of shares issued or issuable upon conversion of the Preferred
Shares (including upon exercise of the Investment Options and including the
Preferred Shares (and Investment Options) issuable at the Second Closing)
exceed 80% of the Maximum Share Amount.
(iv) All of the conditions to the Second Closing
shall have been satisfied within five (5) business days of the satisfaction
of the condition set forth in Section 7(b)(ii) above.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable
to agreements made
<PAGE>
and to be performed in the State of Delaware (without regard to principles of
conflict of laws). Both parties irrevocably consent to the exclusive
jurisdiction of the United States federal courts and the state courts located
in Delaware with respect to any suit or proceeding based on or arising under
this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such
courts. Both parties irrevocably waive the defense of an inconvenient forum
to the maintenance of such suit or proceeding. Both parties further agree
that service of process upon a party mailed by first class mail shall be
deemed in every respect effective service of process upon the party in any
such suit or proceeding. Nothing herein shall affect either party's right to
serve process in any other manner permitted by law. Both parties agree that a
final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This
Agreement may be executed in one or more counterparts, all of which 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.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. NOTICES. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by certified or
registered mail (return receipt requested) or delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile
and shall be effective five days after being placed in the mail, if mailed by
regular United States mail, or upon receipt, if delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile,
in each case addressed to a party. The addresses for such communications
shall be:
<PAGE>
If to the Company:
GlobalMedia.com
400 Robson Street
Vancouver, British Columbia V6B 2B4
Attention: Chief Financial Officer
Facsimile: (604) 688-2987
With copy to:
Davis Wright Tremaine LLP
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101
Attention: Eric A. DeJong
Facsimile: (206) 628-7699
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
With copy to:
Ballard Spahr Andrews & Ingersoll LLP
1735 Market Street
Philadelphia, Pennsylvania 19103
Attention: Gerald J. Guarcini
Facsimile: (215) 864-8625
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Buyer shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, subject to Section 2(f), any Buyer may
assign its rights hereunder to any person that purchases Securities in a
private transaction from a Buyer or to any of its "affiliates," as that term
is defined under the 1934 Act, without the consent of the Company.
h. THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. SURVIVAL. The representations and warranties of
the Company and the agreements and covenants set forth in Sections 3, 4, 5
and 8 shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers. The Company agrees to
indemnify and hold harmless each of the Buyers and all their officers,
directors, employees and agents for loss or damage arising as a result of or
related to any breach or alleged breach by the Company of any of its
representations, warranties and
<PAGE>
covenants set forth in Sections 3 and 4 hereof or any of its covenants and
obligations under this Agreement or the Registration Rights Agreement,
including advancement of expenses as they are incurred.
(i) PUBLICITY. The Company and each of the Buyers
shall have the right to review a reasonable period of time before issuance of
any press releases, filings with the SEC, the NASD or any stock exchange or
interdealer quotation system, or any other public statements with respect to
the transactions contemplated hereby; PROVIDED, HOWEVER, that the Company
shall be entitled, without the prior approval of each of the Buyers, to make
any press release or public filings with respect to such transactions as is
required by applicable law and regulations (although each of the Buyers shall
be consulted by the Company in connection with any such press release prior
to its release and shall be provided with a copy thereof and be given an
opportunity to comment thereon).
(ii) FURTHER ASSURANCES. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(iii) NO STRICT CONSTRUCTION. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be
applied against any party.
(iv) REMEDIES. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to each Buyer
by vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its obligations under this Agreement will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this Agreement, that each Buyer shall be entitled, in addition to all other
available remedies in law or in equity, to an injunction or injunctions to
prevent or cure any breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions of this Agreement, without the
necessity of showing economic loss and without any bond or other security
being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned Buyers and the Company have
caused this Agreement to be duly executed as of the date first above written.
GLOBALMEDIA.COM
By: /s/ Robert Fuller
-------------------------------------
Robert Fuller
Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ Wayne D. Bloch
-------------------------------------
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
<TABLE>
<S> <C>
First Closing:
--------------
Number of Preferred Shares: 5,000
Number of Warrants: 388,500
Aggregate Purchase Price: $5,000,000
Second Closing:
---------------
Number of Preferred Shares: 5,000
Number of Warrants: As determined in accordance with this Agreement
Aggregate Purchase Price: $5,000,000
</TABLE>
<PAGE>
EXHIBIT 99.2
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
GLOBALMEDIA.COM
(Pursuant to Section 78.1955 of the
Nevada General Corporation Law)
GlobalMedia.com, a corporation organized and existing under
the Nevada General Corporation Law (the "CORPORATION"), hereby certifies that
the following resolutions were adopted by the Board of Directors of the
Corporation by unanimous written consent effective as of April 26, 2000,
pursuant to authority of the Board of Directors as required by Section 78.195
of the Nevada General Corporation Law:
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (the "BOARD OF
DIRECTORS" or the "BOARD") in accordance with the provisions of its Articles
of Incorporation, the Board of Directors hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $0.001 per
share (the "PREFERRED STOCK"), and hereby states the designation and number
of shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
Series B Convertible Preferred Stock:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of Five
Thousand (5,000) shares of Preferred Stock, is Series B Convertible Preferred
Stock (the "SERIES B PREFERRED STOCK") and the stated value shall be One
Thousand Dollars ($1,000) per share (the "STATED VALUE").
II. RANK
The Series B Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $0.001 per share (the "COMMON STOCK");
(ii) prior to any class or series of capital stock of the Corporation
hereafter created (unless, with the consent of the holders of Series B
Preferred Stock obtained in accordance with Article IX hereof, such class or
series of capital stock specifically, by its terms, ranks senior to or PARI
PASSU with the Series B Preferred Stock) (collectively, with the Common
Stock, "JUNIOR SECURITIES"); (iii) PARI PASSU with (A) the
<PAGE>
Series A Convertible Preferred Stock, (B) with the Series C Convertible
Preferred Stock issued or issuable pursuant to the Purchase Agreement (as
defined below) (the "SERIES C PREFERRED STOCK") and (C) with any class or
series of capital stock of the Corporation hereafter created (with the
consent of the holders of Series B Preferred Stock obtained in accordance
with Article IX hereof) specifically ranking, by its terms, on parity with
the Series B Preferred Stock (each of clauses (A), (B) and (C) being
hereinafter referred to as "PARI PASSU SECURITIES"); and (iv) junior to any
class or series of capital stock of the Corporation hereafter created (with
the consent of the holders of Series B Preferred Stock obtained in accordance
with Article IX hereof) specifically ranking, by its terms, senior to the
Series B Preferred Stock ("SENIOR SECURITIES"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
III. DIVIDENDS
The Series B Preferred Stock shall not bear any dividends.
In no event, so long as any Series B Preferred Stock shall remain
outstanding, shall any dividend whatsoever be declared or paid upon, nor
shall any distribution be made upon, any Junior Securities, nor shall any
shares of Junior Securities be purchased or redeemed by the Corporation nor
shall any moneys be paid to or made available for a sinking fund for the
purchase or redemption of any Junior Securities (other than a distribution of
Junior Securities), without, in each such case, the written consent of the
holders of a majority of the outstanding shares of Series B Preferred Stock,
voting together as a class.
IV. LIQUIDATION PREFERENCE
A. LIQUIDATION EVENT. If the Corporation shall commence a
voluntary case under the Federal bankruptcy laws or any other applicable
Federal or State bankruptcy, insolvency or similar law, or consent to the
entry of an order for relief in an involuntary case under any law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of
its creditors, or admit in writing its inability to pay its debts generally
as they become due, or if a decree or order for relief in respect of the
Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other
applicable Federal or state bankruptcy, insolvency or similar law resulting
in the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and any such decree or order shall be unstayed and in effect
for a period of thirty (30) consecutive days and, on account of any such
event, the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up (each such event
being considered a "LIQUIDATION EVENT"), no distribution shall be made to the
holders of any shares of capital stock of the Corporation (other than Senior
Securities) upon liquidation, dissolution or winding up unless prior thereto,
the holders of shares of Series B Preferred Stock, subject to this Article
IV, shall have received the Liquidation Preference (as defined in Article
IV.C) with respect to each share. If upon the occurrence of a Liquidation
Event, the assets and funds available for distribution among the holders of
the Series B Preferred Stock and holders of PARI PASSU Securities (including
any dividends or distribution paid on any PARI PASSU Securities after the
date of filing of this Certificate of Designation) shall be insufficient to
permit the payment to
2
<PAGE>
such holders of the preferential amounts payable thereon, then the entire
assets and funds of the Corporation legally available for distribution to the
Series B Preferred Stock and the PARI PASSU Securities shall be distributed
ratably among such shares in proportion to the ratio that the Liquidation
Preference payable on each such share bears to the aggregate liquidation
preference payable on all such shares. Any prior dividends or distribution
made after the date of filing of this Certificate of Designation shall
offset, dollar for dollar, the amount payable to the class or series to which
such distribution was made.
B. CERTAIN ACTS DEEMED LIQUIDATION EVENT. At the option of
any holder of Series B Preferred Stock, (a) the sale, conveyance or
disposition of all or substantially all of the assets of the Corporation, (b)
the effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or (c) the consolidation, merger or other business combination
of the Corporation with or into any other Person (as defined below) or
Persons when the Corporation is not the survivor, shall either: (i) be deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant to
which the Corporation shall be required to distribute upon consummation of
and as a condition to such transaction an amount equal to 118% of the
Liquidation Preference with respect to each outstanding share of Series B
Preferred Stock or (ii) if applicable, be treated pursuant to Article VI.C(b)
hereof. Any holder of Series B Preferred Stock making an election under this
Article IV.B. shall notify the Corporation of such election prior to the
closing of the transaction which would trigger such holder's rights pursuant
to this Article IV.B. The above provisions shall similarly apply to
successive consolidations, mergers, business combinations, sales or
dispositions. "PERSON" shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.
C. LIQUIDATION PREFERENCE. For purposes hereof, the
"LIQUIDATION PREFERENCE" with respect to a share of the Series B Preferred
Stock shall mean an amount equal to the sum of (i) the Stated Value thereof
plus (ii) an amount equal to five percent (5%) per annum of such Stated Value
for the period beginning on April 28, 2000 (the "CLOSING DATE") and ending on
the date of final distribution to the holder thereof (prorated for any
portion of such period) plus (iii) all Conversion Default Payments (as
defined in Article VI.E below), Delivery Default Payments (as defined in
Article VI.D below) and any other amounts owed to such holder pursuant to
Section 2(C) of the Registration Rights Agreement (as defined below). The
liquidation preference with respect to any PARI PASSU Securities shall be as
set forth in the Certificate of Designation filed in respect thereof.
V. REDEMPTION
A. MANDATORY REDEMPTION. If any of the following events
(each, a "MANDATORY REDEMPTION EVENT") shall occur:
(i) The Corporation fails to issue shares of Common
Stock to the holders of Series B Preferred Stock upon exercise by the holders
of their conversion rights in accordance with the terms of this Certificate
of Designation (including upon exercise of or otherwise pursuant to the
Investment Options (as defined in Article VI.G below)) (for a period of at
least sixty (60) days if such failure is solely as a result of the
circumstances governed by the second paragraph of Article VI.E below and the
Corporation is using its best efforts to authorize
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a sufficient number of shares of Common Stock as soon as practicable), fails
to transfer or to cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of or otherwise pursuant to the Series B Preferred
Stock (or upon exercise of or otherwise pursuant to the Investment Options)
as and when required by this Certificate of Designation or the Registration
Rights Agreement, dated as of April 28, 2000, by and among the Corporation
and the other signatories thereto (the "REGISTRATION RIGHTS AGREEMENT"),
fails to remove any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate or any shares of Common
Stock issued to the holders of Series B Preferred Stock upon conversion of or
otherwise pursuant to the Series B Preferred Stock (or upon exercise of or
otherwise pursuant to the Investment Options) as and when required by this
Certificate of Designation, the Securities Purchase Agreement dated as of
April 28, 2000, by and between the Corporation and the other signatories
thereto (the "PURCHASE AGREEMENT") or the Registration Rights Agreement, or
fails to fulfill its obligations pursuant to Sections 4(c), 4(d), 4(e), 4(i),
4(j) or 5 of the Purchase Agreement (or makes any announcement, statement or
threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any announcement,
statement or threat not to honor its obligations shall not be rescinded in
writing) for ten (10) days after the Corporation shall have been notified
thereof in writing by any holder of Series B Preferred Stock;
(ii) The Corporation fails to obtain effectiveness
with the Securities and Exchange Commission (the "SEC"), prior to October 28,
2000 of the Registration Statement(s) (as defined in the Registration Rights
Agreement, the "REGISTRATION STATEMENT(S)") required to be filed pursuant to
Section 2(a) of the Registration Rights Agreement, or fails to obtain the
effectiveness of any additional Registration Statement (required to be filed
pursuant to Section 3(b) of the Registration Rights Agreement) within sixty
(60) days after the Registration Trigger Date (as defined in the Registration
Rights Agreement), or any such Registration Statement, after its initial
effectiveness and during the Registration Period (as defined in the
Registration Rights Agreement), lapses in effect or sales of all of the
Registrable Securities (as defined in the Registration Rights Agreement, the
"REGISTRABLE SECURITIES") otherwise cannot be made thereunder (whether by
reason of the Corporation's failure to amend or supplement the prospectus
included therein in accordance with the Registration Rights Agreement, the
Corporation's failure to file and obtain effectiveness with the SEC of any
additional Registration Statement required pursuant to Section 3(b) of the
Registration Rights Agreement or otherwise) for more than thirty (30)
consecutive days or more than sixty (60) days in any twelve (12) month period
after such Registration Statement becomes effective;
(iii) The Corporation or any Significant Subsidiary
(as defined in Rule 1-02(w) of Regulation S-X promulgated by the SEC) (a
"SIGNIFICANT SUBSIDIARY") of the Corporation shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for all or substantially all of its property or
business; or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against
the Corporation or any Significant Subsidiary of the Corporation;
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(v) The Corporation shall fail to maintain the
listing of the Common Stock on the Nasdaq National Market ("NASDAQ"), the
Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange ("AMEX"), then, upon the occurrence
and during the continuation of any Mandatory Redemption Event specified in
subparagraphs (i), (ii) or (v), at the option of the holders of at least 50%
of the then outstanding shares of Series B Preferred Stock exercisable by the
delivery of written notice (the "MANDATORY REDEMPTION NOTICE") to the
Corporation of such Mandatory Redemption Event, or upon the occurrence of any
Mandatory Redemption Event specified in subparagraphs (iii) or (iv), the then
outstanding shares of Series B Preferred Stock shall become immediately
redeemable and the Corporation shall purchase each holder's outstanding
shares of Series B Preferred Stock for an amount per share equal to the
greater of (1) 120% multiplied by the sum of (a) the Stated Value of the
shares to be redeemed plus (b) an amount equal to five percent (5%) per annum
of such Stated Value for the period beginning on the Closing Date and ending
on the date of payment of the Mandatory Redemption Amount (the "MANDATORY
REDEMPTION DATE"), plus (c) all Conversion Default Payments (as defined in
Article VI.E below), Delivery Default Payments (as defined in Article VI.D
below) and any other amounts owed to such holder pursuant to Section 2(c) of
the Registration Rights Agreement, and (2) the "PARITY VALUE" of the shares
to be redeemed, where parity value means the product of (a) the highest
number of shares of Common Stock issuable upon conversion of such shares of
Series B Preferred Stock in accordance with Article VI below (without giving
effect to any limitations on conversions contained herein and treating the
Trading Day (as defined in Article VI.B) immediately preceding the Mandatory
Redemption Date as the "CONVERSION DATE" (as defined in Article VI.B(a)) for
purposes of determining the lowest applicable Conversion Price (as defined
below), unless the Mandatory Redemption Event arises as a result of a breach
in respect of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the highest Closing Price
(as defined below) for the Common Stock during the period beginning on the
date of first occurrence of the Mandatory Redemption Event and ending one day
prior to the Mandatory Redemption Date (the greater of such amounts being
referred to as the "MANDATORY REDEMPTION AMOUNT"). "CLOSING PRICE," as of any
date, means the last sale price of the Common Stock on Nasdaq as reported by
Bloomberg Financial Markets or an equivalent reliable reporting service
mutually acceptable to and hereafter designated by the holders of a majority
in interest of the shares of Series B Preferred Stock and the Corporation
("BLOOMBERG") or, if Nasdaq is not the principal trading market for such
security, the last sale price of such security on the principal securities
exchange or trading market where such security is listed or traded as
reported by Bloomberg, or, if the foregoing do not apply, the last sale price
of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no last sale price
of such security is available in the over-the-counter market on the
electronic bulletin board for such security or in any of the foregoing
manners, the average of the bid prices of any market makers for such security
that are listed in the "pink sheets" by the National Quotation Bureau, Inc.
If the Closing Price cannot be calculated for such security on such date in
the manner provided above, the Closing Price shall be the fair market value
as mutually determined by the Corporation and the holders of a
majority-in-interest of shares of Series B Preferred Stock being converted
for which the calculation of the Closing Price is required in order to
determine the Conversion Price of such Series B Preferred Stock.
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B. TRADING MARKET REDEMPTION. If and to the extent the
Series B Preferred Stock ceases to be convertible by any holder as a result
of the limitations described in Article VI.A(b) below (a "TRADING MARKET
REDEMPTION EVENT"), and the Corporation has not, prior to the date that such
Trading Market Redemption Event arises, (i) obtained the Stockholder Approval
(as defined in Article VI.A(b)) or (ii) eliminated any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over
the Corporation or any of its securities on the Corporation's ability to
issue shares of Common Stock in excess of the Maximum Share Amount (as
defined in Article VI.A(b)), then the Corporation shall be obligated to
redeem immediately all of the then outstanding Series B Preferred Stock which
ceases to be convertible as a result of the Maximum Share Amount, in
accordance with this Article V.B. An irrevocable redemption notice (the
"TRADING MARKET REDEMPTION NOTICE") shall be delivered promptly to the
holders of Series B Preferred Stock at their registered address appearing on
the records of the Corporation and shall state (i) that the Maximum Share
Amount (as defined in Article VI.A(b)) has been issued upon conversion of the
Series B Preferred Stock, (ii) that the Corporation is obligated to redeem
all of the outstanding Series B Preferred Stock and (iii) the Mandatory
Redemption Date, which shall be a date within five (5) business days of the
earlier of (a) the date of the Redemption Notice or (b) the date on which the
holders of the Series B Preferred Stock notify the Corporation of the
occurrence of a Trading Market Redemption Event. On the Mandatory Redemption
Date, the Corporation shall make payment of the Mandatory Redemption Amount
(as defined in Article V.A above) in cash.
C. FAILURE TO PAY REDEMPTION AMOUNTS. In the case of a
Mandatory Redemption Event, if the Corporation fails to pay the Mandatory
Redemption Amount within five (5) business days of written notice that such
amount is due and payable, then (assuming there are sufficient authorized
shares) in addition to all other available remedies, each holder of Series B
Preferred Stock shall have the right at any time and from time to time after
the failure to timely pay the the Mandatory Redemption Amount, to require the
Corporation, upon written notice, to immediately issue (in accordance with
and subject to the terms of Article VI below), in lieu of the Mandatory
Redemption Amount, the number of shares of Common Stock of the Corporation
equal to such applicable redemption amount divided by any Conversion Price
(as defined below), as chosen in the sole discretion of the holder of Series
B Preferred Stock, in effect from the date of the Mandatory Redemption Event
until the date such holder elects to exercise its rights pursuant to this
Article V.C.
VI. CONVERSION AT THE OPTION OF THE HOLDER
A. OPTIONAL CONVERSION
(i) CONVERSION AMOUNT. Subject to Article VI.A(b)
below, each holder of shares of Series B Preferred Stock may, at its option
at any time and from time to time, upon surrender of the certificates
therefor, convert any or all of its shares of Series B Preferred Stock into
Common Stock as set forth below (an "OPTIONAL CONVERSION"). Each share of
Series B Preferred Stock shall be convertible into such number of fully paid
and nonassessable shares of Common Stock as such Common Stock exists on the
date of issuance of the Series B Preferred Stock (the "ISSUE DATE"), or any
other shares of capital stock or other securities of the Corporation into
which such Common Stock is thereafter changed or reclassified, as is
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determined by dividing (1) the sum of (a) the Stated Value thereof plus (b)
the Premium Amount (as defined below), by (2) the then effective Conversion
Price (as defined below); PROVIDED, HOWEVER, that in no event (other than
pursuant to the Automatic Conversion (as defined in Article VII)) shall a
holder of shares of Series B Preferred Stock be entitled to convert any such
shares (or exercise any Investment Options in connection with any such
conversion) in excess of that number of shares upon conversion of which the
sum of (x) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the shares of Series B Preferred Stock, the unexercised Investment Options or
the unexercised or unconverted portion of any other securities of the
Corporation (including, without limitation, the Series A Preferred Stock, the
warrants issued pursuant to the Securities Purchase Agreement dated as of May
6, 1999 by and between the Corporation and the other signatories thereto, the
Series C Preferred Stock and the warrants issued and issuable by the
Corporation pursuant to the Purchase Agreement (the "WARRANTS")) subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (y) the number of shares of Common Stock issuable upon the
conversion of the shares of Series B Preferred Stock (and upon the exercise,
if any, of Investment Options in connection therewith) with respect to which
the determination of this proviso is being made, would result in beneficial
ownership by a holder and such holder's affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in
clause (x) of such proviso. The "PREMIUM AMOUNT" means the product of the
Stated Value, multiplied by .05, multiplied by (N/365), where "N" equals the
number of days elapsed from the Closing Date to and including the Conversion
Date (as defined in Article VI.B).
(ii) TRADING MARKET LIMITATION. Unless the
Corporation either (i) is permitted (or not prohibited) by the applicable
rules and regulations of the principal securities market on which the Common
Stock is listed or traded to issue shares of Common Stock upon conversion of
or otherwise pursuant to the Series B Preferred Stock and Series C Preferred
Stock and upon exercise of or otherwise pursuant to the Investment Options
(including the Investment Options relating to the Series C Preferred Stock)
in excess of the Maximum Share Amount (as defined below) or (ii) has obtained
approval of the issuance of the Common Stock upon conversion of or otherwise
pursuant to the Series B Preferred Stock and Series C Preferred Stock and
upon exercise of or otherwise pursuant to the Investment Options (including
the Investment Options relating to the Series C Preferred Stock) in excess of
the Maximum Share Amount in accordance with applicable law and the rules and
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Corporation or any of
its securities (the "STOCKHOLDER APPROVAL"), in no event shall the total
number of shares of Common Stock issued upon conversion of or otherwise
pursuant to the Series B Preferred Stock and upon exercise of or otherwise
pursuant to the Investment Options (including any shares of capital stock or
rights to acquire shares of capital stock issued by the Corporation which are
aggregated or integrated with the Common Stock issued or issuable upon
conversion of or otherwise pursuant to the Series B Preferred Stock and upon
exercise or otherwise pursuant to the Investment Options for purposes of any
such rule or regulation, including the Series C Preferred Stock and the
Investment Options issued and issuable in connection therewith) exceed
4,708,342 (19.99% of the total shares of Common Stock outstanding on the
Issue Date) (the
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"MAXIMUM SHARE AMOUNT"), subject to equitable adjustments from time to time
for stock splits, stock dividends, combinations, capital reorganizations and
similar events relating to the Common Stock occurring after the Issue Date.
With respect to each holder of Series B Preferred Stock, the Maximum Share
Amount shall refer to such holder's PRO RATA share thereof determined in
accordance with Article X below. In the event that the sum of (x) the
aggregate number of shares of Common Stock actually issued upon conversion of
or otherwise pursuant to the shares of Series B Preferred Stock and upon
exercise of or otherwise pursuant to the Investment Options and any shares of
capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued
or issuable upon conversion of or otherwise pursuant to the Series B
Preferred Stock and upon exercise or otherwise pursuant to the Investment
Options for purposes of any such rule or regulation, including the Series C
Preferred Stock and the Investment Options issued and issuable in connection
therewith) PLUS (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of or otherwise pursuant to the outstanding
shares of Series B Preferred Stock at the then effective Conversion Price,
upon exercise of or otherwise pursuant to the Investment Options, and any
shares of capital stock or rights to acquire shares of capital stock issuable
by the Corporation which are aggregated or integrated with the Common Stock
issued or issuable upon conversion of or otherwise pursuant to the Series B
Preferred Stock and upon exercise or otherwise pursuant to the Investment
Options for purposes of any such rule or regulation, including the Series C
Preferred Stock and the Investment Options issued and issuable in connection
therewith, represents at least one hundred percent (100%) of the Maximum
Share Amount (the "TRIGGERING EVENT"), the Corporation will use its best
efforts to seek and obtain Stockholder Approval (or obtain such other relief
as will allow conversions hereunder in excess of the Maximum Share Amount) as
soon as practicable following the Triggering Event.
B. CONVERSION PRICE.
(i) CALCULATION OF CONVERSION PRICE. Subject to
subparagraph (b) below, the "CONVERSION PRICE" shall be the lesser of the
Variable Conversion Price (as defined herein) and the Fixed Conversion Price
(as defined herein). The Conversion Price shall be subject to adjustment
pursuant to the provisions of Article VI.C below. "VARIABLE CONVERSION PRICE"
shall mean the product of (x) the Applicable Percentage (as defined below)
and (y) the Market Price (as defined below). "MARKET PRICE" shall mean the
lowest average of the Closing Bid Prices for any seven (7) consecutive
Trading Day period (the "MARKET PRICE DAYS") during the thirty-five (35)
consecutive Trading Day period ending one (1) Trading Day prior to the date
(the "CONVERSION DATE") the Notice of Conversion (as defined in Article VI.E)
is sent by a holder to the Corporation via facsimile (the "PRICING PERIOD").
The Market Price Days shall be designated by the converting holder (from
among the days comprising the Pricing Period) in the Notice of Conversion.
"FIXED CONVERSION PRICE" shall mean $6.435. "APPLICABLE PERCENTAGE" shall
mean 100%; PROVIDED, HOWEVER, that if the Common Stock is at any time
thereafter delisted from Nasdaq or the Nasdaq SmallCap (other than delisting,
for no more than two (2) Trading Days, solely in connection with the
simultaneous listing of the Common Stock on the NYSE, AMEX or the Nasdaq
SmallCap), the Applicable Percentage shall mean 80%. "CLOSING BID PRICE"
means, for any security as of any date, the closing bid price on the Nasdaq
as reported by Bloomberg or, if the Nasdaq is not the principal trading
market for such security, the closing bid price of such security on the
principal securities exchange or trading market
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where such security is listed or traded as reported by Bloomberg, or, if the
foregoing do not apply, the closing bid price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price of such security is
available in the over-the-counter market on the electronic bulletin board for
such security or in any of the foregoing manners, the average of the bid
prices of any market makers for such security that are listed in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price
cannot be calculated for such security on such date in the manner provided
above, the Closing Bid Price shall be the fair market value as mutually
determined by the Corporation and the holders of a majority in interest of
shares of Series B Preferred Stock being converted for which the calculation
of the Closing Bid Price is required in order to determine the Conversion
Price of such Series B Preferred Stock. "TRADING DAY" shall mean any day on
which the Common Stock is traded for any period on the Nasdaq, or on the
principal securities exchange or other securities market on which the Common
Stock is then being traded.
(ii) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in subparagraph (a) of this Paragraph B to
the contrary, in the event the Corporation (i) makes a public announcement
that it intends to consolidate or merge with any other corporation (other
than a merger in which the Corporation is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer all or
substantially all of the assets of the Corporation or (ii) any person, group
or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock then outstanding (or
any other takeover scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT DATE"),
then the Conversion Price shall, effective upon the Announcement Date and
continuing through the Adjusted Conversion Price Termination Date (as defined
below), be equal, for each such date, to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring
on the Announcement Date and (y) the Conversion Price that would otherwise be
in effect on such date. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in
subparagraph (a) of this Article VI.B. For purposes hereof, "ADJUSTED
CONVERSION PRICE TERMINATION DATE" shall mean, with respect to any proposed
transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this subparagraph (b) has been made, the date
upon which the Corporation (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or publicly
announces the termination or abandonment of the proposed transaction or
tender offer (or takeover scheme) which caused this subparagraph (b) to
become operative.
C. ADJUSTMENTS TO CONVERSION PRICE. The Conversion Price
shall be subject to adjustment from time to time as follows:
(i) ADJUSTMENT TO CONVERSION PRICE DUE TO STOCK
SPLIT, STOCK DIVIDEND, ETC. If at any time when Series B Preferred Stock is
issued and outstanding, the number of outstanding shares of Common Stock is
increased or decreased by a stock split, stock dividend, combination,
reclassification, rights offering below the Trading Price (as defined below)
to all holders of Common Stock or other similar event, which event shall have
taken place during the reference period for determination of the Conversion
Price for any Optional Conversion or Automatic Conversion of the Series B
Preferred Stock, then the Conversion Price
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shall be calculated giving appropriate effect to the stock split, stock
dividend, combination, reclassification or other similar event. In such
event, the Corporation shall notify the Transfer Agent of such change on or
before the effective date thereof. "TRADING PRICE," which shall be measured
as of the record date in respect of the rights offering, means (i) the
average of the last reported sale prices for the shares of Common Stock on
the Nasdaq as reported by Bloomberg, as applicable, for the five (5) Trading
Days immediately preceding such date, or (ii) if the Nasdaq is not the
principal trading market for the shares of Common Stock, the average of the
last reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (iii) if market
value cannot be calculated as of such date on any of the foregoing bases, the
Trading Price shall be the fair market value as reasonably determined in good
faith by (a) the Board of Directors of the Corporation or, (b) at the option
of a majority-in-interest of the holders of the outstanding Series B
Preferred Stock, by an independent investment bank of nationally recognized
standing in the valuation of businesses similar to the business of the
Corporation.
(ii) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC.
If, at any time when Series B Preferred Stock is issued and outstanding and
prior to the conversion of all Series B Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the
Corporation shall be changed into the same or a different number of shares of
another class or classes of stock or securities of the Corporation or another
entity, or in case of any sale or conveyance of all or substantially all of
the assets of the Corporation other than in connection with a plan of
complete liquidation of the Corporation (each a "CHANGE OF CONTROL
TRANSACTION"), then the holders of Series B Preferred Stock shall thereafter
have the right to receive upon conversion of the Series B Preferred Stock
(and upon exercise of the Investment Options), upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore issuable upon conversion (and upon exercise of
the Investment Options), such stock, securities or assets which the holders
of Series B Preferred Stock would have been entitled to receive in such
transaction had the Series B Preferred Stock been converted (and had the
Investment Options been exercised) in full immediately prior to such
transaction (without regard to any limitations on conversion contained
herein), and in any such case appropriate provisions shall be made with
respect to the rights and interests of the holders of Series B Preferred
Stock to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of shares
of Common Stock issuable upon conversion of the Series B Preferred Stock (and
upon exercise of the Investment Options)) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities or assets
thereafter deliverable upon the conversion of Series B Preferred Stock (and
upon exercise of the Investment Options). The Corporation shall not effect
any transaction described in this subsection (b) unless (a) it first gives,
to the extent practical, thirty (30) days' prior written notice (but in any
event at least fifteen (15) business days prior written notice) of the record
date of the special meeting of stockholders to approve, or if there is no
such record date, the consummation of, such merger, consolidation, exchange
of shares, recapitalization, reorganization or other similar event or sale of
assets (during which time the holders of Series B Preferred Stock shall be
entitled to convert the Series B Preferred Stock (and exercise the Investment
Options)) and (b) the resulting successor or acquiring entity (if not the
Corporation) and, if an entity different from the successor or acquiring
entity, the entity whose capital stock or assets the holders of the Common
Stock are entitled to receive as a result
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of such Change of Control Transaction, assumes by written instrument the
obligations of the Corporation under this Certificate of Designation
(including under this subsection (b)). The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers or share
exchanges.
(iii) [Intentionally Omitted]
(iv) ADJUSTMENT DUE TO DISTRIBUTION. Subject to
Article III, if the Corporation shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise
(including any dividend or distribution to the Corporation's shareholders in
cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a "DISTRIBUTION"), then the holders of Series B
Preferred Stock shall be entitled, upon any conversion of shares of Series B
Preferred Stock (and upon any exercise of Investment Options) after the date
of record for determining shareholders entitled to such Distribution, to
receive the amount of such assets which would have been payable to the holder
with respect to the shares of Common Stock issuable upon such conversion (or
upon such exercise of Investment Options) had such holder been the holder of
such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(v) PURCHASE RIGHTS. Subject to Article III, if at
any time when any Series B Preferred Stock is issued and outstanding, the
Corporation issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to
the record holders of any class of Common Stock, then the holders of Series B
Preferred Stock will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could
have acquired if such holder had held the number of shares of Common Stock
acquirable upon complete conversion of the Series B Preferred Stock
(including upon exercise of the Investment Options) (without regard to any
limitations on conversion contained herein) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.
(vi) ADJUSTMENT FOR RESTRICTED PERIODS. In the event
that (i) the Corporation fails to obtain effectiveness with the SEC of any
Registration Statement (as defined in the Registration Rights Agreement)
required to be filed pursuant to the Registration Rights Agreement on or
prior to the date on which such Registration Statement is required to become
effective pursuant to the terms of the Registration Rights Agreement, or (ii)
any such Registration Statement, after its initial effectiveness and during
the Registration Period (as defined in the Registration Rights Agreement),
lapses in effect, or sales of all the Registrable Securities otherwise cannot
be made thereunder, whether by reason of the Corporation's failure or
inability to amend or supplement the prospectus (the "PROSPECTUS") included
therein in accordance with the Registration Rights Agreement or otherwise,
after such Registration Statement becomes effective (including, without
limitation, during an Allowed Delay (as defined in Section 3(f) of the
Registration Rights Agreement) (each of such events described in clauses (i)
and (ii) being referred to as an "EXTENDED LOOKBACK EVENT"), then, at the
election of each holder of Series B Preferred Stock exercisable with respect
to any Optional Conversion
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occurring within thirty-five (35) Trading Days after the end of the Extended
Pricing Period (as defined below), the Pricing Period shall be comprised of,
(x) in the case of an event described in clause (i), the thirty-five (35)
Trading Days preceding the date on which such Registration Statement is
required to become effective pursuant to the terms of the Registration Rights
Agreement, plus all Trading Days through and including the third (3rd)
Trading Day following the date of actual effectiveness of such Registration
Statement; and (y) in the case of an event described in clause (ii), the
thirty-five (35) Trading Days preceding the date on which the holder of the
Series B Preferred Stock is first notified that sales may not be made under
the Prospectus, plus all Trading Days through and including the third (3rd)
Trading Day following the date on which the Holder is first notified that
such sales may again be made under the Prospectus (each of such periods
referred to in (x) and (y) being defined as an "EXTENDED PRICING PERIOD"). If
a holder of Series B Preferred Stock determines that sales may not be made
pursuant to the Prospectus (whether by reason of the Corporation's failure or
inability to amend or supplement the Prospectus or otherwise) it shall so
notify the Corporation in writing and, unless the Corporation provides such
holder with a written opinion of the Corporation's counsel to the contrary,
such determination shall be binding for purposes of this paragraph. In the
event that an Extended Lookback Event occurs during the Extended Pricing
Period with respect to any other Extended Lookback Event, the Extended
Pricing Periods shall be cumulative.
D. MECHANICS OF CONVERSION. In order to convert Series B
Preferred Stock into full shares of Common Stock, a holder of Series B
Preferred Stock shall: (i) submit a copy of the fully executed notice of
conversion in the form attached hereto as Exhibit A ("NOTICE OF CONVERSION")
to the Corporation by facsimile dispatched prior to Midnight, New York City
time (the "CONVERSION NOTICE DEADLINE"), on the date specified therein as the
Conversion Date (or by other means resulting in, or reasonably expected to
result in, notice to the Corporation on the Conversion Date) to the office of
the Corporation or its designated Transfer Agent for the Series B Preferred
Stock, which notice shall specify the number of shares of Series B Preferred
Stock to be converted, the applicable Conversion Price and a calculation of
the number of shares of Common Stock issuable upon such conversion (including
the number of shares issuable upon exercise of the Investment Options, if
any), together with a copy of the first page of each certificate to be
converted; and (ii) surrender the original certificates representing the
Series B Preferred Stock being converted (the "PREFERRED STOCK
Certificates"), duly endorsed, along with a copy of the Notice of Conversion
to the office of the Corporation or the Transfer Agent for the Series B
Preferred Stock as soon as practicable thereafter. The Corporation shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion, unless either the Preferred Stock Certificates
are delivered to the Corporation or its Transfer Agent as provided above, or
the holder notifies the Corporation or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements
of subparagraph (a) below). In the case of a dispute as to the calculation of
the Conversion Price, the Corporation shall promptly issue such number of
shares of Common Stock that are not disputed in accordance with subparagraph
(b) below. The Corporation shall submit the disputed calculations to its
outside accountant via facsimile within two (2) business days of receipt of
the Notice of Conversion. The accountant shall audit the calculations and
notify the Corporation and the holder of the results no later than 48 hours
from the time it receives the disputed calculations. The accountant's
calculation shall be deemed conclusive absent manifest error.
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(i) LOST OR STOLEN CERTIFICATES. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series B Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute
and deliver new Preferred Stock Certificate(s) of like tenor and date.
(ii) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon
the surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall, within two (2) business days after such
surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of agreement and indemnification pursuant to subparagraph (a)
above) (the "DELIVERY PERIOD"), issue and deliver (or cause its Transfer
Agent to so issue and deliver) in accordance with the terms hereof and the
Purchase Agreement (including, without limitation, in accordance with the
requirements of Section 2(g) of the Purchase Agreement) to or upon the order
of the holder (i) that number of shares of Common Stock for the portion of
the shares of Series B Preferred Stock converted (and, if applicable, the
number of shares of Common Stock issuable upon exercise of Investment Options
in connection therewith) as shall be determined in accordance herewith and
(ii) a certificate representing the balance of the shares of Series B
Preferred Stock not converted, if any. In addition to any other remedies
available to the holder, including actual damages and/or equitable relief,
the Corporation shall pay to a holder $2,000 per day in cash for each day
beyond a two (2) business day grace period following the Delivery Period that
the Corporation fails to deliver Common Stock (a "DELIVERY DEFAULT") issuable
upon surrender of shares of Series B Preferred Stock (or exercise of
Investment Options) with a Notice of Conversion until such time as the
Corporation has delivered all such Common Stock (the "DELIVERY DEFAULT
PAYMENTS"). Such Delivery Default Payments shall be paid to such holder by
the fifth day of the month following the month in which it has accrued or, at
the option of the holder (by written notice to the Corporation by the first
day of the month following the month in which it has accrued), shall be
convertible into Common Stock in accordance with the terms of this Article VI.
So long as the Common Stock issuable upon conversion to
the holder is either registered under the 1933 Act or such shares may be sold
under Rule 144 promulgated under the 1933 Act without restriction as to the
number of shares as of a particular date that can then be immediately sold,
in lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Corporation's Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder and its
compliance with the provisions contained in Article VI.A and in this Article
VI.D, the Corporation shall use its best efforts to cause its Transfer Agent
to electronically transmit the Common Stock issuable upon conversion to the
holder by crediting the account of holder's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system. The time periods for
delivery and penalties described in the immediately preceding paragraph shall
apply to the electronic transmittals described herein.
(iii) NO FRACTIONAL SHARES. If any conversion of
Series B Preferred Stock would result in a fractional share of Common Stock
or the right to acquire a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares of
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Common Stock issuable upon Conversion of the Series B Preferred Stock shall
be the next higher number of shares.
(iv) CONVERSION DATE. The "CONVERSION DATE" shall be
the date specified in the Notice of Conversion, provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting in, or
reasonably expected to result in, notice) to the Corporation or its Transfer
Agent before Midnight, New York City time, on the date so specified,
otherwise the Conversion Date shall be the first business day after the date
so specified on which the Notice of Conversion is actually received by the
Corporation or its Transfer Agent. The person or persons entitled to receive
the shares of Common Stock issuable upon conversion of the Series B Preferred
Stock (or exercise of Investment Options) shall be treated for all purposes
as the record holder or holders of such securities as of the Conversion Date
and all rights with respect to the shares of Series B Preferred Stock
surrendered shall forthwith terminate except the right to receive the shares
of Common Stock or other securities or property issuable on such conversion
and except that the holders preferential rights as a holder of Series B
Preferred Stock shall survive to the extent the Corporation fails to deliver
such securities.
E. RESERVATION OF SHARES. A number of shares of the
authorized but unissued Common Stock sufficient to provide for the full
conversion of the Series B Preferred Stock outstanding (based on the lesser
of the then current Variable Conversion Price in effect from time to time and
the Fixed Conversion Price in effect from time to time) and the exercise in
full of the Investment Options shall at all times be reserved by the
Corporation, free from preemptive rights, for such conversion or exercise. As
of the date of issuance of the Series B Preferred Stock, 3,855,422 authorized
and unissued shares of Common Stock have been duly reserved for issuance upon
conversion of the Series B Preferred Stock and upon exercise of the
Investment Options (the "RESERVED AMOUNT"). The Reserved Amount shall be
increased from time to time in accordance with the Company's obligations
pursuant to Section 4(h) of the Purchase Agreement. In addition, if the
Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series B Preferred Stock shall be convertible and for which
the Investment Options shall be exercisable, the Corporation shall at the
same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free
from preemptive rights, for conversion of the outstanding Series B Preferred
Stock and exercise of the Investment Options.
If at any time a holder of shares of Series B Preferred
Stock submits a Notice of Conversion, and the Corporation does not have
sufficient authorized but unissued shares of Common Stock available to effect
such conversion in accordance with the provisions of this Article VI
(including any Investment Options exercised in connection therewith) (a
"CONVERSION DEFAULT"), subject to Article X, the Corporation shall issue to
the holder all of the shares of Common Stock which are available to effect
such conversion. The number of shares of Series B Preferred Stock (or number
of shares of Common Stock underlying the Investment Options) included in the
Notice of Conversion which exceeds the amount which is then convertible (or
exercisable) into available shares of Common Stock (the "EXCESS AMOUNT")
shall, notwithstanding anything to the contrary contained herein, not be
convertible (or exercisable) into Common Stock in accordance with the terms
hereof until (and at the holder's option at any time after) the date
additional shares of Common Stock are authorized by the Corporation to
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<PAGE>
permit such conversion (or exercise), at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on
the Conversion Date elected by the holder in respect thereof. The Corporation
shall use its best efforts to effect an increase in the authorized number of
shares of Common Stock as soon as possible following the earlier of (i) such
time that a holder of Series B Preferred Stock notifies the Corporation or
that the Corporation otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full conversion thereof
and (ii) a Conversion Default. In addition, the Corporation shall pay to the
holder payments ("CONVERSION DEFAULT PAYMENTS") for a Conversion Default in
the amount of (a) .24, multiplied by (b) the sum of the Stated Value plus the
Premium Amount per share of Series B Preferred Stock held by such holder
through the Authorization Date (as defined below), multiplied by (c) (N/365),
where N = the number of days from the day the holder submits a Notice of
Conversion giving rise to a Conversion Default (the "CONVERSION DEFAULT
DATE") to the date (the "AUTHORIZATION DATE") that the Corporation authorizes
a sufficient number of shares of Common Stock to effect conversion of the
full number of shares of Series B Preferred Stock. The Corporation shall send
notice to the holder of the authorization of additional shares of Common
Stock, the Authorization Date and the amount of holder's accrued Conversion
Default Payments. The accrued Conversion Default Payment for each calendar
month shall be paid in cash or shall be convertible into Common Stock at the
applicable Conversion Price, at the holder's option, as follows:
(i) In the event the holder elects to take such
payment in cash, cash payment shall be made to holder by the fifth (5th) day
of the month following the month in which it has accrued; and
(ii) In the event the holder elects to take such
payment in Common Stock, the holder may convert such payment amount into
Common Stock at the Conversion Price (as in effect at the time of Conversion)
at any time after the fifth day of the month following the month in which it
has accrued in accordance with the terms of this Article VI (so long as there
is then a sufficient number of authorized shares of Common Stock).
The holder's election shall be made in writing to the
Corporation at any time prior to 9:00 p.m., New York City Time, on the third
(3rd) day of the month following the month in which Conversion Default
payments have accrued. If no election is made, the holder shall be deemed to
have elected to receive cash. Nothing herein shall limit the holder's right
to pursue actual damages (to the extent in excess of the Conversion Default
Payments) for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
F. NOTICE OF CONVERSION PRICE ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Conversion Price
pursuant to this Article VI, the Corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to each holder of Series B Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of
Series B Preferred Stock, furnish or cause to be furnished to such holder a
like
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<PAGE>
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of a share of Series B Preferred
Stock.
G. INVESTMENT OPTIONS. On any Conversion Date relating to a
conversion of the Series B Preferred Stock by a holder thereof, the holder
shall have the option to purchase one additional share of Common Stock for
every share of Common Stock issuable as a result of such conversion at an
exercise price equal to the applicable Conversion Price (the option to
purchase such additional shares shall be referred to herein as the
"INVESTMENT OPTIONS"). The holder (i) shall indicate on the Notice of
Conversion in respect of such Conversion Date that it is exercising its
Investment Option with respect to such conversion and shall specify the
number of shares of Common Stock with respect to which the Investment Option
is being so exercised, and (ii) shall pay to the Corporation, in immediately
available funds, on or within one (1) business day following the Conversion
Date, the aggregate purchase price for the shares of Common Stock issuable as
a result of the exercise of such Investment Options. The provisions of
paragraphs A, D(b) (so long as the holder has delivered to the Corporation
the aggregate purchase price due in connection with the exercise of the
Investment Options) and E of this Article VI shall apply to any exercise by
the holder or the Series B Preferred Stock of Investment Options.
H. STATUS AS STOCKHOLDERS. Upon submission of a Notice of
Conversion by a holder of Series B Preferred Stock, (i) the shares covered
thereby (other than the shares, if any, which cannot be issued because their
issuance would exceed such holder's allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of Common
Stock and (ii) the holder's rights as a holder of such converted shares of
Series B Preferred Stock shall cease and terminate, excepting only the right
to receive certificates for such shares of Common Stock and to any remedies
provided herein or otherwise available at law or in equity to such holder
because of a failure by the Corporation to comply with the terms of this
Certificate of Designation. Notwithstanding the foregoing, if a holder has
not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect
to a conversion of shares of Series B Preferred Stock for any reason, then
(unless the holder otherwise elects to retain its status as a holder of
Common Stock by so notifying the Corporation) the holder shall regain the
rights of a holder of such shares of Series B Preferred Stock with respect to
such unconverted shares of Series B Preferred Stock and the Corporation
shall, as soon as practicable, return such unconverted shares of Series B
Preferred Stock to the holder or, if such shares of Series B Preferred Stock
have not been surrendered, adjust its records to reflect that such shares of
Series B Preferred Stock have not been converted. In all cases, the holder
shall retain all of its rights and remedies (including, without limitation,
(i) the right to receive Conversion Default Payments pursuant to Article VI.E
to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with
respect to subsequent conversions determined in accordance with Article
VI.E.) for the Corporation's failure to convert the Series B Preferred Stock.
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VII. AUTOMATIC CONVERSION
Subject to the limitations on conversion set forth in
Article VI.A(b) and so long as (i) all of the shares of Common Stock issuable
upon conversion of all outstanding shares of Series B Preferred Stock (and
upon exercise of the Investment Options) are then (x) authorized and reserved
for issuance, (y) registered for re-sale under the 1933 Act by the holders of
the Series B Preferred Stock (or may otherwise be resold publicly without
registration or restriction) and (z) eligible to be traded on Nasdaq, the
NYSE, the AMEX or Nasdaq SmallCap and (ii) there is not then a continuing
Mandatory Redemption Event or Trading Market Redemption Event, each share of
Series B Preferred Stock issued and outstanding on April 28, 2003 (the
"AUTOMATIC CONVERSION DATE"), automatically shall be converted into shares of
Common Stock on such date at the then effective Conversion Price in
accordance with, and subject to, the provisions of Article VI hereof
(including the right to exercise the Investment Options in accordance with
Article VI.G) (the "AUTOMATIC CONVERSION"). The Automatic Conversion Date
shall be delayed by one (1) Trading Day for each Trading Day occurring prior
thereto and prior to the full conversion of the Series B Preferred Stock that
(i) any Registration Statement required to be filed and to be effective
pursuant to the Registration Rights Agreement is not effective or sales of
all of the Registrable Securities otherwise cannot be made thereunder during
the Registration Period (as defined in the Registration Rights Agreement)
(whether by reason of the Corporation's failure to properly supplement or
amend the prospectus included therein in accordance with the terms of the
Registration Rights Agreement or otherwise, including any Allowed Delays (as
defined in Section 3(f) of the Registration Rights Agreement), (ii) any
Mandatory Redemption Event or Trading Market Redemption Event exists, without
regard to whether any cure periods shall have run or (iii) that the
Corporation is in breach of any of its obligations pursuant to Section 4(h)
of the Purchase Agreement. The Automatic Conversion Date shall be the
Conversion Date for purposes of determining the Conversion Price and the time
within which certificates representing the Common Stock must be delivered to
the holder.
VIII. VOTING RIGHTS
The holders of the Series B Preferred Stock have no voting
power whatsoever, except as otherwise provided by the Nevada General
Corporation Law ("NGCL"), in this Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide
each holder of Series B Preferred Stock with prior notification of any
meeting of the shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the
Corporation of a record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share of
any class or any other securities or property, or to receive any other right,
or for the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation
shall mail a notice to each holder, at least ten (10) days prior to the
record date specified therein (or thirty (30) days prior to the consummation
of the transaction or event, whichever is earlier), of the date on which any
such record is to be taken for the purpose of such dividend, distribution,
right or
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<PAGE>
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the NGCL the vote of the holders
of the Series B Preferred Stock, voting separately as a class or series, as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the
shares of the Series B Preferred Stock represented at a duly held meeting at
which a quorum is present or by written consent of a majority of the shares
of Series B Preferred Stock (except as otherwise may be required under the
NGCL) shall constitute the approval of such action by the class. To the
extent that under the NGCL holders of the Series B Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one class, each share of Series B Preferred Stock shall be entitled to a
number of votes equal to the number of shares of Common Stock into which it
is then convertible using the record date for the taking of such vote of
shareholders as the date as of which the Conversion Price is calculated.
Holders of the Series B Preferred Stock shall be entitled to notice of all
shareholder meetings or written consents (and copies of proxy materials and
other information sent to shareholders) with respect to which they would be
entitled to vote, which notice would be provided pursuant to the
Corporation's bylaws and the NGCL.
IX. PROTECTIVE PROVISIONS
So long as shares of Series B Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by the NGCL) of the holders of at
least a majority of the then outstanding shares of Series B Preferred Stock:
(i) alter, amend or repeal (whether by merger,
consolidation or otherwise) the rights, preferences or privileges of the
Series B Preferred Stock or any capital stock of the Corporation so as to
affect adversely the Series B Preferred Stock;
(ii) create any new class or series of capital stock
having a preference over the Series B Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "SENIOR SECURITIES");
(iii) create any new class or series of capital stock
(other than the Series C Preferred Stock) ranking PARI PASSU with the Series
B Preferred Stock as to distribution of assets upon liquidation, dissolution
or winding up of the Corporation (as previously defined in Article II hereof,
"PARI PASSU SECURITIES");
(iv) increase the authorized number of shares of
Series B Preferred Stock;
(v) issue any Senior Securities or PARI PASSU
Securities (other than the Series C Preferred Stock issued or issuable
pursuant to the Purchase Agreement);
(vi) increase the par value of the Common Stock, or
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(vii) do any act or thing not authorized or
contemplated by this Certificate of Designation which would result in
taxation of the holders of shares of the Series B Preferred Stock under
Section 305 of the Internal Revenue Code of 1986, as amended (or any
comparable provision of the Internal Revenue Code as hereafter from time to
time amended).
In the event holders of at least a majority of the then
outstanding shares of Series B Preferred Stock agree to allow the Corporation
to alter or change the rights, preferences or privileges of the shares of
Series B Preferred Stock, pursuant to subsection (a) above, so as to affect
the Series B Preferred Stock, then the Corporation will deliver notice of
such approved change to the holders of the Series B Preferred Stock that did
not agree to such alteration or change (the "DISSENTING HOLDERS") and
Dissenting Holders shall have the right for a period of thirty (30) days to
convert into Common Stock pursuant to the terms of this Certificate of
Designation as they exist prior to such alteration or change or continue to
hold their shares of Series B Preferred Stock.
X. PRO RATA ALLOCATIONS
The Maximum Share Amount (including any increases thereto)
shall be allocated by the Corporation pro rata among the holders of Series B
Preferred Stock and Series C Preferred Stock based on the number of shares of
Series B Preferred Stock and Series C Preferred Stock issued to each holder.
Each increase to the Maximum Share Amount shall be allocated pro rata among
the holders of Series B Preferred Stock and Series C Preferred Stock based on
the number of shares of Series B Preferred Stock and Series C Preferred Stock
held by each holder at the time of the increase in the Maximum Share Amount.
In the event a holder shall sell or otherwise transfer any of such holder's
shares of Series B Preferred Stock or Series C Preferred Stock, each
transferee shall be allocated a pro rata portion of such transferor's Maximum
Share Amount. Any portion of the Maximum Share Amount which remains allocated
to any person or entity which does not hold any Series B Preferred Stock
shall be allocated to the remaining holders of shares of Series B Preferred
Stock, pro rata based on the number of shares of Series B Preferred Stock
then held by such holders.
The Reserved Amount (including any increases thereto) shall
be allocated by the Corporation pro rata among the holders of Series B
Preferred Stock based on the number of shares of Series B Preferred Stock
issued to each holder. Each increase to the Reserved Amount shall be
allocated pro rata among the holders of Series B Preferred Stock based on the
number of shares of Series B Preferred Stock held by each holder at the time
of the increase in the Reserved Amount. In the event a holder shall sell or
otherwise transfer any of such holder's shares of Series B Preferred Stock,
each transferee shall be allocated a pro rata portion of such transferor's
Reserved Amount. Any portion of the Reserved Amount which remains allocated
to any person or entity which does not hold any Series B Preferred Stock
shall be allocated to the remaining holders of shares of Series B Preferred
Stock, pro rata based on the number of shares of Series B Preferred Stock
then held by such holders.
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XI. REMEDIES
The Corporation acknowledges that a breach by it of its
obligations under this Certificate of Designation will cause irreparable harm
to each holder of Series B Preferred Stock by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the Corporation
acknowledges that the remedy at law for a breach of its obligations under
this Certificate of Designation will be inadequate and agrees, in the event
of a breach or threatened breach by the Corporation of the provisions of this
Certificate of Designation, that each holder of Series B Preferred Stock
shall be entitled, in addition to all other available remedies in law or in
equity, to any injunction or injunctions to prevent or cure any breaches of
the provisions of this Certificate of Designation and to enforce specifically
the terms and provisions of this Certificate of Designation, without the
necessity of showing economic loss and without any bond or other security
being required.
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation as of the 27th day of April, 2000.
GLOBALMEDIA.COM
By: /s/ Robert Fuller
--------------------------------------
Robert Fuller
Chief Executive Officer
By: /s/ L. James Porter
--------------------------------------
L. James Porter
Secretary
Province of British Columbia )
) ss.
City of )
------------------------------------
On April 27, 2000, personally appeared before me, a Notary Public,
Robert Fuller and L. James Porter, who acknowledged that they executed the
above instrument.
/s/
--------------------------------------
Signature of Notary
(Notary Stamp or Seal)
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series B Preferred Stock, represented by stock certificate No(s).
__________ (the "PREFERRED STOCK CERTIFICATES") into shares of common stock
("COMMON STOCK") of GlobalMedia.com, a Nevada corporation (the "CORPORATION")
according to the conditions of the Certificate of Designation of Series B
Preferred Stock, as of the date written below. If securities are to be issued
in the name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any. A copy of each Preferred Stock Certificate
is attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned hereby irrevocably elects to convert
$_________ in Conversion Default Payments, $_________ in Delivery Default
Payments and or $__________ in payments pursuant to Section 2(c) of the
Registration Rights Agreement at the Applicable Conversion Price set forth
below.
The undersigned hereby irrevocably elects to exercise its
Investment Option to purchase _______________ shares of Common Stock of the
Corporation (up to the number of shares of Common Stock issuable pursuant to
the conversion of the Series B Preferred Stock) at the Applicable Conversion
Price set forth below and shall make payment of $__________ for such shares
by wire transfer of such amount to the Corporation simultaneously upon
transfer of the shares of Common Stock by the Corporation.
So long as the Common Stock issuable pursuant to this
Notice of Conversion is either registered under the Act (as defined below) or
may be sold under Rule 144 promulgated under the Act without restriction as
to the number of shares as of a particular date that can then be immediately
sold, the Corporation shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or
its nominee with DTC through its Deposit Withdrawal Agent Commission system
("DWAC TRANSFER").
Name of DTC Prime Broker: _________________________________
Account Number: ___________________________________________
In lieu of receiving shares of Common Stock issuable pursuant
to this Notice of Conversion by way of a DWAC Transfer, the
undersigned hereby requests that the Corporation issue a
certificate or certificates for the number of shares of Common
Stock set forth above (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified
immediately below or, if additional space is necessary, on an
attachment hereto:
Name: ___________________________________________________
Address: _________________________________________________
<PAGE>
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series B Preferred Stock and exercise of the Investment
Options shall be made pursuant to registration of the securities under the
Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
Conversion Date:___________________________________________
Market Price Days: _________________________________________
Applicable Conversion Price:_________________________________
Number of Shares of Common Stock to be Issued pursuant to:
(i) conversion of Series B Preferred Stock: _____________
(ii) exercise of Investment Options: _____________________
(iii) conversion of Conversion Default Payments, Delivery
Default Payments and/or payments pursuant to Section
2 of the Registration Rights Agreement:
__________________________________
Signature: _______________________________________________
Name: __________________________________________________
Address: _________________________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series B Preferred Stock Certificate(s) (or evidence of loss, theft
or destruction thereof) to be converted are received by the Corporation or
its Transfer Agent. The Corporation shall issue and deliver shares of Common
Stock to an overnight courier not later than two (2) business days following
receipt of the original Preferred Stock Certificate(s) to be converted, and
shall make payments pursuant to the Certificate of Designation for the number
of business days such issuance and delivery is late (subject to the
applicable grace period set forth in the Certificate of Designation).
<PAGE>
EXHIBIT 99.3
EXHIBIT B-1
TO SECURITIES
PURCHASE
AGREEMENT
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OR ANY STATE SECURITIES LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR
IN A SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 28, 2000, NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR, AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO AND IN
COMPLIANCE WITH RULE 144 UNDER SUCH ACT.
Right to
Purchase
388,500
Shares of
Common Stock,
par value $0.001
per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC International
Investors, LDC or its registered assigns, is entitled to purchase from
GlobalMedia.com, a Nevada corporation (the "Company"), at any time or from
time to time during the period specified in Paragraph 2 hereof, Three Hundred
Eighty-Eight Thousand, Five Hundred (388,500) fully paid and nonassessable
shares of the Company's Common Stock, par value $0.001 per share (the "Common
Stock"), at an exercise price of $7.0785 per share (the "Exercise Price").
The term "Warrant Shares," as used herein, refers to the shares of Common
Stock purchasable hereunder. The Warrant Shares and the Exercise Price are
subject to adjustment as provided in Paragraph 4 hereof. The term Warrants
means this Warrant and the other warrants issued pursuant to that certain
Securities Purchase Agreement, dated April 28, 2000, by and among the Company
and the Buyers listed on the execution page thereof (the "Securities Purchase
Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. Subject to the provisions hereof, this Warrant may be exercised by
the holder hereof, in whole or in part, by the surrender of this Warrant,
together with a completed exercise agreement in the form attached hereto (the
"Exercise Agreement"), to the Company during normal business hours on any
trading day at the
<PAGE>
Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by
wire transfer for the account of the Company of the Exercise Price for the
Warrant Shares specified in the Exercise Agreement or (ii) if the resale of
the Warrant Shares by the holder is not then registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), delivery to the Company of a written notice of an
election to effect a "Cashless Exercise" (as defined in Section 11(c) below)
for the Warrant Shares specified in the Exercise Agreement. The Warrant
Shares so purchased shall be deemed to be issued to the holder hereof or such
holder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment shall
have been made for such shares (or an election to effect a Cashless Exercise
has been made) as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding two (2) trading days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder
a new Warrant representing the number of shares with respect to which this
Warrant shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in no
event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or
portions thereof) upon exercise of which the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through
the ownership of the unexercised Warrants and the unexercised or unconverted
portion of any other securities of the Company (including shares of Series B
Preferred Stock and Series C Preferred Stock (each as defined in the
Securities Purchase Agreement) and the Investment Options (as defined in the
Securities Purchase Agreement)) subject to a limitation on conversion or
exercise analogous to the limitation contained herein) and (ii) the number of
shares of Common Stock issuable upon exercise of the Warrants (or portions
thereof) with respect to which the determination described herein is being
made, would result in beneficial ownership by the Holder and its affiliates
of more than 4.9% of the outstanding shares of Common Stock. For purposes of
the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in
clause (i) hereof. Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be
amended without (i) the written consent of the holder hereof and the Company
and (ii) the approval of the holders of a majority of the Company's Common
Stock present, or represented by proxy, and voting at any meeting called to
vote on the amendment of this paragraph.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or
from time to time on or after the date on which this Warrant is issued and
delivered pursuant to the terms of the Securities Purchase Agreement (the
"Issue Date") and before 5:00 p.m., New York City time on the fifth (5th)
anniversary of the Issue Date (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
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<PAGE>
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued,
fully paid, and nonassessable and free from all taxes, liens, and charges
with respect to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this Warrant;
and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the same class
shall be listed on such national securities exchange or automated quotation
system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested
by the holder of this Warrant in order to protect the exercise privilege of
the holder of this Warrant against dilution or other impairment, consistent
with the tenor and purpose of this Warrant. Without limiting the generality
of the foregoing, the Company (i) will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise
of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the
Exercise Price and the number of Warrant Shares shall be subject to
adjustment from time to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded
up to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the Issue Date of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Market Price (as hereinafter defined) on
the date of issuance (or deemed issuance) of such Common Stock (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price
will be
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<PAGE>
reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator
of which is an amount equal to the sum of (x) the number of shares of Common
Stock actually outstanding immediately prior to the Dilutive Issuance, plus
(y) the quotient of the aggregate consideration, calculated as set forth in
Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance
divided by the Market Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Market Price on the date of
issuance or grant of such Options, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options will, as of the
date of the issuance or grant of such Options, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company
as consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon exercise of
such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities, whether or
not immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the Market Price on
the date of issuance of such Convertible Securities, then the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum
total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities.
4
<PAGE>
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion
or exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for
such changed additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or exchange of
any Convertible Securities is not, in fact, issued and the rights to exercise
such Option or to convert or exchange such Convertible Securities shall have
expired or terminated, the Exercise Price then in effect will be readjusted
to the Exercise Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible Securities are issued, granted or sold
for cash, the consideration received therefor for purposes of this Warrant
will be the amount received by the Company therefor, before deduction of
reasonable commissions, underwriting discounts or allowances or other
reasonable expenses paid or incurred by the Company in connection with such
issuance, grant or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall
be other than cash, the amount of the consideration other than cash received
by the Company will be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible
Securities are issued in connection with any acquisition, merger or
consolidation in which the Company is the surviving corporation, the amount
of consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of Directors of the
Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding
on the date of issuance of this Warrant; (ii) upon the grant or exercise of
any stock or options which may hereafter be granted or exercised under any
employee benefit plan of the Company now existing or to be implemented in the
future, so long as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of the Company
or a majority of the members of a committee of independent directors
established for such purpose; (iii) upon the exercise of the Warrants; (iv)
the issuance of shares of Common Stock as contemplated in Schedule 4(d) of
the Securities Purchase Agreement; and (v) the issuance of warrants (and the
issuance of Common Stock upon the exercise thereof) to Broadmark Capital
Corporation in connection with the Securities Purchase Agreement and the
transactions contemplated thereby.
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<PAGE>
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a greater number of shares, then,
after the date of record for effecting such subdivision, the Exercise Price
in effect immediately prior to such subdivision will be proportionately
reduced. If the Company at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) the shares
of Common Stock acquirable hereunder into a smaller number of shares, then,
after the date of record for effecting such combination, the Exercise Price
in effect immediately prior to such combination will be proportionately
increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all
of the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger
or sale or conveyance, adequate provision will be made whereby the holder of
this Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore
acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such
case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly
as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect
any consolidation, merger or sale or conveyance unless prior to the
consummation thereof, the successor or acquiring entity (if other than the
Company) and, if an entity different from the successor or acquiring entity,
the entity whose capital stock or assets the holders of the Common Stock of
the Company are entitled to receive as a result of such consolidation, merger
or sale or conveyance assumes by written instrument the obligations under
this Warrant (including under this Paragraph 4) and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the holder may be
entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders
entitled to such distribution, but prior to the date of distribution, the
holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the holder
had such holder been the holder of such shares of Common Stock on the record
date for the determination of stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant,
which notice shall state the Exercise Price resulting from such adjustment
and the increase or decrease in the number of Warrant Shares purchasable at
such price
6
<PAGE>
upon exercise, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to not less than 1% of
such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the Company
shall pay a cash adjustment in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all its assets
to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a
record shall be taken for determining the holders of Common Stock entitled to
receive any such dividend, distribution, or subscription rights or for
determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take
place. Such notice shall also specify the date on which the holders of Common
Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed
in respect thereto. Failure to give any such notice or any defect therein
shall not affect the validity of the proceedings referred to in clauses (i),
(ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not
expressly provided for by such provisions, the Company will give notice of
such event as provided in Paragraph 4(g) hereof, and the Company's Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of
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shares of Common Stock acquirable upon exercise of this Warrant so that the
rights of the Holder shall be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the
number of shares of Common Stock actually outstanding (not including shares
of Common Stock held in the treasury of the Company), plus (x) pursuant to
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or
grant of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof,
the maximum total number of shares of Common Stock issuable upon conversion
or exchange of Convertible Securities, as of the date of issuance of such
Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the
average of the last reported sale prices for the shares of Common Stock on
the Nasdaq National Market ("Nasdaq") for the five (5) trading days
immediately preceding such date as reported by Bloomberg Financial Markets or
an equivalent reliable reporting service mutually acceptable to and hereafter
designated by the holder of this Warrant and the Company ("Bloomberg"), or
(ii) if Nasdaq is not the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg,
or (iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or (b) at the option of a majority-in-interest of the holders of
the outstanding Warrants by an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common
Stock set forth in the foregoing definition shall apply with respect to any
other security in respect of which a determination as to market value must be
made hereunder.
(iii) "COMMON STOCK," for purposes of this Paragraph
4, includes the Common Stock, par value $0.001 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant
to this Warrant shall include only shares of Common Stock, par value $0.001
per share, in respect of which this Warrant is exercisable, or shares
resulting from any subdivision or combination of such Common Stock, or in the
case of any reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon
the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no
mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as
a shareholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
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(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in
the form attached hereto, at the office or agency of the Company referred to
in Paragraph 7(e) below, provided, however, that any transfer or assignment
shall be subject to the conditions set forth in Paragraph 7(f) hereof and to
the applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in
accordance with the provisions of that certain Registration Rights Agreement,
dated as of April 28, 2000, by and among the Company and the other
signatories thereto (the "Registration Rights Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Paragraph 7(e) below, for
new Warrants of like tenor representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased
hereunder, each of such new Warrants to represent the right to purchase such
number of shares as shall be designated by the holder hereof at the time of
such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company, or, in the case of any such mutilation,
upon surrender and cancellation of this Warrant, the Company, at its expense,
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer
taxes) and all other expenses (other than legal expenses, if any, incurred by
the Holder or transferees) and charges payable in connection with the
preparation, execution, and delivery of Warrants pursuant to this Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the
time of the surrender of this Warrant in connection with any exercise,
transfer, or exchange of this Warrant, this Warrant (or, in the case of any
exercise, the Warrant Shares issuable hereunder), shall not be registered
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such exercise,
transfer, or exchange, (i) that the holder or transferee of this Warrant, as
the case may be, furnish to the Company a written opinion of counsel, which
opinion and counsel are acceptable to the Company, to the effect that such
exercise, transfer, or exchange may be made without registration under said
Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (iii) that the transferee
be an "accredited investor" as
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defined in Rule 501(a) promulgated under the Securities Act; provided that no
such opinion, letter or status as an "accredited investor" shall be required
in connection with a transfer pursuant to Rule 144 under the Securities Act.
The first holder of this Warrant, by taking and holding the same, represents
to the Company that such holder is acquiring this Warrant for investment and
not with a view to the distribution thereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.
9. NOTICES. All notices, requests, and other communications
required or permitted to be given or delivered hereunder to the holder of
this Warrant shall be in writing, and shall be personally delivered, or shall
be sent by certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to such holder at the address shown
for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such holder. All
notices, requests, and other communications required or permitted to be given
or delivered hereunder to the Company shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail courier, postage prepaid and addressed, to the
office of the Company at Global Media Corp., 400 Robson Street, Vancouver,
British Columbia V6B 2B4 Canada, Attention: Chief Executive Officer, or at
such other address as shall have been furnished to the holder of this Warrant
by notice from the Company. Any such notice, request, or other communication
may be sent by facsimile, but shall in such case be subsequently confirmed by
a writing personally delivered or sent by certified or registered mail or by
recognized overnight mail courier as provided above. All notices, requests,
and other communications shall be deemed to have been given either at the
time of the receipt thereof by the person entitled to receive such notice at
the address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier, if
postage is prepaid and the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED IN THE STATE OF DELAWARE (WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS). THE COMPANY AND THE HOLDER IRREVOCABLY
CONSENT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND
THE STATE COURTS LOCATED IN DELAWARE IN ANY SUIT OR PROCEEDING BASED ON OR
ARISING UNDER THIS WARRANT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND IRREVOCABLY
AGREE THAT ALL CLAIMS IN RESPECT OF SUCH SUIT OR PROCEEDING MAY BE DETERMINED
IN SUCH COURTS. THE COMPANY AND THE HOLDER IRREVOCABLY WAIVE THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. THE
COMPANY AND THE HOLDER FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE COMPANY OR THE HOLDER HEREOF TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW. THE COMPANY AND THE HOLDER AGREE THAT A
FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
JUDGMENT OR IN ANY OTHER LAWFUL MANNER.
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11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may
only be amended by an instrument in writing signed by the Company and the
holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference
only, and shall not affect the meaning or construction of any of the
provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by
the holder is not then registered pursuant to an effective registration
statement under the Securities Act, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect a
cashless exercise, including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise, in lieu of paying
the Exercise Price in cash, the holder shall surrender this Warrant for that
number of shares of Common Stock determined by multiplying the number of
Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market
Price per share of the Common Stock and the Exercise Price, and the
denominator of which shall be the then current Market Price per share of
Common Stock.
(d) REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the holder by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its obligations under this Warrant will be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the provisions of
this Warrant, that the holder shall be entitled, in addition to all other
available remedies at law or in equity, to an injunction or injunctions
restraining, preventing or curing any breach of this Warrant and to enforce
specifically the terms and provisions thereof, without the necessity of
showing economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
GLOBALMEDIA.COM
By: /s/ Robert Fuller
-----------------------------
Robert Fuller
Chief Executive Officer
Dated as of April 28, 2000
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FORM OF EXERCISE AGREEMENT
Dated: ________,__
To: GlobalMedia.com
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per
share provided by such Warrant in cash or by certified or official bank check
in the amount of, or, if the resale of such Common Stock by the undersigned
is not currently registered pursuant to an effective registration statement
under the Securities Act of 1933, as amended, by surrender of securities
issued by the Company (including a portion of the Warrant) having a market
value (in the case of a portion of this Warrant, determined in accordance
with Section 11(c) of the Warrant) equal to $_________. Please issue a
certificate or certificates for such shares of Common Stock in the name of
and pay any cash for any fractional share to:
Name:____________________________________
Signature: ______________________________
Address: ______________________________
______________________________
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the
name of said undersigned covering the balance of the shares purchasable
thereunder less any fraction of a share paid in cash.
<PAGE>
EXHIBIT 99.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of April
28, 2000, by and among GlobalMedia.com, a Nevada corporation, with
headquarters located at 400 Robson Street, Vancouver, British Columbia V6B
2B4, Canada (the "COMPANY"), and each of the undersigned (together with their
respective affiliates and any assignee or transferee of all of their
respective rights hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE
AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
shares of its Series B Convertible Preferred Stock (the "SERIES B PREFERRED
STOCK") and Series C Convertible Preferred Stock (the "SERIES C PREFERRED
STOCK" and, collectively with the Series B Preferred Stock, the "PREFERRED
SHARES "), that are convertible into shares of the Company's common stock,
par value $0.001 per share (the "COMMON STOCK"), upon the terms and subject
to the limitations and conditions set forth in the Certificate of
Designations, Preferences, Rights with respect to the Series B Preferred
Stock (the "SERIES B CERTIFICATE OF DESIGNATION") and the Certificate of
Designations, Preferences, and rights with respect to the Series C Preferred
Stock (the "SERIES C CERTIFICATE OF DESIGNATION" and, collectively with the
Series B Certificate of Designation, the "CERTIFICATES OF DESIGNATION"); and
(ii) warrants to acquire 338,500 shares of Common Stock, upon the terms and
conditions and subject to the limitations and conditions set forth in the
Warrants dated April 28, 2000, issuable in connection with the Series B
Preferred Stock (the "SERIES B WARRANTS") and warrants to acquire a number of
shares of Common Stock as specified in the Securities Purchase Agreement
issuable in connection with the Series C Preferred Stock (the "SERIES C
WARRANTS" and, together with the Series B Warrants, the "WARRANTS"); and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute
(collectively, the "1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and
each of the Initial Investors hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall
have the following meanings:
<PAGE>
(i) "INVESTORS" means the Initial Investors and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule providing for offering
securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means (A) the
Conversion Shares issued or issuable upon conversion or otherwise pursuant to
the Preferred Shares (including the Preferred Shares issuable at the Second
Closing) and including, without limitation, any shares issued or issuable
upon exercise of the Investment Options (as defined in the Certificates of
Designation) (including the Investment Options issued in connection with the
Series C Preferred Stock) or pursuant to Articles V, VI.D(b) and VI.E of the
Certificates of Designation and Section 2(c) herein); (B) the Warrant Shares
issued or issuable upon exercise or otherwise pursuant to of the Warrants
(including the Warrants issuable at the Second Closing); and (C) any shares
of capital stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT(S)" means a
registration statement(s) of the Company under the 1933 Act.
(b) Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare, and,
on or prior to the date (the "FILING DATE") which is forty-five (45) days
after the closing date with respect to the First Closing under the Securities
Purchase Agreement (the "FIRST CLOSING DATE"), file with the SEC a
Registration Statement on Form S-3, if eligible, or on Form SB-2 or Form S-1
(or, if Form SB-2 or Form S-1 is not then available, on such form of
Registration Statement as is then available to effect a registration of the
Registrable Securities, subject to the consent of the Initial Investors,
which consent will not be unreasonably withheld) covering the resale of the
Registrable Securities, which Registration Statement, to the extent allowable
under the 1933 Act and the rules and regulations promulgated thereunder
(including Rule 416), shall state that such Registration Statement also
covers such indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of or otherwise pursuant to the Preferred
Shares (including, but not limited to, shares issued or issuable upon
exercise of the Investment Options) and exercise of or otherwise pursuant to
the Warrants to prevent dilution resulting from stock splits, stock dividends
or similar transactions. The number of shares of Common Stock initially
included in such Registration Statement shall be no less than two (2) times
the sum of (i) the aggregate number of Conversion Shares that are then
issuable upon conversion of or otherwise pursuant to the Preferred Shares
(including upon exercise of the Investment Options under the Preferred
Shares) (in each case based on the lesser of Variable Conversion Price and
the Fixed
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Conversion Price (each as defined in the Certificates of Designation) then in
effect) and (ii) the number of Warrant Shares issuable upon exercise of or
otherwise pursuant to the Warrants (based on the Exercise Price (as defined
in the Warrants) then in effect), in each case without regard to any
limitation on the Investor's ability to convert the Preferred Shares or
exercise the Warrants. The Company acknowledges that the number of shares
initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of or
otherwise pursuant to the Preferred Shares (including exercise of the
Investment Options under the Preferred Shares) and upon exercise of or
otherwise pursuant to the Warrants. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the approval of)
the Initial Investors and their counsel prior to its filing or other
submission.
(b) UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an
underwritten offering, the Investors who hold a majority-in-interest of the
Registrable Securities subject to such underwritten offering, with the
consent of a majority-in-interest of the Initial Investors, shall have the
right to select one legal counsel and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the
Company. In the event that any Investors elect not to participate in such
underwritten offering, the Registration Statement covering all of the
Registrable Securities shall contain appropriate plans of distribution
reasonably satisfactory to the Investors participating in such underwritten
offering and the Investors electing not to participate in such underwritten
offering (including, without limitation, the ability of non-participating
Investors to sell from time to time at any time during the effectiveness of
such Registration Statement). If the Investors who hold a
majority-in-interest of the Registrable Securities wish to have the
Registrable Securities delivered through an underwriter, such Investors shall
notify the Company of their desire to use an underwriter within a reasonable
time prior to the effectiveness of such Registration Statement pertaining to
such underwritten offering.
(c) PAYMENTS BY THE COMPANY. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable, but in any event not later than the one-hundred fiftieth (150th)
day after the First Closing Date (the "REGISTRATION DEADLINE"). If (i) the
Registration Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not declared
effective by the SEC by the Registration Deadline, or (ii) after the
Registration Statement has been declared effective by the SEC, sales of all
of the Registrable Securities cannot be made pursuant to the Registration
Statement during the Registration Period (as defined in Section 3(a)), or
(iii) the Common Stock is not listed or included for quotation on the Nasdaq
National Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"),
the New York Stock Exchange (the "NYSE") or the American Stock Exchange (the
"AMEX") after being so listed or included for quotation, then the Company
will make payments to the Investors in such amounts and at such times as
shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity). The Company
shall pay to each holder of the Preferred Shares or Registrable Securities an
amount equal to the product of (i) the stated value of such holder's
Preferred Shares then outstanding (and, in the case of holders of Registrable
Securities which have not been sold pursuant to the Registration Statement
required to be filed pursuant to Section 2(a), the stated value of Preferred
Shares from
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which such Registrable Securities were converted) ("AGGREGATE SHARE PRICE"),
multiplied by (ii) the Applicable Percentage (as defined below), multiplied
by (iii) the sum of: (A) the number of months (prorated for partial months)
after the Registration Deadline and prior to the date the Registration
Statement required to be filed pursuant to Section 2(a) is declared effective
by the SEC; PROVIDED, HOWEVER, that there shall be excluded from such period
any delays which are solely attributable to changes required by the Investors
in the Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of
distribution, or to the failure of the Investors to conduct their review of
the Registration Statement pursuant to Section 3(h) below in a reasonably
prompt manner; and (B) the number of months (prorated for partial months)
during the Registration Period (as defined below) that sales of all of the
Registrable Securities cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective (including,
without limitation, when sales cannot be made by reason of the Company's
failure to properly supplement or amend the prospectus included therein in
accordance with the terms of this Agreement (including Section 3(b) hereof or
otherwise), but excluding any days during an Allowed Delay (as defined in
Section 3(f)); and (C) the number of months (prorated for partial months)
that the Common Stock is not listed or included for quotation on Nasdaq,
Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term "APPLICABLE
PERCENTAGE" means two hundredths (.02). (For example, if the Registration
Statement becomes effective one (1) month after the Registration Deadline,
the Company would pay $20,000 for each $1,000,000 of Aggregate Share Price.
If thereafter, sales could not be made pursuant to the Registration Statement
for an additional period of one (1) month, the Company would pay an
additional $20,000 for each $1,000,000 of Aggregate Share Price). Such
amounts shall be paid in cash or, at each Investor's option, may be added to
the stated value of the Preferred Shares and thereafter be convertible into
Common Stock at the "CONVERSION PRICE" (as defined in the Certificates of
Designation) in accordance with the terms of the Preferred Shares, as
applicable. Any shares of Common Stock issued upon conversion of such amounts
shall be Registrable Securities. If the Investor desires to convert the
amounts due hereunder into Registrable Securities, it shall so notify the
Company in writing within two (2) business days of the date on which such
amounts are first payable in cash and such amounts shall be so convertible
(pursuant to the mechanics set forth in the Certificates of Designation, as
applicable), beginning on the last day upon which the cash amount would
otherwise be due in accordance with the following sentence. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each
period that gives rise to such obligation, provided that, if any such period
extends for more than thirty (30) days, interim payments shall be made for
each such thirty (30) day period.
(d) PIGGY-BACK REGISTRATIONS. Subject to the last sentence
of this Section 2(d), if at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall determine to
file with the SEC a Registration Statement relating to an offering for its
own account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be 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), the Company
shall send to each Investor who is entitled to registration rights under this
Section 2(d) written notice of such determination and, if within fifteen (15)
days after the date of such notice, such Investor shall so request in
writing, the Company shall include in such Registration Statement all or any
part of the Registrable Securities such Investor requests to be registered,
except that if, in connection
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<PAGE>
with any underwritten public offering for the account of the Company the
managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)' judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only
such limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit.
Any exclusion of Registrable Securities shall be made pro rata among the
Investors seeking to include Registrable Securities in proportion to the
number of Registrable Securities sought to be included by such Investors;
PROVIDED, HOWEVER, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities,
the holders of which are not entitled by contract or otherwise to inclusion
of such securities in such Registration Statement or are not entitled to pro
rata inclusion with the Registrable Securities; and PROVIDED, FURTHER,
HOWEVER, that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of
other securities having the contractual right to include such securities in
the Registration Statement other than holders of securities entitled to
inclusion of their securities in such Registration Statement by reason of
demand registration rights. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2(d) is
an underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
Notwithstanding anything to the contrary set forth herein, the registration
rights of the Investors pursuant to this Section 2(d) shall only be available
in the event the Company fails to timely file, obtain effectiveness or
maintain effectiveness of any Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.
(e) ELIGIBILITY FOR FORM SB-2 OR FORM S-1: CONVERSION TO
FORM S-3. The Company represents and warrants that it meets the requirements
for the use of Form SB-2 or Form S-1 for registration of the sale by the
Initial Investors and any other Investors of the Registrable Securities. The
Company agrees to file all reports required to be filed by the Company with
the SEC in a timely manner so as to become eligible, and thereafter to
maintain its eligibility, for the use of Form S-3. Not later than ten (10)
days after the Company first meets the registration eligibility and
transaction requirements for the use of Form S-3 (or any successor form) for
registration of the offer and sale by the Initial Investors and any other
Investors of Registrable Securities, the Company shall file a Registration
Statement on Form S-3 (or such successor form) with respect to the
Registrable Securities covered by the Registration Statement on Form SB-2 or
Form S-1, whichever is applicable, filed pursuant to Section 2(a) (and
include in such Registration Statement on Form S-3 the information required
by Rule 429 under the 1933 Act) or convert the Registration Statement on Form
SB-2 or Form S-1, whichever is applicable, filed pursuant to Section 2(a) to
a Form S-3 pursuant to Rule 429 under the 1933 Act and use its best efforts
to have such Registration Statement (or such amendment) declared effective as
soon as practicable thereafter.
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<PAGE>
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities,
the Company shall have the following obligations:
(a) The Company shall prepare promptly, and file with the
SEC as soon as practicable after the First Closing Date (but in no event
later than the Filing Date), a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter use
its best efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, (but in
no event later than one-hundred fifty (150) days after the First Closing
Date), and keep the Registration Statement (and, following the effectiveness
of the Registration Statement on Form S-3 referred to in Section 2(e) such
later Registration Statement) effective pursuant to Rule 415 at all times
until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which the
Registrable Securities (in the opinion of counsel to the Initial Investors)
may be immediately sold to the public without registration or restriction
(including without limitation as to volume by each holder thereof) under the
1933 Act (the "REGISTRATION PERIOD"), which Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein)
shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein, or necessary to make the
statements therein not misleading.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration
Statements effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statements until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof as set forth in the Registration Statements.
In the event that on any Trading Day (as defined in the Certificates of
Designation) (such Trading Day being a "REGISTRATION TRIGGER DATE") the
number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities
issued or issuable upon conversion of or otherwise pursuant to the Preferred
Shares (including upon exercise of the Investment Options under the Preferred
Shares) (in each case based on the lesser of the Variable Conversion Price
and the Fixed Conversion Price (each as defined in the Certificates of
Designation) then in effect) and upon exercise of or otherwise pursuant to
the Warrants, in each case without giving effect to any limitations on the
Investors' ability to convert the Preferred Shares or exercise the Warrants,
the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover two hundred percent (200%) of all of the
Registrable Securities so issued or issuable (without giving effect to any
limitations on conversion or exercise contained in the Certificates of
Designation or Warrants, as applicable) as of the Registration Trigger Date,
in each case, as soon as practicable, but in any event within twenty (20)
days after the necessity therefor arises (based on the market price of the
Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within sixty (60)
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days of the Registration Trigger Date. The provisions of Section 2(c) above
shall be applicable with respect to the Company's obligations under this
Section 3(b).
(c) The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of each Registration
Statement and any amendment thereto, each preliminary prospectus and
prospectus and each amendment or supplement thereto, and, in the case of the
Registration Statement referred to in Section 2(a), each letter written by or
on behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor. The Company will immediately notify each Investor by facsimile of
the effectiveness of each Registration Statement or any post-effective
amendment. The Company will promptly respond to any and all comments received
from the SEC, with a view towards causing each Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as practicable
and shall file an acceleration request as soon as practicable following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review.
(d) The Company shall use reasonable efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statements under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a majority in
interest of the Registrable Securities being offered reasonably request, (ii)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof
during the Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in effect at all
times during the Registration Period, and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (b) subject itself to general taxation in
any such jurisdiction, (c) file a general consent to service of process in
any such jurisdiction, (d) provide any undertakings that cause the Company
undue expense or burden, or (e) make any change in its charter or bylaws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders.
(e) In the event Investors who hold a majority-in-interest
of the Registrable Securities being offered in the offering (with the
approval of a majority-in-interest of the Initial Investors) select
underwriters for the offering, the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
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(f) As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event,
of which the Company has knowledge, as a result of which the prospectus
included in any Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and use its best efforts promptly to prepare a supplement or amendment to any
Registration Statement to correct such untrue statement or omission, and
deliver such number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request; provided that, for not more
than ten (10) consecutive trading days (or a total of not more than thirty
(30) trading days in any twelve (12) month period), the Company may delay the
disclosure of material non-public information concerning the Company (as well
as prospectus or Registration Statement updating) the disclosure of which at
the time is not, in the good faith opinion of the Company, in the best
interests of the Company (an "ALLOWED DELAY"); provided, further, that the
Company shall promptly (i) notify the Investors in writing of the existence
of (but in no event, without the prior written consent of an Investor, shall
the Company disclose to such Investor any of the facts or circumstances
regarding) material non-public information giving rise to an Allowed Delay
and (ii) advise the Investors in writing to cease all sales under such
Registration Statement until the end of the Allowed Delay. Upon expiration of
the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto.
(g) The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof.
(h) The Company shall permit a single firm of counsel
designated by the Initial Investors to review such Registration Statement and
all amendments and supplements thereto (as well as all requests for
acceleration or effectiveness thereof) a reasonable period of time prior to
their filing with the SEC, and not file any document in a form to which such
counsel reasonably objects and will not request acceleration of such
Registration Statement without prior notice to such counsel. The sections of
such Registration Statement covering information with respect to the
Investors, the Investor's beneficial ownership of securities of the Company
or the Investors intended method of disposition of Registrable Securities
shall conform to the information provided to the Company by each of the
Investors.
(i) The Company shall make generally available to its
security holders as soon as practicable, but not later than ninety (90) days
after the close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration
Statement.
(j) At the request of any Investor, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with any Registration Statement
or, if such securities are not being sold by an underwriter, on the date of
effectiveness thereof (i) an opinion, dated as of such date, from counsel
representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the underwriters, if any, and
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the Investors and (ii) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any,
and the Investors.
(k) The Company shall make available for inspection by (i)
any Investor, (ii) any underwriter participating in any disposition pursuant
to a Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Initial Investors, (iv) one firm
of attorneys and one firm of accountants or other agents retained by all
other Investors, and (v) one firm of attorneys retained by all such
underwriters (collectively, the "INSPECTORS") all pertinent financial and
other records, and pertinent corporate documents and properties of the
Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably
request for purposes of such due diligence; PROVIDED, HOWEVER, that each
Inspector shall hold in confidence and shall not make any disclosure (except
to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena
or other order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company shall not be required to disclose any confidential information in
such Records to any Inspector until and unless such Inspector shall have
entered into confidentiality agreements (in form and substance satisfactory
to the Company) with the Company with respect thereto, substantially in the
form of this Section 3(k). Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to
the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. Nothing herein (or in any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit the
Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
(l) The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company
unless (i) disclosure of such information is necessary to comply with federal
or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the public other than by disclosure in violation of this or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give
prompt notice to such Investor prior to making such disclosure, and allow the
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
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<PAGE>
(m) The Company shall (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on each
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) to the extent the securities of the same class or series are not then
listed on a national securities exchange, secure the designation and
quotation of all the Registrable Securities covered by the Registration
Statement on Nasdaq or, if not eligible for Nasdaq, on the Nasdaq SmallCap
and, without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
(n) The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
(o) Provided the Registrable Securities are registered
under the 1933 Act, the Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to such Registration Statement and enable
such certificates to be in such denominations or amounts, as the case may be,
as the managing underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing underwriter
or underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall cause legal counsel selected by the Company to deliver, to the transfer
agent for the Registrable Securities (with copies to the Investors whose
Registrable Securities are included in such Registration Statement) an
instruction in the form attached hereto as EXHIBIT 1 and an opinion of such
counsel in the form attached hereto as EXHIBIT 2.
(p) At the request of the holders of a majority-in-interest
of the Registrable Securities, the Company shall prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to
a Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
(q) The Company shall comply with all applicable laws
related to a Registration Statement and offering and sale of securities and
all applicable rules and regulations of governmental authorities in
connection therewith (including without limitation the 1933 Act and the 1934
Act and the rules and regulations promulgated by the SEC).
(r) The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
(s) The Company shall not, and shall not agree to, allow
the holders of any securities of the Company to include any of their
securities in any Registration Statement under Section 2(a) hereof or any
amendment or supplement thereto under Section 3(b) hereof without
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<PAGE>
the consent of the holders of a majority-in-interest of the Registrable
Securities. In addition, the Company shall not offer any securities for its
own account or the account of others in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities,
the Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with
respect to the Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of
the Registrable Securities held by it as shall be reasonably required to
effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably
request. At least three (3) business days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor of the information the Company requires from each such Investor.
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statements hereunder, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from the Registration Statements.
(c) In the event Investors holding a majority-in-interest
of the Registrable Securities being registered (with the approval of the
Initial Investors) determine to engage the services of an underwriter, each
Investor agrees to enter into and perform such Investor's obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in
writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
(d) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 3(f) or 3(g), such Investor will immediately discontinue disposition
of Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(f) or 3(g)
and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the
Company a certificate of destruction) all copies in such Investor's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
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<PAGE>
(e) No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by the Company, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the
terms of such underwriting arrangements, and (iii) agrees to pay its pro rata
share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5 below.
(f) At the written request of the Company, which request
shall be forwarded to such Investor within three (3) business days of the end
of each calendar quarter, each Investor shall inform the Company as to the
number of Registrable Securities sold by such Investor during the calendar
quarter to which such notice relates for the purpose of allowing the Company
to prepare prospectus supplements, which prospectus supplements shall be
forwarded to each Investor for its review at least two (2) business days
prior to filing with the SEC.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation,
all registration, listing and qualification fees, printers and accounting
fees, the fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel selected by the Initial
Investors pursuant to Sections 2(b) and 3(h) hereof shall be borne by the
Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds such
Registrable Securities, (ii) the directors, officers, partners, employees,
agents and each person who controls any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
if any, (iii) any underwriter (as defined in the 1933 Act) for the Investors,
and (iv) the directors, officers, partners, employees and each person who
controls any such underwriter within the meaning of the 1933 Act or the 1934
Act, if any (each, an "INDEMNIFIED PERSON"), against any joint or several
losses, claims, damages, liabilities or expenses (collectively, together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "CLAIMS")
to which any of them may become subject insofar as such Claims arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated or necessary to make
the statements therein not misleading; (ii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
if used prior to the effective date of such Registration Statement, or
contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the
omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in
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<PAGE>
light of the circumstances under which the statements therein were made, not
misleading; or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the
offer or sale of the Registrable Securities (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject to the
restrictions set forth in Section 6(c) with respect to the number of legal
counsel, the Company shall reimburse the Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees
or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for such Indemnified Person expressly for use in connection with the
preparation of such Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any preliminary prospectus, shall not inure to the benefit of any
Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, such corrected prospectus
was timely made available by the Company pursuant to Section 3(c) hereof, and
the Indemnified Person was promptly advised in writing not to use the
incorrect prospectus prior to the use giving rise to a Violation and such
Indemnified Person, notwithstanding such advice, used it. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which
an Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors,
each of its officers who signs the Registration Statement, each person, if
any, who controls the Company within the meaning of the 1933 Act or the 1934
Act, any underwriter and any other stockholder selling securities pursuant to
the Registration Statement or any of its directors or officers or any person
who controls such stockholder or underwriter within the meaning of the 1933
Act or the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
arises out of or is based upon any Violation by such Investor, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by
such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal
or other expenses (promptly as such expenses are incurred and are due and
payable) reasonably incurred by them in connection with investigating or
defending any such Claim; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement
of any Claim if such settlement is effected without the prior written consent
of such Investor, which consent shall not be unreasonably withheld; PROVIDED,
FURTHER, HOWEVER, that the Investor shall be liable under this Agreement
(including this Section 6(b) and Section 7) for only that amount as does not
exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
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<PAGE>
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.
(c) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof, and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; PROVIDED, HOWEVER, that an
Indemnified Person or Indemnified Party shall have the right to retain its
own counsel with the fees and expenses to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or Indemnified
Party and any other party represented by such counsel in such proceeding. The
indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or
the Company, if the Company is entitled to indemnification hereunder, as
applicable. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under Section 6 to the fullest extent permitted by law; PROVIDED,
HOWEVER, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (ii) no seller of Registrable Securities
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent
misrepresentation, and (iii) contribution (together with any indemnification
or other obligations under this Agreement) by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received
by such seller from the sale of such Registrable Securities.
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<PAGE>
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the investors to sell
securities of the Company to the public without registration ("RULE 144"),
the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements (it being
understood that nothing herein shall limit the Company's obligations under
Section 4(c) of the Securities Purchase Agreement) and the filing of such
reports and other documents is required for the applicable provisions of Rule
144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing 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
assignee is restricted under the 1933 Act and applicable state securities
laws, (iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence, the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained herein, (v) such transfer shall have been made in accordance with
the applicable requirements of the Securities Purchase Agreement, and (vi)
such transferee shall be an "ACCREDITED INVESTOR" as that term defined in
Rule 501 of Regulation D promulgated under the 1933 Act.
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<PAGE>
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with written consent of the
Company, each of the Initial Investors (to the extent such Initial Investor
still owns Registrable Securities) and Investors who hold a majority interest
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
(b) Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a
party. The addresses for such communications shall be:
If to the Company:
GlobalMedia.com
400 Robson Street
Vancouver, British Columbia
Canada V6B 2B4
Attention: Chief Financial Officer
Facsimile: (604) 688-2987
With copy to:
Davis Wright Tremaine LLP
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101
Attention: Eric A. DeJong
Facsimile: (206) 628-7699
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
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With copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Attention: Gerald J. Guarcini
Facsimile: (215) 864-8999
(c) Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state
courts located in Delaware with respect to any suit or proceeding based on or
arising under this Agreement, the agreements entered into in connection
herewith or the transactions contemplated hereby or thereby and irrevocably
agree that all claims in respect of such suit or proceeding may be determined
in such courts. Both parties irrevocably waive the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Both parties further
agree that service of process upon a party mailed by first class mail shall
be deemed in every respect effective service of process upon the party in any
such suit or proceeding. Nothing herein shall affect either party's right to
serve process in any other manner permitted by law. Both parties agree that a
final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
(e) This Agreement, the Securities Purchase Agreement and
the Warrants (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, the Securities Purchase Agreement and the Warrants supersede
all prior agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
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(i) Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(j) Except as otherwise provided herein, all consents and
other determinations to be made by the Investors pursuant to this Agreement
shall be made by Investors holding a majority of the Registrable Securities,
determined as if the all of the Preferred Shares and Warrants then
outstanding have been converted or exercised into for Registrable Securities,
as the case may be.
(k) The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to each Investor by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for breach of
its obligations hereunder will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of any of the provisions
hereunder, that each Investor shall be entitled, in addition to all other
available remedies in law or in equity, to an injunction or injunctions to
prevent or cure breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity of
showing economic loss and without any bond or other security being required.
(l) The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
(m) In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other
provision hereof.
(n) The initial number of Registrable Securities included
on any Registration Statement and each increase to the number of Registrable
Securities included therein shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each Investor at the
time of such establishment or increase, as the case may be. In the event an
Investor shall sell or otherwise transfer any of such holder's Registrable
Securities, each transferee shall be allocated a pro rata portion of the
number of Registrable Securities included in a Registration Statement for
such transferor. Any shares of Common Stock included on a Registration
Statement and which remain allocated to any person or entity which does not
hold any Registrable Securities shall be allocated to the remaining
Investors, pro rata based on the number of shares of Registrable Securities
then held by such Investors. For the avoidance of doubt, the number of
Registrable Securities held by an Investor shall be determined as if all
Preferred Shares and Warrants then outstanding and held by an Investor were
converted into or exercised for Registrable Securities.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company and the undersigned Initial
Investors have caused this Agreement to be duly executed as of the date first
above written.
GLOBALMEDIA.COM
By: /s/ Robert Fuller
-----------------------------------------
Robert Fuller
Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., as General Partner
By: /s/ Wayne D. Bloch
-----------------------------------------
Wayne D. Bloch
Managing Director
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EXHIBIT 99.5
C O R R E C T I O N - GlobalMedia.com
TORONTO, May 2 /CNW-PRN/ - GlobalMedia.com (NASDAQ: GLMC),
www.globalmedia.com, an award-winning Internet company focused on providing
companies with revenue generating e-commerce and streaming solutions, today
announced that it has sold, in a private placement, $5 million of its
preferred stock to a fund managed by Rose Glen Capital Management, L.P..
Pursuant to the arrangement, GlobalMedia.com received $5 million in an
initial closing and an additional $5 million will be received in a second
closing subject to the satisfaction of certain conditions to closing, none of
which are within the investor's control. The preferred stock issued is
convertible into GlobalMedia.com common stock at a conversion price equal to
$6.435, or if lower, the market price at the time of conversion. The
purchaser also received five-year warrants to purchase 388,500 shares of
common stock at an exercise price of 7.0785 per share. In addition, on
conversion of the preferred stock, the purchaser has the option to purchase
up to an additional $5 million of common stock at a price per share equal to
the then effective conversion price.
GlobalMedia.com's President Jeff Mandlebaum commented, "We are pleased that
an existing shareholder, one that has had a significant investment in
GlobalMedia.com since May 1999, has provided this investment. This funding
will allow us to meet certain obligations to RealNetworks, grow our business
internally and possibly through acquisitions, and bulk up our sales team."
GlobalMedia.com's Chairman Michael Metcalfe said, "Over the past year, we
have demonstrated that we deliver results. Namely, we successfully developed
and launched our media player, streaming and e-commerce solutions and most
recently achieved a listing on the National Market tier of the Nasdaq Stock
Market, the preeminent technology stock market. We look forward to delivering
on the growth opportunities this financing presents to us."
ABOUT GLOBALMEDIA.COM
Winner of the prestigious Linux Journal award for the "Best Overall Linux
Solution" at Comdex Fall '99, GlobalMedia.com provides Internet e-commerce
and streaming tools to companies that are looking to leverage their existing
brand names and customer base to the Internet. GlobalMedia.com's streaming
media and e-commerce infrastructure focuses on providing businesses with a
totally integrated, private branded solution: interactive stimulating audio
and video, banner and rich media advertising, and e-commerce.
The GlobalMedia.com e-commerce solution offers private label e-commerce
capabilities. The GlobalMedia.com Broadcast Network ("GMBN") is a
distributed, multi-tiered Internet broadcast network that combines leading
edge signal aggregation and broadcast technologies to provide clients and end
users with what GlobalMedia.com believes to be the highest quality streaming
media experience available.
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GlobalMedia.com trades on the Nasdaq National Market tier of the Nasdaq Stock
Market, under the symbol GLMC. The Company has established important
relationships with RealNetworks (Nasdaq: RNWK - news), Liquid Audio (Nasdaq:
LQID - news), MCI/Worldcom (Nasdaq: WCOM - news) and Muze.
This press release may contain forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and section 21E of the Exchange
Act of 1934 and is subject to safe harbor created by these sections. Actual
results may differ materially due to a number of risks, including
technological and operational challenges, changes in consumer preferences and
developments affecting the Internet.
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