<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
COMPRESSION LABS, INCORPORATED
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.001 per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
20467210
- --------------------------------------------------------------------------------
(CUSIP Number)
J. David Washburn, Esq.
Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201 (214) 761-4309
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 23, 1996
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box. [ ]
Check the following box if a fee is being paid with this Statement.
[x] (A fee is not required only if the Reporting Person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent (5%)
of the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of less than five percent
(5%) of such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
* The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the subject
class of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to
the liabilities of that section of the Exchange Act but shall be subject to all
other provisions of the Exchange Act (however, see the Notes).
<PAGE> 2
CUSIP No. 20467210 13D
(1) Name of Reporting Person Infinity Investors Limited
I.R.S. Identification N/A
No. of Above Person
(2) Check the Appropriate Box if a (a) [x]
Member of a Group* (b) [ ]
(3) SEC Use Only
(4) Source of Funds* WC
(5) Check Box if Disclosure of Legal [ ]
Proceedings is Required Pursuant
to Items 2(d) or 2(e)
(6) Citizenship or Place of Organization Nevis, West Indies
Number of Shares (7) Sole Voting 1,519,571**
Power
Beneficially
(8) Shared Voting 414,429**
Owned by Each Power
Reporting Person (9) Sole Dispositive 1,519,571**
Power
with:
(10) Shared Dispositive 414,429**
Power
(11) Aggregate Amount Beneficially Owned 1,934,000**
by Each Reporting Person
(12) Check Box if the Aggregate Amount in [ ]
Row (11) Excludes Certain Shares*
(13) Percent of Class Represented by 10.9%
Amount in Row (11)
(14) Type of Reporting Person* CO
* SEE INSTRUCTIONS
** The exact number of shares of Common Stock issuable upon conversion of
the derivative securities described herein is not determinable without
knowledge of and reference to the applicable conversion date. This
Statement has been prepared on the basis of certain assumptions made
herein.
<PAGE> 3
CUSIP No. 20467210 13D
(1) Name of Reporting Person Seacrest Capital Limited
I.R.S. Identification N/A
No. of Above Person
(2) Check the Appropriate Box if a (a) [x]
Member of a Group* (b) [ ]
(3) SEC Use Only
(4) Source of Funds* WC
(5) Check Box if Disclosure of Legal [ ]
Proceedings is Required Pursuant
to Items 2(d) or 2(e)
(6) Citizenship or Place of Organization Nevis, West Indies
Number of Shares (7) Sole Voting 414,429**
Power
Beneficially
(8) Shared Voting 1,519,571**
Owned by Each Power
Reporting Person (9) Sole Dispositive 414,429**
Power
with:
(10) Shared Dispositive1,519,571**
Power
(11) Aggregate Amount Beneficially Owned 1,934,000**
by Each Reporting Person
(12) Check Box if the Aggregate Amount in [ ]
Row (11) Excludes Certain Shares*
(13) Percent of Class Represented by 10.9%
Amount in Row (11)
(14) Type of Reporting Person* CO
* SEE INSTRUCTIONS
** The exact number of shares of Common Stock issuable upon conversion of
the derivative securities described herein is not determinable without
knowledge of and reference to the applicable conversion date. This
Statement has been prepared on the basis of certain assumptions made
herein.
<PAGE> 4
CUSIP No. 20467210 13D
SCHEDULE 13D
Filed Pursuant to Rule 13d-1
ITEM 1. SECURITY AND ISSUER.
This original Statement on Schedule 13D (this "Statement") relates to
the common stock, par value $.001 per share (the "Common Stock") of Compression
Labs, Incorporated, a Delaware corporation, which has its principal executive
offices located at 350 East Plumeria, San Jose, California 95134 (the
"Issuer").
ITEM 2. IDENTITY AND BACKGROUND.
Group Filing Pursuant to Rule 13d-1(f)(1) promulgated under the
Only Securities Exchange Act of 1934, as amended (the
"Exchange Act"), this Statement is filed jointly by
Infinity Investors Limited, a Nevis, West Indies
business corporation ("Infinity") and Seacrest
Capital Limited, a Nevis, West Indies business
corporation ("Seacrest") (collectively, the
"Reporting Persons") as a "group" as such term is
used in Rule 13d-5 of the Exchange Act. However,
each of such Reporting Persons expressly states that
it is included in this Statement solely for the
purpose of presenting information with respect to the
ownership of the Common Stock and disclaims any
knowledge as to any statements made herein on behalf
of the other Reporting Person. Each of the Reporting
Persons disclaims beneficial ownership of the shares
of Common Stock acquirable upon the conversion or
exercise, as the case may be, of securities actually
held by the other Reporting Person pursuant to Rule
13d-4 of the Exchange Act. The Reporting Persons
have included as Exhibit 1 to this Statement an
agreement in writing that this Statement is filed on
behalf of each of them.
(a) - (c) Each of the Reporting Persons is principally engaged
and (f) in the business of acquiring, holding, selling,
trading, exchanging or otherwise investing in
securities and other financial assets. The principal
business and principal office of each of the
Reporting Persons is located at Memorial Square, P.O.
Box 556, Charleston, Nevis, West Indies. The mailing
address of each of the Reporting Persons is 27
Wellington Street, Cork, Ireland. The name,
citizenship (or place of organization, as
applicable), business address, present principal
occupation or employment of each of the executive
officers, directors and persons who may deemed in
control of Infinity, if any, (and the executive
officers and directors of any entity which could be
deemed ultimately in control of Infinity) are set
forth on Schedule 1 attached hereto and incorporated
herein by reference. Such persons are collectively
referred to herein as the "Infinity Individuals."
The name, citizenship (or place of organization, as
applicable), business
<PAGE> 5
CUSIP No. 20467210 13D
address, present principal occupation or employment
of each of the executive officers, directors and
persons who may be deemed in control of Seacrest, if
any (and the executive officers and directors of any
entity which could be deemed ultimately in control of
Seacrest), are set forth on Schedule 2 attached
hereto and incorporated herein by reference. Such
persons are collectively referred to herein as the
"Seacrest Individuals."
(d) - (e) During the last five (5) years, neither the Reporting
Person nor any of the Infinity Individuals nor the
Seacrest Individuals has been convicted in any
criminal proceeding (excluding traffic violations or
similar misdemeanors) and neither the Reporting
Person nor any of the Infinity Individuals nor the
Seacrest Individuals is a party to a civil proceeding
of a judicial or administrative body of competent
jurisdiction such that, as a result of such
proceeding, the Reporting Person or any of the
Infinity Individuals or the Seacrest Individuals was
or is subject to a judgment, decree of final order
enjoining future violations of, or prohibiting or
mandating activity subject to, federal or state
securities laws or finding any violation with respect
to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
This Statement is being filed with respect to certain shares of the
Common Stock of the Issuer which may be acquired by the Reporting Persons,
although such shares have not been previously purchased or otherwise acquired
by the Reporting Persons. The Reporting Persons are filing this Statement
because they may be deemed to have acquired beneficial ownership of five
percent (5%) or more of the Common Stock by virtue of (i) the issuance of an
aggregate of 350,000 shares of the Issuer's Series C Convertible Preferred
Stock, par value $.001 per share (the "Series C Preferred Stock") convertible
into an indeterminable number of shares of Common Stock and (ii) the issuance
of a common stock purchase warrant directly to Infinity exercisable for 275,000
shares of Common Stock (the "Series C Warrant"), both as more particularly
described in Item 4 below. The Series C Preferred Stock and the Series C
Warrant were issued to the Reporting Persons in connection with that
Convertible Preferred Stock Purchase Agreement dated as of October 24, 1996
(the "Purchase Agreement") between the Issuer and the Reporting Persons, which
such Purchase Agreement is filed as Exhibit 2 hereto and incorporated herein by
reference.
Pursuant to the terms of the Purchase Agreement, the Issuer issued and
sold 275,000 shares of the Series C Preferred Stock to Infinity (the "Infinity
Shares") and 75,000 shares of Series C Preferred Stock to Seacrest (the
"Seacrest Shares" and, collectively with the Infinity Shares, the "Series C
Shares") for a purchase price of $20 per Series C Share (the "Stated Value") or
an aggregate purchase price of $7.0 million (the "Purchase Price"). The Series
C Warrant is exercisable at $5.70 per share. The funds used to acquire the
Infinity Shares and the Seacrest Shares were derived from the separate working
capital accounts of Infinity and Seacrest, respectively. Additionally, the
Reporting Persons expect that any funds necessary to exercise
<PAGE> 6
CUSIP No. 20467210 13D
the Series C Warrant will be derived from working capital. No part of the
Purchase Price was represented by funds borrowed or otherwise obtained from any
bank or other third party.
ITEM 4. PURPOSE OF TRANSACTION.
Effective October 24, 1996 (the "Series C Closing Date"), pursuant to
the terms of the Purchase Agreement, the Issuer issued and sold the Infinity
Shares and the Series C Warrant to Infinity and the Seacrest Shares to
Seacrest. The Reporting Persons acquired such securities from the Issuer for
investment purposes only.
Series C Conversion. Pursuant to the terms of the Certificate of
Designation of the Series C Convertible Preferred Stock filed with the
Secretary of State of the State of Delaware on October 24, 1996 (the
"Certificate of Designation"), which such Certificate of Designation is filed
as Exhibit 3 hereto and incorporated herein by reference, the Series C Shares
are convertible, in whole or in part, at the option of the holders thereof, at
any time after the Reference Date (as hereinafter defined) into shares of
Common Stock of the Issuer at a conversion ratio (the "Conversion Ratio") equal
to the Stated Value plus any accrued but unpaid dividends divided by the
Conversion Price (as hereinafter defined). Because, as indicated below, the
Conversion Price (and therefore the Conversion Ratio) is based in part on the
average per share market price of the Issuer's Common Stock preceding the
applicable conversion date, the Series C Shares are convertible into a number
of shares of Common Stock that is indeterminable until conversion thereof. The
Series C Shares become convertible (the "Reference Date") at any time after the
expiration of the earlier to occur of (i) January 22, 1997 and (ii) the
effective date of the Underlying Securities Registration Statement (as
hereinafter defined). Accordingly, because the Reference Date will occur no
later than sixty (60) days after the date of this Statement, the Reporting
Persons could be deemed to be the beneficial owners of such indeterminable
number of shares of Common Stock pursuant to rule 13d-3(d)(1)(i) of the
Exchange Act.
Pursuant to the terms of the Certificate of Designation, the
Conversion Price in effect on any applicable conversion date will be the lesser
of (a) $4.22 and (b) eighty percent (80%) of the average Per Share Market Value
for the five (5) Trading Days immediately preceding such conversion date;
provided, however, that the Conversion Price may be decreased by 1% each month
that the effectiveness of the Underlying Securities Registration Statement is
delayed in excess of ten (10) business days. See Item 6 below. As used in the
foregoing calculation, "Per Share Market Value" means on any particular day (a)
the closing bid price per share of the Common Stock on such date on the Nasdaq
National Market or other stock exchange in which the Common Stock has been
listed or if there is no such price on such date, then the closing bid price on
such exchange from the date nearest preceding such date, or (b) if the Common
Stock is not listed on the Nasdaq National Market or any stock exchange, the
closing bid price for a share of Common Stock in the over-the-counter market,
as reported by the Nasdaq Stock Market at the close of business on such date,
or (c) if the Common Stock is not quoted on the Nasdaq Stock Market, the
closing bid price for a share of Common Stock in the over-the-counter market as
reported by the National Quotation Bureau Incorporated, or (d) if the Common
Stock is not reported by the National Quotation Bureau Incorporated, then the
average of the "Pink Sheet"
<PAGE> 7
CUSIP No. 20467210 13D
quotes for the relevant conversion period as determined in good faith by the
holder, or (e) if the Common Stock is not publicly traded the fair market value
of the share of Common Stock as determined by an appraiser selected in good
faith by the holders of the majority in interest of the shares of the Series C
Preferred Stock; provided, however, that the Issuer, after receipt of the
determination by such appraiser, shall have the right to select an additional
appraiser, in which case, the fair market value shall be equal to the average
of the determinations by each such appraiser. Additionally, "Trading Day"
means (a) a day on which the Common Stock is traded on the Nasdaq National
Market or principal stock exchange on which the Common Stock has been listed,
or (b) if the Common Stock is not listed on the Nasdaq National Market or any
stock exchange, a day on which the Common Stock is traded in the over-the-
counter market, as reported by the Nasdaq Stock Market, or (c) if the Common
Stock is not quoted on the Nasdaq Stock Market, a day in which the Common Stock
is quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated. The Conversion Ratio and the number of shares of Common
Stock ultimately issuable upon conversion of the Series C Shares are subject to
certain other adjustments as set forth in the Certificate of Designation and
Purchase Agreement. The shares of Series C Preferred Stock are also
convertible at the option of the Issuer upon the terms and conditions set forth
in the Certificate of Designation at the applicable Conversion Ratio.
Based upon the foregoing formulation of the Conversion Ratio and
assuming (1) that the Reporting Persons converted all of the Series C Shares on
the date of this Statement, (2) upon such conversion, the effectiveness of the
Underlying Securities Registration Statement has not been delayed so as to
reduce the Conversion Price, (3) no unpaid dividends have accrued on the Series
C Shares and (4) the occurrence of no other extraordinary event specified in
the Certificate of Designation or Purchase Agreement affecting the Conversion
Ratio, then, the Reporting Persons, as a group, would have the right to acquire
1,659,000 shares of Common Stock of the Issuer, representing approximately 9.5%
of the outstanding shares of Common Stock (based upon the number of outstanding
shares indicated by the Issuer in its most recent Exchange Act filing.) The
number of shares of Common Stock described as beneficially owned in this
paragraph is included for disclosure purpose only. The exact number of shares
of Common Stock to be acquired by the Reporting Persons, if any, upon
conversion of the Series C Shares cannot be determined until conversion
thereof. The Reporting Persons do not intend to file amendments to this
Statement solely to reflect changes in beneficial ownership based on
fluctuations in the market value of the Common Stock.
Series C Warrant Exercise. Pursuant to the terms of the Purchase
Agreement, Infinity was issued the Series C Warrant exercisable at any time
until October 24, 2001 into 275,000 shares of Common Stock (subject to
adjustment as set forth in the Warrant Certificate) at a price of $5.70 per
share thereof (the "Warrant Exercise Price"). The terms of the Series C
Warrant are as set forth in the Warrant Certificate of the Issuer dated October
24, 1996 and filed as Exhibit 4 hereto and incorporated herein by reference.
Effective November 15, 1996, Infinity transferred a portion of the Series C
Warrant representing 58,929 Warrant Shares to Seacrest for no additional
consideration. This portion of the Series C Warrant represented Seacrest's
pro-rata share of the Series C Shares and was contemplated by the Purchase
Agreement.
<PAGE> 8
CUSIP No. 20467210 13D
Although the Warrant Exercise Price materially exceeds the market
value of the Common Stock on the date of this Statement ($4.25 per share), the
Reporting Persons, as a group, could be deemed to be the beneficial owners of
275,000 shares of Common Stock issuable upon full exercise of the Series C
Warrant (the "Warrant Shares") pursuant to Rule 13d-3(d)(1)(i) under the
Exchange Act.
Series D Transaction. Pursuant to the terms of the Purchase
Agreement, Infinity or an affiliate thereof may, subject to certain conditions
specified in the Purchase Agreement, be required to purchase between 50,000 and
350,000 shares of Series D Convertible Preferred Stock, par value $.001 per
share ("Series D Shares"), of the Issuer on a date specified by the Issuer in
writing (the "Closing Notice") during the period commencing April 22, 1997 and
ending May 27, 1997 (such date being referred to herein as the "Series D
Closing Date"). The parties have agreed that the rights, preferences and
privileges applicable to the Series D Preferred Stock shall be identical to the
rights, preferences and privileges of the Series C Preferred Stock, and shall
rank pari passu with the Series C Preferred Stock with regard to dividends,
liquidation, voting rights and any other preferential rights designated
therein, except that the Conversion Price applicable to the Series D Preferred
Stock shall (except in such cases as the Series D Preferred Stock is converted
at the option of the Issuer) be equal to the lesser of (a) 101% of the average
Per Share Market Value for the ten (10) Trading Days immediately preceding the
date of the first issuance of the Series D Preferred Stock and (b) the Per
Share Market Value for the five (5) Trading Days immediately preceding the
applicable conversion date less the Applicable Discount. Consistent with the
Purchase Agreement, the Applicable Discount is based on the market
capitalization of the Issuer as of the close of business on the day immediately
preceding the delivery of the Closing Notice. Specifically, if the market
capitalization is less than $80 million, the Applicable Discount is 22.5%, if
the market capitalization is $80 million to $15 million, the Applicable
Discount is 20% and if the market capitalization is greater than $15 million,
the Applicable Discount is 17.5%. As a result, the Series D Preferred Stock
are also convertible into an indeterminable number of shares of Common Stock
(the "Series D Conversion Shares").
Also on the Series D Closing Date, the Issuer will be required to
issue to Infinity a common stock purchase warrant (the "Series D Warrant")
exercisable at any time prior to the fourth anniversary of issuance thereof for
75,000 shares of Common Stock (the "Series D Warrant Shares") at an exercise
price equal to 125% of the average Per Share Market Value for the five (5)
Trading Days immediately preceding the conversion date. However, pursuant to
Rule 13d-3(d)(1)(i) under the Exchange Act, because Infinity does not have the
right to convert the Series D Preferred Stock or exercise the Series D Warrant
for in excess of 60 days from the date of this Statement, it does not
beneficially own the Series D Conversion Shares or the Series D Warrant Shares
on the date hereof.
The transactions contemplated by the Purchase Agreement relating to
the issuance and sale of the Series D Preferred Stock and the Series D Warrant
to Infinity on the Series D Closing Date (the "Series D Closing") are subject
to numerous terms and conditions set forth in the Purchase Agreement including,
without limitation, the market capitalization of the Issuer on the Series D
Closing Date, the effectiveness of the Underlying Securities Registration
Statement and the absence of adverse changes in the business of the Issuer
prior to such date.
<PAGE> 9
CUSIP No. 20467210 13D
The Purchase Agreement may be terminated with respect to the Series D Closing
at any time prior to the Series D Closing Date by either the Issuer or Infinity
upon specified occurrences including, without limitation, the occurrence in the
opinion of Infinity, of a material adverse change in the Issuer (including
changes in stock price).
Series E Transaction. Pursuant to the terms of the Purchase
Agreement, Infinity or an affiliate thereof, subject to certain terms and
conditions specified in the Purchase Agreement, may, subject to certain
conditions specified in the Purchase Agreement, be required to purchase between
50,000 and 350,000 shares of series E Convertible Preferred Stock, par value
$.001 per share (the "Series E Preferred Stock") of the Issuer on a date
specified by the Issuer in writing during the period commencing 180 days after
the Series D Closing Date and ending 210 days after the Series D Closing Date
(October 19, 1997 to December 18, 1997) (such date being referred to herein as
the "Series E Closing Date"). The parties have agreed that the rights,
preferences and privileges applicable to the Series E Preferred Stock shall be
identical to the rights, preferences and privileges of the Series C Preferred
Stock, and shall rank pari passu with the Series C Preferred Stock with regard
to dividends, liquidation, voting rights and other preferential rights
designated therein, except that the Conversion Price applicable to the Series E
Preferred Stock shall (except in such cases as the Series E Preferred Stock is
converted at the option of the Issuer) be equal to the lesser of (a) 101% of
the average Per Share Market Value for the ten Trading Days immediately
preceding the date of the first issuance of the Series E Preferred Stock and
(b) the Per Share Market Value for the five (5) Trading Days immediately
preceding the applicable conversion date less the Applicable Discount. The
Applicable Discount relative to the Series E Preferred Stock is calculated
identically as that noted above with regard to the Series D Preferred Stock.
As a result, the shares of Series E Preferred Stock are also convertible into
an indeterminable number of shares of common stock (the "Series E Conversion
Shares"). Likewise, because Infinity does not have the right to convert the
Series E Preferred Stock for in excess of sixty (60) days from the date of this
Statement it does not beneficially own the Series E Conversion Shares on the
date hereof. Rule 13d-3(d)(1)(i)
The transactions contemplated by the Purchase Agreement relating to
the issuance and sale of the Series E Preferred Stock to Infinity on the Series
E Closing Date (the "Series E Closing") are subject to numerous terms and
conditions set forth in the Purchase Agreement including, without limitation,
the market capitalization of the Issuer on the Series E Closing Date, the
effectiveness of the Underlying Securities Registration Statement and the
absence of adverse changes in the business of the Issuer prior to such date.
The Purchase Agreement may be terminated with respect to the Series E Closing
at any time prior to the Series E Closing Date by either the Issuer or Infinity
upon specified occurrences including, without limitation, the occurrence in the
opinion of Infinity, of a material adverse change in the Issuer (including
changes in stock price).
The Reporting Persons presently anticipate that to the extent the
Series D Closing and Series E Closing occur, any shares of Series D Preferred
Stock, Series D Warrants or shares of Series E Preferred Stock so acquired
(collectively, the "Additional Acquirable Securities") and the underlying
shares of Common Stock to be acquired upon conversion or exercise, as
applicable, of any of such Additional Acquirable Securities shall be acquired
by the Reporting Persons for investment purposes only.
<PAGE> 10
CUSIP No. 20467210 13D
Whether the Reporting Persons convert or exercise, as applicable, the
Series C Shares, the Series C Warrant, or the Additional Acquirable Securities
(if acquired) into shares of Common Stock, and the amount, method and timing of
any such conversion or exercise, will depend upon the Reporting Persons'
continuing assessment of pertinent factors, including, among other things, the
Reporting Persons' evaluation of the Issuer's business prospects and financial
condition, the market for the Issuer's shares, general economic and stock
market conditions, the availability and nature of opportunities to dispose of
the Common Stock, regulatory and other legal considerations and other
investment opportunities. Depending upon their assessment of these factors
from time to time, the Reporting Persons may elect to acquire additional shares
of Common Stock or to dispose of some or all of the Common Stock beneficially
owned by them. However, except as specifically contemplated herein, neither
the timing nor the circumstances of future acquisitions or dispositions has
been determined as of the date hereof.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The exact number of shares of Common Stock which may
be deemed to be beneficially owned by the Reporting
Persons is indeterminable without reference to the
precise conversion date of the Series C Shares.
However, based upon the assumptions set forth in Item
4 above, the Reporting Persons, as a group, shall be
deemed to be the beneficial owners of an aggregate of
1,934,000 shares of Common Stock constituting
approximately 10.9% of the outstanding Common Stock
of the Issuer (based on 15,864,053 shares of Common
Stock outstanding at October 31, 1996 pursuant to the
Issuer's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996) as of the date
hereof. The Reporting Persons hereby disclaim
beneficial ownership of (and thereby do not include
in the foregoing calculation of beneficial ownership)
any shares of Common Stock issuable upon conversion
or exercise of the Additional Acquirable Securities.
(b) Upon acquisition of any shares of Common Stock
pursuant to the transactions described in Item 4
above, each Reporting Person anticipates that it
would have sole voting and dispositive power over all
of the shares of Common Stock listed next to its name
below and acknowledges that it may be deemed to have
shared voting and dispositive power over the shares
held by the other Reporting Person. However,
pursuant to Rule 13d-4, each Reporting Person
disclaims beneficial ownership of those shares of
Common Stock over which it does not have sole voting
and dispositive power.
<PAGE> 11
CUSIP No. 20467210 13D
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------------------------- PERCENT OF
NAME INFINITY SHARES WARRANT SHARES SEACREST SHARES CLASS
-------------------------- --------------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
Infinity Investors Limited 1,303,500 216,071 0 8.7%
Seacrest Capital Limited 0 58,929 355,500 2.5%
</TABLE>
Except as specified herein, the Reporting Persons have
effected no other transaction in the shares of Common Stock of
the Issuer within the preceding sixty (60) days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, OR UNDERSTANDINGS WITH RESPECT TO
SECURITIES OF THE ISSUER.
Pursuant to the transactions contemplated by the Purchase Agreement,
Infinity, Seacrest and the Issuer entered into a Registration Rights
Agreement, dated October 24, 1996 (the "Registration Rights
Agreement"). Pursuant to the terms of the Registration Rights
Agreement, the Issuer agreed to file with the Securities and Exchange
Commission, within 30 days after the Series C Closing Date, Series D
Closing Date and Series E Closing Date a shelf registration statement
covering the shares of Common Stock underlying the Series C Shares,
Series C Warrant, and the Additional Acquirable Securities, as
applicable (collectively, the "Underlying Securities Registration
Statement") to be resold by the holders thereof. Additionally, the
Issuer has agreed to use its best efforts to cause the Underlying
Securities Registration Statement to be declared effective as soon as
practicable (but in any event within 90 days following the applicable
closing date) and to keep such registration statement continuously
effective until October 24, 1999 or such earlier date when all
registrable securities have been or may be sold pursuant to rule 144
promulgated under the Securities Act of 1933, as amended. The parties
have agreed that the Issuer may suspend effectiveness of the
Underlying Securities Registration Statement for up to 60 days in any
12-month period relating to a significant merger or acquisition.
Except as described or referred to in this Statement or in the
documents included as Exhibits hereto, the Reporting Persons have no
other contracts, arrangements, understandings, or relationships with
any person with respect to any securities of the Issuer.
<PAGE> 12
CUSIP No. 20467210 13D
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
99.1 Joint Filing Agreement, dated December 5, 1996,
between Infinity Investors Limited and Seacrest
Capital Limited.
99.2 Convertible Preferred Stock Purchase Agreement, dated
as of October 24, 1996, among the Issuer, Infinity
Investors Limited and Seacrest Capital Limited.
99.3 Certificate of Designation of Series C Convertible
Preferred Stock of the Issuer.
99.4 Warrant Certificate of the Issuer, dated October 24,
1996 issued to Infinity Investors Limited.
</TABLE>
<PAGE> 13
CUSIP No. 20467210 13D
SIGNATURE
After reasonable inquiry, I certify that to the best of my
knowledge and belief the information set forth in this Statement is
true, complete and correct.
Date: December 5, 1996
INFINITY INVESTORS LIMITED
By: /s/ James A. Loughran
----------------------------
James A. Loughran
Director
SEACREST CAPITAL LIMITED
By: /s/ James E. Martin
----------------------------
James E. Martin
President
Attention: Intentional misstatements or
omissions of fact constitute federal
criminal violations (see 18 U.S. C. 1001).
<PAGE> 14
CUSIP No. 20467210 13D
SCHEDULE 1
DIRECTORS AND EXECUTIVE OFFICERS OF
INFINITY INVESTORS LIMITED
Set forth below is the name, citizenship (or place of organization, as
applicable), business address and present principal occupation or employment of
each director and executive officer of Infinity Investors Limited.
<TABLE>
<CAPTION>
NAME AND
CITIZENSHIP OR PRESENT PRINCIPAL
PLACE OF OCCUPATION OR POSITION WITH
ORGANIZATION BUSINESS ADDRESS EMPLOYMENT REPORTING PERSON
------------ ---------------- ---------- ----------------
<S> <C> <C> <C>
Cofides S.A.* Memorial Square Nevis business corporation Director
(Nevis, West Indies) P. O. Box 556 which serves as the
Nevis, West Indies Director of various
entities
James Loughran 38 Hertford Street Lawyer Director
(Irish) London, England
W1Y 7TG
James E. Martin 38 Hertford Street Accountant Director
(British) London, England
W1Y 7TG
SECORP Limited 38 Hertford Street British corporation which Secretary
(England) London, England serves as the Secretary of
W1Y 7TG various entities
Margareta Hedstrom 37 Shepherd Street Business Executive President/
(Swedish) London, England Treasurer
W1Y 7LH
- ---------------
* The members of the Board of Directors of Cofides S.A. are James A.
Loughran, Siobhan B. Loughran, James E. Martin, Ashley Bolt + Co.
Limited and Margareta Hedstrom.
</TABLE>
Infinity Investors Limited advises that no persons and/or
organizations control the Reporting Person (either individually or as a group)
as that term is used in Instruction C to Rule 13d-101 promulgated under the
Securities Exchange Act of 1934, as amended.
<PAGE> 15
CUSIP No. 20467210 13D
SCHEDULE 2
DIRECTORS AND EXECUTIVE OFFICERS OF
SEACREST CAPITAL LIMITED
Set forth below is the name, citizenship (or place of organization, as
applicable), business address and present principal occupation or employment of
each director and executive officer of Seacrest Capital Limited.
<TABLE>
<CAPTION>
NAME AND
CITIZENSHIP OR PRESENT PRINCIPAL
PLACE OF OCCUPATION OR POSITION WITH
ORGANIZATION BUSINESS ADDRESS EMPLOYMENT REPORTING PERSON
------------ ---------------- ---------- ----------------
<S> <C> <C> <C>
James E. Martin 38 Hertford Street Accountant President and
(British) London, England Treasurer
W1Y 7TG
SECORP Limited 38 Hertford Street British corporation which Secretary
(England) London, England serves as the Secretary of
W1Y 7TG various entities
Parchmore Incorporated 80 Broad Street Liberian corporation which Director
(Liberia) Monrovia serves as the Director of
Liberia various entities
</TABLE>
Seacrest Capital Limited advises that no persons and/or organizations
control the Reporting Person (either individually or as a group) as that term
is used in Instruction C to Rule 13d-101 promulgated under the Securities
Exchange Act of 1934, as amended.
<PAGE> 16
CUSIP No. 20467210 13D
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
99.1 Joint Filing Agreement, dated December 5, 1996,
between Infinity Investors Limited and Seacrest
Capital Limited.
99.2 Convertible Preferred Stock Purchase Agreement, dated
as of October 24, 1996, among the Issuer, Infinity
Investors Limited and Seacrest Capital Limited.
99.3 Certificate of Designation of Series C Convertible
Preferred Stock of the Issuer.
99.4 Warrant Certificate of the Issuer, dated October 24,
1996 issued to Infinity Investors Limited.
</TABLE>
<PAGE> 1
CUSIP No. 20467210 13D
JOINT FILING AGREEMENT EXHIBIT 99.1
In accordance with Rule 13d-1(f) under the Securities Exchange Act of
1934, as amended, the persons named below agree to the joint filing on behalf
of each of them of a Statement on Schedule 13D (including any amendments
thereto) with respect to the Common Stock of Compression Labs, Incorporated.
This Joint Filing Agreement shall be included as an exhibit to such filing. In
evidence thereof, each of the undersigned, being duly authorized, hereby
executes this Joint Filing Agreement as of the 5th day of December, 1996.
INFINITY INVESTORS LIMITED
By: /s/ James A. Loughran
---------------------------------
James A. Loughran
Director
SEACREST CAPITAL LIMITED
By: /s/ James E. Martin
---------------------------------
James E. Martin
President
<PAGE> 1
EXHIBIT 99.2
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
COMPRESSION LABS, INCORPORATED
and
INFINITY INVESTORS, LTD.
and
SEACREST CAPITAL LIMITED
______________________________
Dated as of October 24, 1996
______________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I PURCHASE AND SALE OF PREFERRED SHARES . . . . . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 The Closings . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) The Series C Closing . . . . . . . . . . . . . . . 2
(b) The Series D Closing . . . . . . . . . . . . . . . 3
(c) The Series E Closing . . . . . . . . . . . . . . . 4
ARTICLE II REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . 5
2.1 Representations, Warranties and Agreements of the Company . . 5
(a) Organization and Qualification . . . . . . . . . . 5
(b) Authorization; Enforcement . . . . . . . . . . . . 5
(c) Capitalization . . . . . . . . . . . . . . . . . . 5
(d) Issuance of Shares . . . . . . . . . . . . . . . . 6
(e) No Conflicts . . . . . . . . . . . . . . . . . . . 6
(f) Consents and Approvals . . . . . . . . . . . . . . 7
(g) Litigation; Proceedings . . . . . . . . . . . . . 7
(h) No Default or Violation . . . . . . . . . . . . . 7
(i) Schedules . . . . . . . . . . . . . . . . . . . . 8
(j) Private Offering . . . . . . . . . . . . . . . . . 8
(k) SEC Documents . . . . . . . . . . . . . . . . . . 8
(l) Seniority . . . . . . . . . . . . . . . . . . . . 8
(m) Investment Company . . . . . . . . . . . . . . . . 9
(n) Certain Fees . . . . . . . . . . . . . . . . . . . 9
(o) Solicitation Materials . . . . . . . . . . . . . . 9
2.2 Representations and Warranties of the Purchasers . . . . . . 9
(a) (1) Organization; Authority . . . . . . . . . . . . . 9
(2) Investment Intent . . . . . . . . . . . . . . . . 9
(3) Purchaser Status . . . . . . . . . . . . . . . . . 9
(4) Experience of Purchaser . . . . . . . . . . . . . 10
(5) Ability of Purchaser to Bear Risk of Investment. . 10
(6) Prohibited Transactions . . . . . . . . . . . . . 10
(7) Access to Information . . . . . . . . . . . . . . 10
(8) Reliance . . . . . . . . . . . . . . . . . . . . . 10
(b) (1) Organization; Authority . . . . . . . . . . . . . 11
(2) Investment Intent . . . . . . . . . . . . . . . . 11
(3) Purchaser Status . . . . . . . . . . . . . . . . . 11
(4) Experience of Purchaser . . . . . . . . . . . . . 11
(5) Ability of Purchaser to Bear Risk of Investment. . 11
(6) Prohibited Transactions . . . . . . . . . . . . . 11
(7) Access to Information . . . . . . . . . . . . . . 12
(8) Reliance . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE III OTHER AGREEMENTS OF THE PARTIES . . . . . . . . . . . . . . . 12
3.1 Transfer Restrictions . . . . . . . . . . . . . . . . . . . . 12
3.2 Stop Transfer Instruction . . . . . . . . . . . . . . . . . . 13
3.3 Furnishing of Information . . . . . . . . . . . . . . . . . . 13
3.4 Notice of Certain Events . . . . . . . . . . . . . . . . . . 14
3.5 Copies and Use of Disclosure Materials . . . . . . . . . . . 14
3.6 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . 14
3.7 Integration . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.8 Certain Agreements . . . . . . . . . . . . . . . . . . . . . 14
3.9 Purchaser Ownership of Common Stock . . . . . . . . . . . . . 15
3.10 Listing of Underlying Shares . . . . . . . . . . . . . . . . 15
3.11 Conversion Procedures . . . . . . . . . . . . . . . . . . . . 15
3.12 Purchaser's Rights if Trading in Common Stock is Suspended. . 15
3.13 No Violation of Applicable Law . . . . . . . . . . . . . . . 16
3.14 Redemption Restrictions . . . . . . . . . . . . . . . . . . . 16
3.15 Piggyback Registration Rights . . . . . . . . . . . . . . . . 16
3.16 Notice of Breaches . . . . . . . . . . . . . . . . . . . . . 17
3.17 Conversion Obligations of the Company . . . . . . . . . . . . 17
3.18 Right of First Refusal . . . . . . . . . . . . . . . . . . . 17
3.19 The Warrants . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Break-up Fee . . . . . . . . . . . . . . . . . . . . . . . . 18
3.21 Book Entry Arrangements . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1(a) Conditions Precedent to the Obligation of the Company
to Sell the Series C Shares . . . . . . . . . . . . . . . . . 19
(i) Accuracy of the Purchaser's Representations
and Warranties . . . . . . . . . . . . . . . . . . 19
(ii) Performance by the Purchaser . . . . . . . . . . . 19
(iii) No Injunction . . . . . . . . . . . . . . . . . . 19
(iv) Required Approvals . . . . . . . . . . . . . . . . 19
(b) Conditions Precedent to the Obligation of the
Purchaser to Purchase the Series C Shares . . . . . . . . . . 19
(i) Accuracy of the Company's Representations
and Warranties . . . . . . . . . . . . . . . . . . 19
(ii) Performance by the Company . . . . . . . . . . . . 19
(iii) No Injunction . . . . . . . . . . . . . . . . . . 20
(iv) Adverse Changes . . . . . . . . . . . . . . . . . 20
(v) No Suspensions of Trading in Common Stock . . . . 20
(vi) Listing of Common Stock . . . . . . . . . . . . . 20
(vii) Legal Opinion . . . . . . . . . . . . . . . . . . 20
(viii) Required Approvals . . . . . . . . . . . . . . . . 20
(ix) Shares of Common Stock . . . . . . . . . . . . . . 20
(x) Delivery of Stock Certificates . . . . . . . . . . 20
(xi) Registration Rights Agreement . . . . . . . . . . 21
(xii) Warrants . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(xiii) Certificate of Designation . . . . . . . . . . . . 21
(xiv) Company Certificates . . . . . . . . . . . . . . . 21
(xv) Change of Control . . . . . . . . . . . . . . . . 21
4.2 Conditions Precedent to the Obligation of each
Purchaser to Purchase the Series D Shares and the
Series E Shares . . . . . . . . . . . . . . . . . . . . . . . 21
(i) Series C Closing . . . . . . . . . . . . . . . . . 21
(ii) Series D Infinity Warrant . . . . . . . . . . . . 21
(iii) Accuracy of the Company's Representations
and Warranties . . . . . . . . . . . . . . . . . . 21
(iv) Performance by the Company . . . . . . . . . . . . 22
(v) Underlying Securities Registration
Statements . . . . . . . . . . . . . . . . . . . . 22
(vi) No Injunction . . . . . . . . . . . . . . . . . . 22
(vii) Adverse Changes . . . . . . . . . . . . . . . . . 22
(viii) Litigation . . . . . . . . . . . . . . . . . . . . 22
(ix) Management . . . . . . . . . . . . . . . . . . . . 22
(x) No Suspensions of Trading in Common Stock . . . . 23
(xi) Listing of Common Stock . . . . . . . . . . . . . 23
(xii) Change of Control . . . . . . . . . . . . . . . . 23
(xiii) Legal Opinion . . . . . . . . . . . . . . . . . . 23
(xiv) Required Approvals . . . . . . . . . . . . . . . . 23
(xv) Shares of Common Stock . . . . . . . . . . . . . . 23
(xvi) Delivery of Stock Certificates . . . . . . . . . . 23
(xvii) Performance of Conversion/Exercise
Obligations . . . . . . . . . . . . . . . . . . . 23
ARTICLE V TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . 24
5.2 Termination by the Company . . . . . . . . . . . . . . . . . 24
5.3 Termination by the Purchasers . . . . . . . . . . . . . . . . 24
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 26
6.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 26
6.2 Entire Agreement; Amendments . . . . . . . . . . . . . . . . 26
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . 28
6.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . 28
6.7 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . 28
6.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.10 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 29
Exhibit A - Series C Terms
Exhibit B - Registration Rights Agreement
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
Exhibit C - Conversion Procedures
Exhibit D - Form of Legal Opinion
Exhibit E(1) - Form of Series C Infinity Warrant
Exhibit E(2) - Form of Brown Simpson Warrant
Exhibit E(3) - Form of Alpine Warrant
Exhibit E(4) - Form of Series D Infinity Warrant
</TABLE>
-iv-
<PAGE> 6
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of October 24, 1996, between Infinity Investors, Ltd., a corporation
organized and existing under the laws of Nevis, West Indies ("Infinity"),
Seacrest Capital Limited, a corporation organized and existing under the laws
of Nevis, West Indies ("Seacrest") (Infinity and Seacrest are each a
"Purchaser" and are collectively, the "Purchasers"), and Compression Labs,
Incorporated, a corporation organized and existing under the laws of the State
of Delaware (the "Company").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire shares of the Company's Series C Convertible
Preferred Stock, par value $.001 per share (the "Series C Preferred"), the
Company's Series D Convertible Preferred Stock, par value $.001 per share (the
"Series D Preferred"), and the Company's Series E Convertible Preferred Stock,
par value $.001 per share (the "Series E Preferred") (the Series C Preferred,
Series D Preferred and Series E Preferred are collectively referred to as the
"Preferred Stock").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and each Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED SHARES
1.1 Purchase and Sale. (a) Subject to the terms and conditions
set forth herein, the Company shall issue and sell and the Purchasers shall
purchase the Preferred Stock as follows: (a) Infinity shall purchase 275,000
shares of Series C Preferred (the "Infinity C Preferred") and Seacrest shall
purchase 75,000 shares of Series C Preferred (the "Seacrest C Preferred") (the
Infinity C Preferred and the Seacrest C Preferred are collectively, the "Series
C Shares"); (b) Infinity or an eligible affiliate thereof specified by Infinity
(an "Infinity Affiliate") shall purchase between 50,000 and 350,000 shares of
Series D Preferred (the "Series D Shares"); and (c) Infinity or an Infinity
Affiliate shall purchase between 50,000 and 350,000 shares of Series E
Preferred (the "Series E Shares").
(b) The Series C Preferred shall have the respective
rights, preferences and privileges set forth in Exhibit A attached hereto (the
"Series C Terms"), which shall be incorporated into a Certificate of
Designation to be approved by the Purchasers and filed on or prior to the
Series C Closing (as defined below) by the Company with the Secretary of State
of Delaware (the "Series C Designation"). The Series D Preferred and Series E
Preferred shall have respective rights, preferences and privileges identical to
the Series C Terms as set forth in Exhibit A, mutatis mutandis, and shall rank
pari passu with the Series C Preferred with regard to dividends, liquidation,
voting rights and any other preferential rights designated therein, except that
the Conversion Price for conversion of said Shares (as hereinafter defined)
shall be determined by reference to the following table:
<PAGE> 7
Market Capitalization Applicable Discount
- --------------------- -------------------
Less than $80,000,000 22.5%
$80,000,000 - $115,000,000 20%
Greater than $115,000,000 17.5%
The Series D Shares and Series E Shares shall be authorized pursuant to
certificates of designation to be prepared by the Company, subject to the
approval of each Purchaser, and filed at or prior to the Series D Closing Date
(as defined below) or Series E Closing Date (as defined below), as applicable,
by the Company with the Secretary of State of Delaware (such certificates of
designation, together with the Series C Designation, are referred to as the
"Certificates of Designation").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series C Terms; and "Market Price" as at any date
shall mean the average Per Share Market Value for the five (5) Trading Days
immediately preceding such date. In addition the Company's "Market
Capitalization" shall be determined as of the close of business on the date
prior to the date of delivery of the Subsequent Financing Notice and shall be
the product of the Per Share Market Value multiplied by the number of
outstanding shares of the Company's Common Stock determined in accordance with
generally accepted accounting principles applicable to income statements on a
fully diluted basis.
1.2 Purchase Price. The purchase price per Share shall be $20.
1.3 The Closings.
(a) The Series C Closing. (i) The closing of the
purchase and sale of the Series C Shares (the "Series C Closing") shall take
place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP
("Robinson Silverman"), 1290 Avenue of the Americas, New York, New York 10104,
immediately following the execution hereof or such later date as the parties
shall agree, but not prior to the date that the conditions set forth in Section
4.1 have been satisfied or waived by the appropriate party and provided, that
the Series C Closing may not occur later than November 15, 1996 (the "Series C
Closing Expiration Date"). The date of the Series C Closing is hereinafter
referred to as the "Series C Closing Date." At the Series C Closing, the
Company shall sell and issue to the Purchasers, and the Purchasers shall
purchase, the Series C Shares, for an aggregate purchase price of $7,000,000.
(ii) At the Series C Closing, (a) the Company
shall deliver (1) to Infinity (A) one or more stock certificates representing
the Infinity C Preferred, registered in the name of Infinity, (B) the Series C
Infinity Warrant (as defined in Section 3.19), and (C) all other documents,
instruments and writings required to have been delivered at or prior to the
Series C Closing by the Company pursuant to this Agreement and the Registration
Rights
-2-
<PAGE> 8
Agreement, dated the date hereof, by and between the Company and the
Purchasers, in the form of Exhibit B (the "Registration Rights Agreement"), (2)
to Seacrest (A) one or more certificates representing the Seacrest C Preferred,
registered in the name of Seacrest and (B) all other documents, instruments and
writings required to have been delivered at or prior to the Series C Closing by
the Company pursuant to this Agreement and the Registration Rights Agreement
(3) to Brown Simpson, LLC, ("Brown Simpson"), the Brown Simpson Warrant (as
defined in Section 3.19) and (4) to Alpine Capital Partners, Inc. ("Alpine")
the Alpine Warrant (as defined in Section 3.19); and (b) (1) Infinity shall
deliver to the Company $5,500,000 and Seacrest shall deliver to the Company
$1,500,000, less the fees and disbursements of the legal counsel contemplated
in Section 6.1, in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company prior to the Series
C Closing Date, and (2) the Purchasers shall deliver all documents, instruments
and writings required to have been delivered at or prior to the Series C
Closing by each Purchaser pursuant to this Agreement and the Registration
Rights Agreement.
(b) The Series D Closing. (i) The closing of the
purchase and sale of the shares of Series D Preferred to be issued and sold at
such closing in accordance herewith (the "Series D Shares", and such closing
the "Series D Closing") shall take place at the offices of Robinson Silverman
on such date (which may not be prior to the tenth day after receipt of the
notice described hereafter in this paragraph (b)) as the Company may designate
in a written notice to Infinity (a "Subsequent Financing Notice") relating to
the Series D Shares which the Company may deliver no earlier than 180 days
after the date hereof and no later than 210 days after the date hereof (such
210th day, the "Series D Closing Expiration Date"), which Subsequent Financing
Notice shall set forth the number of Series D Shares (which may not be less
than 50,000 nor in excess of (i) 250,000 shares, if the Company's Market
Capitalization (not inclusive of the proceeds from the Series D Closing) is
less than $80,000,000 on the Series D Closing Date, (ii) 300,000 shares, if the
Company's Market Capitalization (not inclusive of the proceeds from the Series
D Closing) is between $80,000,000 and $115,000,000 on the Series D Closing Date
or (iii) 350,000 shares, if the Company's Market Capitalization (not inclusive
of the proceeds from the Series D Closing) is greater than $115,000,000 on the
Series D Closing Date) that the Company intends to sell to Infinity (or an
eligible affiliate thereof specified by Infinity (an "Infinity Affiliate")
provided, however, that in no case shall the Series D Closing take place unless
and until the conditions listed in Section 4.2 have been satisfied or waived by
the appropriate party. The date of the Series D Closing is hereinafter
referred to as the "Series D Closing Date."
(ii) At the Series D Closing, (a) the Company
shall deliver (1) to Infinity (and/or an Infinity Affiliate, as the case may
be) one or more stock certificates representing the Series D Shares registered
in the name of Infinity and/or such Infinity Affiliate (2) to Infinity the
Series D Infinity Warrant and (3) to Infinity (and/or such Infinity Affiliate)
all documents, instruments and writings required to have been delivered at or
prior to the Series D Closing by the Company pursuant to this Agreement and the
Registration Rights Agreement and (b) Infinity (and/or such Infinity Affiliate)
shall deliver to the Company (1) the purchase price for the Series D Shares
being purchased as determined pursuant to this Article I in immediately
available funds by wire transfer to an account
-3-
<PAGE> 9
designated in writing by the Company and delivered to Infinity (and/or such
Infinity Affiliate) prior to the Series D Closing Date and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Series D Closing by Infinity (and/or such Infinity Affiliate) pursuant to this
Agreement and the Registration Rights Agreement.
(c) The Series E Closing. (i) The closing of the
purchase and sale of the shares of Series E Preferred to be issued and sold at
such closing in accordance herewith (the "Series E Shares," and such closing
the "Series E Closing") shall take place at the offices of Robinson Silverman
on such date (which may not be prior to the tenth day after receipt of the
Subsequent Financing Notice relating to the Series E Shares) as the Company
shall designate in the Subsequent Financing Notice relating to the Series E
Shares, which the Company may deliver no earlier than 180 days after the Series
D Closing Date and no later than 210 days after the Series D Closing Date (the
"Series E Closing Expiration Date"), which Subsequent Financing Notice shall
set forth the number of Series E Shares (which may not be less than 50,000 nor
in excess of (i) 250,000 shares, if the Company's Market Capitalization (not
inclusive of the proceeds from the Series E Closing) is less than $80,000,000
on the Series E Closing Date, (ii) 300,000 shares, if the Company's Market
Capitalization (not inclusive of the proceeds from the Series E Closing) is
between $80,000,000 and $115,000,000 on the Series E Closing Date or (iii)
350,000 shares, if the Company's Market Capitalization (not inclusive of the
proceeds from the Series E Closing) is greater than $115,000,000 on the Series
E Closing Date; provided, that in no event shall the aggregate number of Shares
(as defined below) to be issued and sold under this Agreement exceed 1,000,000)
that the Company intends to sell thereunder, provided, however, that in no case
shall the Series E Closing take place unless and until the conditions listed in
Section 4.2 have been satisfied or waived by the appropriate party. The date
of the Series E Closing is referred to as the "Series E Closing Date." The
Series C Closing Date, the Series D Closing Date or the Series E Closing Date,
are sometimes referred to herein as a "Closing Date." The Series C Shares,
Series D Shares and Series E Shares are collectively referred to herein as the
"Shares".
(ii) At the Series E Closing, (a) the Company
shall deliver to Infinity (and/or an Infinity Affiliate, as the case may be)
(1) one or more stock certificates representing the Series E Shares being sold
at such Closing, registered in the name of Infinity (and/or such Infinity
Affiliate), and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series E Closing by the Company pursuant to
this Agreement and the Registration Rights Agreement, and (b) Infinity (and/or
such Infinity Affiliate) shall deliver to the Company (1) the purchase
price for the Series E Shares being purchased, as determined pursuant to this
Article I, in immediately available funds by wire transfer to an account
designated in writing by the Company and delivered to each Purchaser prior to
the Series E Closing Date, and (2) all documents, instruments and writings
required to have been delivered at or prior to the Series E Closing by Infinity
(and/or such Infinity Affiliate) pursuant to this Agreement and the
Registration Rights Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company.
The Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth
in the Schedule 2.1(a) attached hereto (collectively, the "Subsidiaries").
Each of the Subsidiaries is a corporation, duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
with the full corporate power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, have a material
adverse effect on the results of operations, assets, prospects, or financial
condition of the Company and the Subsidiaries, taken as a whole (a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and by the Warrants (as defined below), the
Certificate of Designation, the Registration Rights Agreement, and otherwise to
carry out its obligations hereunder and thereunder. This Agreement, the
Registration Rights Agreement and the Warrants are collectively referred to as
the "Transaction Documents". The execution and delivery of each of this
Agreement, each Certificate of Designation and each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby has been duly authorized by all necessary action on the
part of the Company. Each of this Agreement, each Certificate of Designation
and each of the Transaction Documents has been duly executed by the Company and
when delivered in accordance with the terms hereof will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of this Agreement.
Except as disclosed in Schedule 2.1(c), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Shares and Warrants hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving
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<PAGE> 11
any person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings, or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective Certificate of Incorporation, bylaws or other
charter documents.
(d) Issuance of Shares. The Shares and the Warrants are
duly authorized, and when issued and paid for in accordance with the terms
hereof, shall be validly issued, fully paid and nonassessable. The Company, as
at the Series C Closing Date, Series D Closing Date and Series E Closing Date,
as the case may be, has and at all times while the Shares and any Warrants are
outstanding will maintain an adequate reserve of duly authorized shares of
Common Stock to enable it to perform its obligations under this Agreement, the
Warrants and the Certificates of Designation with respect to the number of
Shares and Warrants issued and outstanding at such Closing Date and in no
circumstances shall such reserved and available shares of Common Stock be less
than the sum of (i) two times the number of shares of Common Stock which would
be issuable upon conversion of the Shares issued pursuant to the terms hereof
(the "Underlying Shares") with respect to the number of Shares and Warrants
issued and outstanding at such Closing Date were such conversion effected on
the Original Issue Date for such Shares and (ii) the number of shares of Common
Stock which would be issuable upon exercise in full of the Warrants (the
"Warrant Shares"). When issued in accordance with the terms hereof and the
Certificates of Designation, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable; and when issued upon exercise of
the Warrants in accordance with their respective terms, the Warrant Shares will
be duly authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and
performance of the Transaction Documents and the Certificates of Designation by
the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of its Certificate of Incorporation or bylaws (each as amended
through the date hereof) or (ii) subject to obtaining the consents referred to
in Section 2.1(f), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company is a party, or
(iii) to the knowledge of the Company result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
Federal and state securities laws and regulations), or by which any material
property or asset of the Company is bound or affected, except in the case of
clause (ii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, do
not have a Material Adverse Effect.
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<PAGE> 12
(f) Consents and Approvals. Except as specifically set
forth in Schedule 2.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of the Transaction Documents and the
Certificates of Designation, except for (i) the filings of the Certificates of
Designation with respect to the Shares with the Secretary of State of Delaware,
which filings shall be effected prior to the Series C Closing Date, the Series
D Closing Date and the Series E Closing Date, as appropriate, (ii) the filing
of the registration statements contemplated by the Registration Rights
Agreement (the "Underlying Securities Registration Statement(s)") with the
Securities and Exchange Commission (the "Commission"), which shall be filed in
the time periods set forth in the Registration Rights Agreement (iii) the
applications for the listing of the Underlying Shares and the Warrant Shares
with the Nasdaq National Market (and with any other national securities
exchange or market on which the Common Stock is then listed), and (iv) other
than, in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give or make such notice or filing, would not
materially impair or delay the ability of the Company to effect the Series C
Closing, the Series D Closing or the Series E Closing and to deliver to the
Purchasers the Shares (and, upon conversion of the Shares thereunder, the
Underlying Shares) or to the appropriate party, the Warrants (and, upon
exercise of the Warrants, the Warrant Shares) in the manner contemplated hereby
and by the Registration Rights Agreement free and clear of all liens and
encumbrances of any nature whatsoever (together with the consents, waivers,
authorizations, orders, notices and filings referred to in Schedule 2.1(f), the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically
disclosed in the Disclosure Materials (as hereinafter defined) or in Schedule
2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, county, local or foreign) which
(i) relates to or challenges the legality, validity or enforceability of any of
the Transaction Documents or any of the Certificates of Designation or the
Shares (ii) could, individually or in the aggregate, have a Material Adverse
Effect or (iii) could, individually or in the aggregate, materially impair the
ability of the Company to perform fully on a timely basis its obligations under
the Transaction Documents or the Certificates of Designation.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is in violation
of any statute, rule or regulation of any governmental authority, except as
could, in any such case (individually or in the aggregate), not (x) adversely
affect the legality, validity or enforceability of any of the Transaction
Documents or any of the Certificates of Designation, (y) have a Material
Adverse Effect or (z) adversely impair the Company's ability or obligation to
perform fully on a timely basis its obligations under any of the Transaction
Documents or any of the Certificates of Designation.
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<PAGE> 13
(i) Schedules. The Schedules to this Agreement furnished
by or on behalf of the Company do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) Private Offering. Assuming (without any independent
investigation or verification by or on behalf of the Company) the accuracy of
the representations and warranties of the Purchasers set forth in Section 2.2,
the offer and sale of the Shares, the Warrants, the Underlying Shares and the
Warrant Shares are exempt from registration under Section 5 of the Securities
Act of 1933, as amended (the "Securities Act"). Neither the Company nor any
person acting on its behalf has taken or will take any action which might
subject the offering, issuance or sale of such Shares, the Warrants, the
Underlying Shares or the Warrant Shares to the registration requirements of
Section 5 of the Securities Act.
(k) SEC Documents. The Company has filed all reports
required to be filed by it under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as
the Company was required by law to file such material) (the foregoing materials
being collectively referred to herein as the "SEC Documents" and, together with
the Schedules to this Agreement furnished by or on behalf of the Company, the
"Disclosure Materials") on a timely basis, or has received a valid extension of
such time of filing. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved, except as may be
otherwise indicated in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
as of and for the dates thereof and the results of operations and cash flows
for the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments. Except as disclosed in Schedule 2.1(g) and
in the audited and unaudited balance sheets of the Company included in the SEC
Documents, there are no material liabilities, contingent or otherwise, as to
which the Company or its Subsidiaries, or any of their respective assets is or
may become bound. Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-Q or last filed Annual Report
on Form 10-K, whichever has been most recently filed with the Commission, there
has been no event, occurrence or development that has had a Material Adverse
Effect which is not specifically disclosed in any of the Disclosure Materials.
(l) Seniority. No class of equity securities of the
Company is senior to the Shares in right of payment, whether upon liquidation,
dissolution or otherwise.
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<PAGE> 14
(m) Investment Company. The Company is not, and is not
an Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(n) Certain Fees. No fees or commissions will be payable
by the Company to any broker, financial advisor, finder, investment banker, or
bank with respect to the transactions contemplated by this Agreement.
(o) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Shares, the Warrants, the Underlying Shares or the Warrant Shares other
than the Disclosure Materials and any amendments and supplements thereto
prepared in compliance herewith or (ii) solicited any offer to buy or sell the
Shares, the Warrants, the Underlying Shares or the Warrant Shares by means of
any form of general solicitation or advertising.
2.2 Representations and Warranties of the Purchasers.
(a) Infinity hereby represents and warrants to the Company as
follows:
(1) Organization; Authority. Infinity is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase by Infinity of the Shares
(other than the Seacrest C Preferred; such Shares, the "Infinity Shares") and
the Infinity Warrants hereunder has been duly authorized by all necessary
action on the part of Infinity. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by Infinity or on its
behalf and constitutes the valid and legally binding obligation of Infinity,
enforceable against Infinity in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
(2) Investment Intent. Infinity is acquiring the
Infinity Shares, the Infinity Warrants, the Underlying Shares relating to the
Infinity Shares and the Warrant Shares relating to the Infinity Warrants for
its own account for investment purposes only and not with a view to or for
distributing or reselling such Infinity Shares, Infinity Warrants, Underlying
Shares or Warrant Shares or any part thereof or interest therein, without
prejudice, however, to Infinity's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Infinity Shares, Underlying
Shares, Infinity Warrants or Warrant Shares pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable State securities laws or under an exemption from such registration.
(3) Purchaser Status. At the time Infinity was offered
the Infinity Shares and the Infinity Warrants, it was, and at the date hereof,
it is, and at each Closing Date and
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<PAGE> 15
each exercise date under the Infinity Warrants, it will be, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(4) Experience of Purchaser. Infinity, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Infinity Shares, the
Infinity Warrants, the Underlying Shares relating to the Infinity Shares and
the Warrant Shares, and has so evaluated the merits and risks of such
investment.
(5) Ability of Purchaser to Bear Risk of Investment.
Infinity is able to bear the economic risk of an investment in the Infinity
Shares, the Infinity Warrants, the Underlying Shares relating to the Infinity
Shares and the Warrant Shares, relating to the Infinity Warrants and, at the
present time, is able to afford a complete loss of such investment.
(6) Prohibited Transactions. The Infinity Shares and the
Infinity Warrants are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan," within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended.
(7) Access to Information. Infinity acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Infinity Shares and the Infinity Warrants,
and the merits and risks of investing in the Infinity Shares and the Infinity
Warrants; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses
or can acquire without unreasonable effort or expense that is necessary to make
an informed investment decision with respect to the investment and to verify
the accuracy and completeness of the information contained in the Disclosure
Materials.
(8) Reliance. Infinity understands and acknowledges that
(i) the Infinity Shares and the Infinity Warrants are being offered and sold to
Infinity without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act under
Regulation D promulgated thereunder and (ii) the availability of such
exemption, depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and Infinity hereby consents to
such reliance.
The Company acknowledges and agrees that Infinity makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2(a).
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<PAGE> 16
(b) Seacrest hereby represents and warrants to the Company as
follows:
(1) Organization; Authority. Seacrest is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority to enter into and to consummate the transactions contemplated hereby
and by the Registration Rights Agreement and otherwise to carry out its
obligations hereunder and thereunder. The purchase by Seacrest of the Seacrest
C Preferred hereunder has been duly authorized by all necessary action on the
part of Seacrest. Each of this Agreement and the Registration Rights Agreement
has been duly executed and delivered by Seacrest or on its behalf and
constitutes the valid and legally binding obligation of Seacrest, enforceable
against Seacrest in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity.
(2) Investment Intent. Seacrest is acquiring the
Seacrest C Preferred and the Underlying Shares relating to the Seacrest C
Preferred for its own account for investment purposes only and not with a view
to or for distributing or reselling such Seacrest C Preferred or Underlying
Shares or any part thereof or interest therein, without prejudice, however, to
Seacrest's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Seacrest C Preferred or Underlying Shares pursuant to an
effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration.
(3) Purchaser Status. At the time Seacrest was offered
the Seacrest C Preferred it was, and at the date hereof, it is, and at each
Closing Date, it will be, an "accredited investor" as defined in Rule 501(a)
under the Securities Act.
(4) Experience of Purchaser. Seacrest, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Seacrest C Preferred
and the Underlying Shares relating to the Seacrest C Preferred and has so
evaluated the merits and risks of such investment.
(5) Ability of Purchaser to Bear Risk of Investment.
Seacrest is able to bear the economic risk of an investment in the Seacrest C
Preferred and the Underlying Shares relating to the Seacrest C Preferred and,
at the present time, is able to afford a complete loss of such investment.
(6) Prohibited Transactions. The Seacrest C Preferred is
not being acquired, directly or indirectly, with the assets of any "employee
benefit plan," within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended.
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<PAGE> 17
(7) Access to Information. Seacrest acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Seacrest C Preferred and the merits and risks
of investing therein; (ii) access to information about the Company and the
Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials.
(8) Reliance. Seacrest understands and acknowledges that
(i) the Seacrest C Preferred is being offered and sold to Seacrest without
registration under the Securities Act in a private placement that is exempt
from the registration provisions of the Securities Act under Regulation D
promulgated thereunder and (ii) the availability of such exemption, depends in
part on, and the Company will rely upon the accuracy and truthfulness of, the
foregoing representations and Seacrest hereby consents to such reliance.
The Company acknowledges and agrees that Seacrest makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2(b).
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If any Purchaser should decide to
dispose of any of the Shares or any portion of Infinity Warrants to be
purchased by it hereunder (and upon conversion or exercise thereof, of any
Underlying Shares or Warrant Shares, as applicable), each Purchaser understands
and agrees that it may do so only (i) pursuant to an effective registration
statement under the Securities Act, (ii) to the Company or (iii) pursuant to an
available exemption or exclusion from the registration requirements of the
Securities Act. In connection with any transfer of any Shares, Infinity
Warrants, Underlying Shares or Warrant Shares other than pursuant to an
effective registration statement or to the Company, the Company may require
that the transferor provide to the Company an opinion of counsel experienced in
the area of United States securities laws selected by the transferor, the form
and substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such Shares,
Infinity Warrants, Underlying Shares or Warrant Shares, as the case may be,
under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as
appropriate, of the following legend on certificates representing the Shares,
Underlying Shares, Infinity Warrants and Warrant Shares:
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<PAGE> 18
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed in connection with any
resale of Underlying Shares or Warrant Shares, pursuant to an effective
registration statement under the Securities Act or sooner if, in the opinion of
counsel to the Company experienced in the area of United States securities
laws, such legend is no longer required under applicable requirements of the
Securities Act (including judicial interpretation and pronouncements issued by
the staff of the Commission). The certificates representing the Shares,
Infinity Warrants, Underlying Shares and Warrant Shares shall also bear any
other legends required by applicable Federal or state securities laws, which
legends may be removed when, in the opinion of counsel to the Company
experienced in the applicable securities laws, such legends are no longer
required under the applicable requirements of such securities laws. The
Company agrees that it will provide each Purchaser, upon request, with a
substitute certificate or certificates, free from such legend at such time as
such legend is no longer applicable. Each Purchaser agrees that, in connection
with any transfer of Underlying Shares or Warrant Shares by it pursuant to an
effective registration statement under the Securities Act, such Purchaser will
comply with all applicable prospectus delivery requirements of the Securities
Act. The Company makes no representation, warranty or agreement as to the
availability of any exemption from registration under the Securities Act with
respect to any resale of Shares, Underlying Shares, Infinity Warrants or
Warrant Shares.
3.2 Stop Transfer Instruction. Each Purchaser agrees that the
Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as a Purchaser owns
Shares, Underlying Shares, Infinity Warrants or Warrant Shares, the Company
covenants to timely file (or obtain extensions in respect thereof) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act and to promptly furnish each Purchaser with
true and complete copies of all such filings. If the Company is not at the
time required to file reports pursuant to such sections, it will prepare and
furnish to each Purchaser annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act.
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<PAGE> 19
3.4 Notice of Certain Events. The Company shall (i) advise each
Purchaser promptly after obtaining knowledge thereof, and, if requested by
either Purchaser, confirm such advice in writing, of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of the Shares or the Common Stock for offering or
sale in any jurisdiction, or the initiation of any proceeding for such purpose
by any state securities commission or other regulatory authority, or (ii) use
its best efforts to prevent the issuance of any stop order or order suspending
the qualification or exemption from qualification of the Shares, Warrant Shares
or the Underlying Shares under any state securities or Blue Sky laws, and (iii)
if at any time any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Shares, Warrant Shares or the Underlying Shares under any
such laws, use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
3.5 Copies and Use of Disclosure Materials. The Company shall
furnish each Purchaser, without charge, as many copies of the Disclosure
Materials, and any amendments or supplements thereto, as such Purchaser may
reasonably request. The Company consents to the use of the Disclosure
Materials, and any amendments and supplements thereto, by a Purchaser in
connection with resales of the Shares, the Underlying Shares or the Warrant
Shares.
3.6 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares and the Warrant
Shares under the securities or Blue Sky laws of such jurisdictions as any
Purchaser may request and shall continue such qualification at all times
through the third anniversary of the last Closing Date; provided, however, that
neither the Company nor its Subsidiaries shall be required in connection
therewith to qualify as a foreign corporation where they are not now so
qualified or to take any action that would subject the Company to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any material tax in any such jurisdiction where it is
not then so subject.
3.7 Integration. The Company shall not and shall use its best
efforts to ensure that no person controlling, controlled by or under common
control with the Company (an "Affiliate") shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Shares, the Warrants, the Underlying Shares relating to the Shares
or the Warrant Shares in a manner that would require the registration under the
Securities Act of the sale of the Shares, the Warrants, the Underlying Shares
or the Warrant Shares to any Purchaser.
3.8 Certain Agreements. From the date hereof through the final
Closing Date, the Company shall not and shall cause the Subsidiaries not to,
without the consent of each Purchaser, (i) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of a Purchaser; (ii) declare, authorize, set aside or pay any dividend
or other distribution with respect to the Common Stock except as permitted
under the Certificates of Designation and as would not adversely affect the
rights of a Purchaser
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hereunder or under the Certificates of Designation; (iii) repay, repurchase or
offer to repay, repurchase or otherwise acquire shares of its Common Stock in
any manner which adversely affects the rights of a Purchaser hereunder or under
the Certificates of Designation; or (iv) enter into any agreement with respect
to any of the foregoing.
3.9 Purchaser Ownership of Common Stock. (a) Infinity may not use
its ability to convert Shares hereunder or under the terms of the Certificates
of Designation or to use its ability to acquire shares of Common Stock upon
exercise of the Infinity Warrants and (b) Seacrest may not use its ability to
convert the Seacrest C Preferred hereunder or under the terms of the
Certificates of Designation, in each case of (a) and (b) above, to the extent
that such conversion or exercise would result in such Purchaser beneficially
owning (for purposes of Rule 13d-3 under the Exchange Act) more than 4.9% of
the outstanding shares of the Common Stock. The Company shall, promptly upon
its receipt of a Holder Conversion Notice tendered by a Purchaser (or its sole
designee) under the Certificates of Designation, and upon its receipt of a
notice of exercise under the terms of the Infinity Warrants, notify such
Purchaser by telephone and by facsimile of the number of shares of Common Stock
outstanding on such date and the number of Underlying Shares and Warrant Shares
which would be issuable to such Purchaser (or its sole designee, as the case
may be) if the conversion requested in such Conversion Notice or exercise
requested in such exercise notice were effected in full, whereupon,
notwithstanding anything to the contrary set forth in the Certificates of
Designation or the Infinity Warrants, such Purchaser may within one Trading Day
of its receipt of the Company notice required by this Section by telephone or
by facsimile revoke such conversion or exercise to the extent (in whole or in
part) that it determines that such conversion or exercise would result in such
Purchaser beneficially owning (for purposes of Rule 13d-3 under the Exchange
Act) in excess of 4.9% of such outstanding shares of Common Stock.
3.10 Listing of Underlying Shares. The Company shall take all
steps necessary to cause the Underlying Shares and Warrant Shares to be
approved for listing in the Nasdaq National Market (as well as on any other
national securities exchange or market on which the Common Stock is then
listed) no later than the first day after which Shares may be converted by any
Purchaser into Common Stock, and shall provide to such Purchasers evidence of
such listing, and shall maintain the listing of its Common Stock on such
exchange.
3.11 Conversion Procedures. Exhibit C attached hereto sets forth
the procedures with respect to the conversion of the Preferred Stock, including
the forms of conversion notice to be provided upon conversion, instructions as
to the procedures for conversion, the form of legal opinion, if necessary, that
shall be rendered to the Company's transfer agent and such other information
and instructions as may be reasonably necessary to enable the Purchasers to
exercise their right of conversion smoothly and expeditiously.
3.12 Purchaser's Rights if Trading in Common Stock is Suspended.
In the event that at any time within the three-year period after the last
Closing Date trading in the shares of the Common Stock is suspended on the
Nasdaq National Market (other than as a result of the suspension of trading in
securities on such market generally or temporary suspensions pending the
release of material information and other than a suspension of trading on the
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<PAGE> 21
Nasdaq National Market if the Common Stock is listed for trading, and not
suspended, on the Nasdaq SmallCap Market within one business day after such
suspension), at a Purchaser's option exercisable by written notice to the
Company, the Company shall redeem all Shares owned by such Purchaser (and, to
the extent converted into Underlying Shares, such Underlying Shares) and all
Underlying Shares then held by such Purchaser, at an aggregate purchase price
equal to (A) the product of the per Share Market Value as of the Trading Day
immediately preceding the day of such notice multiplied by the number of shares
of Common Stock into which the Shares and the Warrants to be purchased are then
convertible (or in the case of Underlying Shares, the number of Underlying
Shares to be purchased), plus (B) interest on such amount accruing from the 7th
day after such notice until paid at the rate of 15% per annum.
3.13 No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the redemption of shares otherwise
required under this Agreement or the Registration Rights Agreement would be
prohibited by the relevant provisions of the Delaware General Corporation Law,
such redemption shall be effected as soon as it is permitted under such law;
provided, however, that interest payable by the Company with respect to any
such redemption shall continue to accrue in accordance with Section 3.12.
3.14 Redemption Restrictions. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of shares otherwise required
under this Agreement or the Registration Rights Agreement would be prohibited
in the absence of consent from any lender of the Company or any of the
Subsidiaries, or by the holders of any class of securities of the Company, the
Company shall use its best efforts to obtain such consent as promptly as
practicable after the redemption is required. Interest payable by the Company
with respect to any such redemption shall continue to accrue until such consent
is obtained. Nothing contained in this Section 3.14 shall be construed as a
waiver by the Purchaser of any rights it may have by virtue of any breach of
any representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
3.15 Piggyback Registration Rights. During the period commencing
the date hereof and ending on the earlier to occur of (i) the one year
anniversary of the last Closing and (ii) the date the last Underlying
Securities Registration Statement required to be filed by the Company in
accordance with the Registration Rights Agreement is declared effective under
the Securities Act by the Commission, the Company may not file any registration
statement that provides for the registration of shares of Common Stock to be
sold by other shareholders of the Company unless the Company provides each
Purchaser with not less than seven (7) Trading Days' notice of its intention to
file such registration statement and provides each Purchaser the option to
include any or all of the Underlying Shares and Warrant Shares then owned by it
therein as to which there is not at that time an effective Underlying
Securities Registration Statement. Such registration rights shall not apply to
registration statements relating solely to (i) employee benefit plans
notwithstanding the inclusion of a resale prospectus for securities received
under such employee benefit plan, or (ii) business combinations unless the
registration statement relates to securities to be received by the holders of
the Common Stock of the Company.
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3.16 Notice of Breaches. Each of the Company and the Purchasers
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Series C Closing, the
Series C Closing Date, with respect to the Series D Closing, the Series D
Closing Date and with respect to the Series E Closing, the Series E Closing
Date which would reasonably be likely to cause any representation or warranty
or other agreement of such party, as the case may be, contained herein to be
incorrect or breached as of such Closing Date. However, no disclosure by
either party pursuant to this Section 3.16 shall be deemed to cure any breach
of any representation, warranty or other agreement contained herein or in the
Registration Rights Agreement.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify each Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly furnish by facsimile to
the holders of the Shares a copy of any written statement in support of or
relating to such claim or notice.
3.17 Conversion Obligations of the Company. The Company covenants
to convert Shares and to deliver Underlying Shares in accordance with the terms
and conditions and time period set forth in the respective Certificates of
Designation, and to deliver Warrant Shares in accordance with the terms and
conditions and time periods set forth in the Warrants.
3.18 Right of First Refusal. For a period of one year commencing
as of the date hereof, the Company may not enter into any transaction with a
person other than Infinity to sell or otherwise dispose of securities in any
transaction intended not to be subject to the registration requirements of the
Securities Act (a "Private Placement") unless the Company provides a written
notice to Infinity describing the terms of such Private Placement (the "Private
Placement Notice") and attaches to such notice any written term sheet or other
similar writing with respect thereto. Infinity shall have the right,
exercisable within five (5) business days of its receipt of such notice, to
elect, by written notice to the Company to inform the Company of its intention
to provide (or cause an Infinity Affiliate to provide) the financing described
in the Private Placement Notice on terms no less favorable to the Company than
as set forth in the Private Placement Notice. If Infinity fails to elect to
exercise such right, the Company may enter into the Private Placement, but only
if the Private Placement is on the terms set forth in the notice provided to
Infinity in accordance with this paragraph and provided such Private Placement
is consummated within thirty (30) days after the Company's receipt of such
notice. If such Private Placement does not occur within such period, then the
Company shall not consummate such Private Placement without again providing
Infinity with the right of first refusal set forth in this Section.
3.19 The Warrants. (a) In connection with the Series C Closing,
the Company shall issue (i) to Infinity or as otherwise directed by Infinity, a
common stock purchase
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Warrant, in the form of Exhibit E(1) (the "Series C Infinity Warrant"),
pursuant to which Infinity shall have the right at any time thereafter through
the fifth anniversary of the date of issuance thereof, to acquire 275,000
shares of Common Stock at an exercise price per share equal to 135% of the
lesser of (1) the average Per Share Market Value for the five (5) Trading Days
immediately preceding the date hereof or (2) the average Per Share Market Value
for the five (5) Trading Days immediately following the announcement by the
Company of its earnings for the quarter ended September 30, 1996 (the lesser
such average, the "Applicable Market Price"), (ii) to Brown Simpson a
common stock purchase warrant, in the form of Exhibit E(2) (the "Brown Simpson
Warrant"), pursuant to which Brown Simpson shall have the right at any time
thereafter through the fifth anniversary of the date of issuance thereof, to
acquire 50,000 shares of Common Stock at an exercise price per share equal to
135% of the Applicable Market Price and (iii) to Alpine, a common stock
purchase Warrant, in the form of Exhibit E(3) (the "Alpine Warrant"), pursuant
to which Alpine shall have the right at any time thereafter through the fifth
anniversary of the date of the issuance thereof, to acquire 50,000 shares of
Common Stock at an exercise price per share equal to 135% of the Applicable
Market Price.
(b) In connection with the Series D Closing, the Company
shall issue to Infinity or as otherwise directed by Infinity, a common stock
purchase Warrant, in the form of Exhibit E(4) (the "Series D Infinity
Warrant"), pursuant to which Infinity shall have the right at any time
thereafter through the fourth anniversary of the date of issuance thereof, to
acquire 75,000 shares of Common Stock at an exercise price per share equal to
125% of the Market Price immediately preceding the Series D Closing Date. The
Series C Infinity Warrant and Series D Infinity Warrant are collectively, the
"Infinity Warrants" and the Infinity Warrants, Brown Simpson Warrant and Alpine
Warrant are collectively, the "Warrants."
3.20 Break-up Fee. If the Company fails to issue and sell the
Series C Shares to the Purchasers in accordance with the terms hereof prior to
the Series C Closing Expiration Date for any reason other than the breach of
this Agreement by the Purchasers, the Company shall promptly, and in any event
prior to the 10th day thereafter pay to Infinity $100,000, which sum shall be
treated as liquidated damages and not as a penalty. The payment due under this
Section shall be increased by $2,000 for each day that such payment has not
been paid when due, and such daily amount (which shall be treated as additional
liquidated damages and not as a penalty) shall continue to be assessed until
the amount then due is paid in full. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, THE COMPANY'S OBLIGATIONS UNDER THIS SECTION SHALL
SURVIVE ANY TERMINATION OF THIS AGREEMENT.
3.21 Book Entry Arrangements. No later than the close of business
on the seventh business day after the Series C Closing Date, the Company shall
enter into a book-entry agreement substantially on terms and conditions
mutually satisfactory to each of the Company and the Purchasers, which such
book-entry agreement shall provide for customary paying agency arrangements and
book-entry transfers, conversions and issuance procedures in connection with
the Underlying Shares and the Warrant Shares.
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ARTICLE IV
CONDITIONS
4.1(a) Conditions Precedent to the Obligation of the Company to
Sell the Series C Shares. The obligation of the Company to sell the Series C
Shares hereunder is subject to the satisfaction or waiver by the Company, at or
before the Series C Closing, of each of the following conditions:
(i) Accuracy of the Purchaser's Representations
and Warranties. The representations and warranties of each Purchaser shall be
true and correct in all material respects as of the date when made and as of
the Series C Closing Date, as though made on and as of such date;
(ii) Performance by the Purchaser. Each Purchaser
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by each Purchaser at or prior to the
Series C Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement; and
(iv) Required Approvals. All Required Approvals
shall have been obtained other than those relating solely to the Series D
Shares or Series E Shares.
(b) Conditions Precedent to the Obligation of the
Purchaser to Purchase the Series C Shares. The obligation of each Purchaser
hereunder to acquire and pay for the Series C Shares is subject to the
satisfaction or waiver by each Purchaser, at or before the Series C Closing, of
each of the following conditions:
(i) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company set forth herein
and in the Registration Rights Agreement (except as such representations and
warranties relate to the Brown Simpson Warrant and the Alpine Warrant) shall be
true and correct in all material respects as of the date when made and as of
the Series C Closing Date as though made on and as of such date;
(ii) Performance by the Company. The Company
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Series
C Closing;
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<PAGE> 25
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement;
(iv) Adverse Changes. Since the date of the
financial statements included in the Company's Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, whichever is more recent, last filed prior to the
date of this Agreement, no event which in the judgment of the Purchaser had a
Material Adverse Effect and no material adverse change in the financial
condition or prospects of the Company shall have occurred which is not
disclosed in the Disclosure Materials (for purposes hereof changes in the
market price of the Common stock may be considered in determining whether there
has occurred an event which has had a Material Adverse Effect or whether a
material adverse change has occurred);
(v) No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by the Commission
or on the Nasdaq National Market (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company and other than a suspension of trading on the Nasdaq
National Market if the Common Stock is listed for trading, and not suspended,
on the Nasdaq SmallCap Market within one business day after such suspension);
(vi) Listing of Common Stock. The Common Stock
shall have at all times between the date hereof and the Series C Closing Date
been, and on the Series C Closing Date be, listed for trading on the Nasdaq
National Market or on the Nasdaq SmallCap Market;
(vii) Legal Opinion. The Company shall have
delivered to the Purchaser the opinion of Cooley Godward LLP, counsel to the
Company ("Cooley Godward"), in substantially the form attached hereto as
Exhibit D and an opinion of Cooley Godward as required by the Company's
transfer agent to ensure that the Underlying Shares and Warrant Shares are
issued free of restrictive legends upon resale pursuant to an effective
registration statement under the Securities Act;
(viii) Required Approvals. All Required Approvals
shall have been obtained other than those relating solely to the Series D
Shares or the Series E Shares;
(ix) Shares of Common Stock. On or prior to the
Series C Closing Date, the Company shall have duly reserved for issuance upon
conversion of Series C Shares and exercise of the Warrants 2,424,242 Underlying
Shares and 375,000 Warrant Shares;
(x) Delivery of Stock Certificates. The Company
shall have delivered to each Purchaser or such Purchaser's designee the stock
certificate(s) representing the Series C Shares, registered in the name of such
Purchaser, each in form satisfactory to each Purchaser;
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(xi) Registration Rights Agreement. The Company
shall have executed and delivered the Registration Rights Agreement;
(xii) Warrants. The Company shall have executed
and delivered the Warrants (other than the Series D Infinity Warrant) in
accordance with the terms of the Agreement;
(xiii) Certificate of Designation. The Series C
Designation shall have been duly filed with the Secretary of State of Delaware,
and the Company shall have delivered a copy thereof to each Purchaser certified
as filed by the office of the Secretary of State of Delaware;
(xiv) Company Certificates. Each Purchaser shall
have received a certificate, dated the Series C Closing Date, signed by the
Secretary or an Assistant Secretary of the Company and certifying (i) that
attached thereto is a true, correct and complete copy of (A) the Company's
Restated Articles of Organization, as amended to the date thereof, (B) the
Company's By-Laws, as amended to the date thereof, and (C) resolutions duly
adopted by the Board of Directors of the Company authorizing the execution,
delivery and (where appropriate) filing of the Transaction Documents and the
Certificates of Designation and the issuance and sale of the Series C Shares,
the Warrants, the Underlying Shares and the Warrant Shares and (ii) the
incumbency of the officers executing the Transactions Documents, the Series C
Certificate of Designation and the Warrants; and
(xv) Change of Control. No Change of Control (as
hereafter defined) shall have occurred between the date hereof and the Series C
Closing Date.
4.2 Conditions Precedent to the Obligation of each
Purchaser to Purchase the Series D Shares and the Series E Shares. The
obligation of each Purchaser hereunder to acquire and pay for the Series D
Shares and the Series E Shares is subject to the satisfaction or waiver by each
such Purchaser, at or before the Series D Closing and the Series E Closing, as
applicable of each of the following conditions:
(i) Series C Closing. The Series C Closing shall
have occurred.
(ii) Series D Infinity Warrant. With respect to
the Series E Closing, the Company shall have executed and delivered the Series
D Infinity Warrant in accordance with the terms of this Agreement.
(iii) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company contained herein
and in the Registration Rights Agreement (except as such representations and
warranties relate to the Brown Simpson Warrant and the Alpine Warrant) shall be
true and correct in all material respects as of the date when made and as of
the Series D Closing Date and the Series E Closing Date, as applicable, as
though made on and as of such date;
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(iv) Performance by the Company. The Company
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied with by
the Company at or prior to the Series D Closing Date or the Series E Closing
Date, as applicable;
(v) Underlying Securities Registration
Statements. With respect to the Series D Closing, the Underlying Securities
Registration Statement with respect to the Underlying Shares issuable on
conversion of all outstanding Series C Shares and with respect to the Warrant
Shares issuable upon exercise of the Warrants (other than the Series D Infinity
Warrant) shall have been declared effective under the Securities Act by the
Commission; and with respect to the Series E Closing, the Underlying Securities
Registration Statement with respect to the Underlying Shares issuable on
conversion of all outstanding Series D Shares and with respect to the Warrant
Shares issued upon exercise of the Series D Infinity Warrant shall have been
declared effective under the Securities Act by the Commission; and in each such
case such Underlying Registration Statement shall have remained effective and
shall not be subject to any stop order and no stop order shall be pending or
threatened as at such Closing Date;
(vi) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Registration Rights Agreement relating to
the issuance or conversion of any of the Shares or exercise of any of the
Warrants;
(vii) Adverse Changes. Since the date of the
financial statements included in the Company's last filed Quarterly Report on
Form 10-Q or Annual Report on Form 10-K, whichever is more recent, last filed
prior to the date of this Agreement, no event which in the judgment of the
Purchaser had a Material Adverse Effect which has not specifically been
disclosed on Schedule 2.1(g) hereto prior to the date of this Agreement shall
have occurred, nor shall there have occurred in the judgment of the Purchaser a
material adverse change in the financial conditions or prospects of the
Company, which is not disclosed in the Disclosure Materials (for purposes
hereof, changes in the market price of the Common stock may be considered in
determining whether there has occurred an event which has had a Material
Adverse Event or whether a material adverse change has occurred);
(viii) Litigation. No material litigation shall
have been instituted or threatened against the Company which has not
specifically been disclosed on Schedule 2.1(g) hereto prior to the Series C
Closing ;
(ix) Management. L. Gary Trimm shall remain in
his current management position without a material diminution of his management
responsibilities as at the date hereof;
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(x) No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by the Commission
or on the Nasdaq National Market (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company and except if, at the time there is any suspension on the
Nasdaq National Market, the Common Stock is then listed and approved for
trading on the Nasdaq SmallCap Market within one (1) trading day thereof);
(xi) Listing of Common Stock. The Common Stock
shall have been at all times between the Series C Closing Date, the Series D
Closing Date and the Series E Closing Date, as applicable, and on such
applicable Closing Date be, listed for trading on the Nasdaq National Market or
Nasdaq SmallCap Market.
(xii) Change of Control. No Change of Control in
the Company shall have occurred. "Change of Control" means the occurrence of
any of (i) an acquisition after the date hereof by an individual or legal
entity of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's board of
directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (iv) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
(xiii) Legal Opinion. The Company shall have
delivered to each Purchaser an opinion of outside legal counsel to the Company
in substantially the form attached hereto as Exhibit D and dated the applicable
Closing Date;
(xiv) Required Approvals. All Required Approvals
shall have been obtained;
(xv) Shares of Common Stock. On each of the
Series D Closing Date and Series E Closing Date, as applicable, the Company
shall have reserved for issuance to each Purchaser two times the number of
Underlying Shares which would be issuable upon conversion in full of the Series
D Shares or Series E Shares, as applicable, assuming such conversion occurred
on the Original Issue Date for such Shares;
(xvi) Delivery of Stock Certificates. The Company
shall have delivered to each Purchaser or such Purchaser's designee the stock
certificate(s) representing the Shares, being purchased at such Closing,
registered in the name of such Purchaser, each in form satisfactory to each
Purchaser; and
(xvii) Performance of Conversion/Exercise
Obligations. Through the Series D Closing Date or Series E Closing Date, as
applicable, the Company shall have (a) delivered Underlying Shares upon
conversion of Shares and otherwise performed its obligations in accordance with
the terms, conditions and timing requirements of each Certificate of
Designation and (b) shall have delivered Warrant Shares upon exercise of the
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Warrants and otherwise performed its obligations in accordance with the terms
of the Warrants.
ARTICLE V
TERMINATION
5.1 Termination by Mutual Consent. (a) This Agreement
may be terminated with respect to the transactions contemplated herein relating
to both the Shares and the Underlying Shares at any time prior to the Series C
Closing by the mutual consent of the Company and each Purchaser.
(b) This Agreement may be terminated with respect
to the transactions contemplated herein relating solely to the Series D Shares
at any time prior to the Series D Closing by the mutual written consent of the
Company and each Purchaser.
(c) This Agreement may be terminated with respect
to the transactions contemplated herein relating solely to the Series E Shares
at any time prior to the Series E Closing by the mutual written consent of the
Company and each Purchaser.
5.2 Termination by the Company. (a) This Agreement may
be terminated with respect to the transactions contemplated herein relating to
both the Shares and the Underlying Shares prior to the Series C Closing by the
Company, by giving notice of such termination to each Purchaser, if any
Purchaser has materially breached any representation, warranty, covenant or
agreement contained in this Agreement and such breach is not cured within five
business days following receipt by such Purchaser of notice of such breach.
(b) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series D Shares prior
to the Series D Closing by the Company, by giving notice of such termination to
each Purchaser.
(c) This Agreement may be terminated with respect to the
transactions contemplated herein relating solely to the Series E Shares prior
to the Series E Closing by the Company, by giving notice of such termination to
each Purchaser.
5.3 Termination by the Purchasers. (a) This Agreement
may be terminated prior to the Series C Closing with respect to the
transactions contemplated herein relating to both the Shares and the Underlying
Shares by any Purchaser, by giving notice of such termination to the Company,
if:
(i) the Company has breached any representation,
warranty, covenant or agreement contained in this Agreement and such
breach is not cured within five business days following receipt by the
Company of notice of such breach;
(ii) there has occurred an event since the date of
the financial statements included in the Company's Quarterly Report on
Form 10-Q or Annual
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Report on Form 10-K, whichever is more recent, last filed prior to the
date of this Agreement which has in the judgment of any Purchaser had
a Material Adverse Effect and which is not disclosed in the SEC
Documents or if there has occurred in such Purchaser's judgment since
such date a material adverse change in the financial condition or
prospects of the Company (for each such purpose, each Purchaser may
consider changes in stock price);
(iii) trading in the Company's Common Stock has
been suspended by the Commission or the Nasdaq (other than a
suspension of trading on the Nasdaq National Market if the Common
Stock is listed for trading, and not suspended, on the Nasdaq SmallCap
Market within one business day after such suspension);
(iv) the Company's Common Stock shall have failed
to be listed for trading on the Nasdaq National Market or Nasdaq
SmallCap Market and a Purchaser shall have exercised its termination
right herein provided within 10 business days of obtaining knowledge
of such delisting;
(v) a Change of Control shall have occurred; or
(vi) the Series C Closing shall not have occurred
by the Series C Closing Expiration Date.
(b) This Agreement may be terminated by a Purchaser prior
to the Series D Closing with respect to the transactions contemplated herein
relating solely to the Series D Shares, or prior to the Series E Closing with
respect to the transactions contemplated herein relating solely to the Series E
Shares, by giving notice of such termination to the Company, if:
(i) after the Series C Closing Date, the Company
has breached any representation, warranty, covenant or agreement
contained in this Agreement, the Registration Rights Agreement, any
Warrant or any Certificate of Designation and such breach is not cured
within five business days following receipt by the Company of notice
of such breach;
(ii) there has occurred an event since the date of
the financial statements included in the Company's Quarterly Report on
Form 10-Q or Annual Report on Form 10-K, whichever is later, last
filed prior to the date of this Agreement which in the judgment of the
Purchaser could have a Material Adverse Effect and which is not
disclosed in the SEC Documents or if there has occurred in a
Purchaser's judgment since such date a material adverse change (for
each such purpose, each Purchaser may consider changes in stock
price);
(iii) trading in the Company's Common Stock has
been suspended by the Commission or the Nasdaq (except for any
suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company or other
than a suspension of trading on the Nasdaq National Market if the
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<PAGE> 31
Common Stock is listed for trading, and not suspended, on the Nasdaq
SmallCap Market within one business day after such suspension);
(iv) the Company's Common Stock shall have failed
to be listed for trading on either the Nasdaq National Market or
Nasdaq SmallCap Market at any time after the Series C Closing Date and
a Purchaser shall have exercised its termination right herein provided
within 10 Trading Days of obtaining knowledge of any delisting;
(v) the Underlying Securities Registration
Statement with respect to (1) the Underlying Shares into which the
Series C Shares may be converted and (2) the Warrant Shares issuable
upon conversion of the Warrants is not declared effective under the
Securities Act by the Commission prior to the 90th day after the
Series C Closing Date or shall not be effective on such subsequent
Closing Date; the Underlying Securities Registration Statement with
respect to the Underlying Shares into which the Series D Shares may be
converted has not been declared effective under the Securities Act by
the Commission prior to the 90th day after the Series D Closing Date
or shall not be effective on such subsequent Closing Date; or the
Underlying Securities Registration Statement with respect to the
Underlying Shares into which the Series E Shares may be converted in
respect to the Series E Shares has not been declared effective under
the Securities Act by the Commission prior to the 90th day after the
Series E Closing Date; or
(vi) a Change of Control in the Company shall have
occurred.
ARTICLE VI
MISCELLANEOUS
6.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, except as
set forth in the Registration Rights Agreement and except that the Company
shall reimburse the Purchaser at the Series C Closing, for its legal fees and
disbursements of $12,500. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares pursuant hereto.
Each Purchaser shall be responsible for such Purchaser's own tax liability that
may arise as a result of the investment hereunder or the transactions
contemplated by this Agreement.
6.2 Entire Agreement; Amendments. This Agreement,
together with the Exhibits and Schedules hereto, the Registration Rights
Agreement, the Certificates of Designation (each when filed) and the Warrants
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters.
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<PAGE> 32
6.3 Notices. Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered on a business day after during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: COMPRESSION LABS, INCORPORATED
350 East Plumaria Drive
San Jose, California 95134
Attn: Corporate Secretary
Tel: (408) 435-3000
Fax: (408) 922-5574
With copies to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attn: Deborah Cleveland
Tel: (415) 843-5000
Fax: (415) 857-0663
If to either Purchaser: 27 Wellington Road
Cork, Ireland
Attn: J. A. Loughran
Fax: 011-44-171-355-4975
With copies to Mr. Stuart Chasanoff
c/o HW Finance
160 Elm Street, Suite 4000
Dallas, Texas 75201
Fax: (214) 720-1662
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<PAGE> 33
Brown Simpson, LLC
Carnegie Hall Tower
152 West 57th Street, 40th Floor
New York, NY 10019
Attn: James R. Simpson
Fax: (212) 243-1329
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
6.4 Amendments; Waivers. No provision of this Agreement
may be waived or amended except in a written instrument signed, in the case of
an amendment, by both the Company and the Purchaser; or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
6.5 Headings. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
6.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns. Neither the Company nor any Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
6.7 No 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, except that the representations,
warranties and other agreements contained herein of the Company are intended
for the benefit of and may be relied upon and enforced by each of Brown Simpson
and Alpine to the extent such representations, warranties and agreements relate
to the Warrants.
6.8 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof.
6.9 Survival. The agreements and covenants contained in
Article III and this Article VI shall survive the delivery and conversion of
the Shares pursuant to this
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<PAGE> 34
Agreement. and the representations and warranties of the Company and the
Purchasers contained in Article II shall survive until a date that is three
years after the last Closing date.
6.10 Execution. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
6.11 Publicity. The Company and the Purchasers shall
consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement.
6.12 Severability. In case any one or more of the
provisions of this Agreement shall be invalid or unenforceable in any respect,
the validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affecting or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
Company:
COMPRESSION LABS, INCORPORATED
By:
--------------------------
Name:
Title:
Purchasers:
INFINITY INVESTORS, LTD.
By:
--------------------------
Name:
Title:
SEACREST CAPITAL LIMITED
By:
--------------------------
Name:
Title:
<PAGE> 36
SCHEDULE 2.1(c)
Capitalization
<PAGE> 37
SCHEDULE 2.1(f)
Consents and Approvals
None
<PAGE> 1
EXHIBIT 99.3
TERMS OF
CERTIFICATE OF DESIGNATION OF
SERIES C CONVERTIBLE PREFERRED STOCK OF
COMPRESSION LABS, INCORPORATED
Section 1. Designation, Amount and Par Value. The
series of Preferred Stock shall be designated as the Series C Convertible
Preferred Stock (the "Preferred Stock"), and the number of shares so designated
shall be 350,000. The par value of each share of Preferred Stock shall be
$.001. Each share of Preferred Stock shall have a stated value of $20 per
share (the "Stated Value"). The Preferred Stock shall rank, with respect to
dividends, voting rights, distributions upon Liquidation (as defined in Section
4) or otherwise, pari passu with each other series of preferred stock of the
Company (each, a "Subsequent Holder Series") that is authorized and issued to
the original holder of the Preferred Stock pursuant to the Convertible Stock
Purchase Agreement, dated October 24, 1996, between the Company and such
original holder (the "Purchase Agreement").
Section 2. Dividends.
(a) Holders of Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, and the Company shall pay, cumulative dividends at the rate
per share (as a percentage of the Stated Value per share) equal to 4% per
annum, in cash or (at the option of the Company) shares of Common Stock,
payable quarterly commencing three (3) months from the Original Issue Date (as
defined in Section 7); provided, that upon the occurrence and during the
continuation of an Event (as defined in Section 5(d)(i)), the dividend herein
provided shall automatically increase to 6% per annum. Any arrears in payment
of dividends hereunder shall be payable on the Conversion Date (as defined in
Section 5(b)) or earlier if so determined by the Company. Dividends on the
Preferred Stock shall accrue daily commencing on the Original Issue Date, shall
be calculated based on the actual number of days in such quarterly period in a
360 day year and shall be deemed to accrue on such date whether or not earned
or declared and whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. The party that holds
the Preferred Stock on an applicable record date for any dividend payment will
be entitled to receive such dividend payment and any other accrued and unpaid
dividends which accrued prior to such dividend payment date, without regard to
any sale or disposition of such Preferred Stock subsequent to the applicable
record date but prior to the applicable dividend payment date. Except as
otherwise provided herein, if at any time the Company pays less than the total
amount of dividends then accrued on account of the Preferred Stock, such
payment shall be distributed ratably among the holders of Preferred Stock.
<PAGE> 2
(b) So long as any Preferred Stock shall remain
outstanding, neither the Company nor any subsidiary thereof shall redeem,
purchase or otherwise acquire directly or indirectly any Junior Securities (as
defined in Section 7), nor shall the Company directly or indirectly pay or
declare any dividend or make any distribution (other than a dividend or
distribution described in Section 5) upon, nor shall any distribution be made
in respect of, any Junior Securities, nor shall any monies be set aside for or
applied to the purchase or redemption (through a sinking fund or otherwise) of
any Junior Securities, unless in each case all dividends on the Preferred Stock
for all past dividend periods shall have been paid.
Section 3. Voting Rights. Except as otherwise provided
herein and as otherwise provided by law, the Preferred Stock shall have no
voting rights. However, so long as any shares of Preferred Stock are
outstanding, the Company shall not, without the affirmative vote of the holders
of a majority of the shares of the Preferred Stock then outstanding, (i) alter
or change adversely the powers, preferences or rights given to the Preferred
Stock or (ii) authorize or create any class of stock ranking as to dividends or
distribution of assets upon a Liquidation senior to, prior to or, except as to
any Subsequent Holder Series, pari passu with the Preferred Stock.
Section 4. Liquidation. Upon any liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of shares of Preferred Stock shall be entitled to
have their Shares redeemed by the Company. Payment for such redemption shall
be from proceeds received out of the assets of the Company, whether such assets
are capital or surplus, for each share of Preferred Stock an amount equal to
the Stated Value, plus an amount equal to accrued but unpaid dividends per
share, whether declared or not, without interest, before any distribution or
payment shall be made to the holders of any Junior Securities, and if the
assets of the Company shall be insufficient to redeem the Shares in full, then
the entire assets of the Company to be distributed shall be distributed among
the holders of Preferred Stock ratably in accordance with the respective
amounts that would be payable on such shares if such shares were redeemed in
full. A sale, conveyance or disposition of all or substantially all of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of
the Company is disposed of, or a consolidation or merger of the Company with or
into any other company or companies shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall
mail written notice of any such Liquidation, not less than 60 days prior to the
payment date stated therein, to each record holder of Preferred Stock.
Section 5. Conversion.
(a) (i) Each share of Preferred Stock shall be
convertible into shares of Common Stock at the Conversion Ratio (subject to
reduction under Section 5(a)(ii) and Section 5(a)(iii)), at the option of the
holder in whole or in part at any time after the expiration of the earlier to
occur of (i) 90 days after the Original Issue Date and (ii) the date the
Securities and
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<PAGE> 3
Exchange Commission (the "Commission") declares effective under the Securities
Act of 1933, as amended (the "Securities Act"), the registration statement
contemplated by the Registration Rights Agreement, dated the Original Issue
Date (the "Registration Rights Agreement"), by and between the Company and the
original holder of Preferred Stock, under which the Company is to register the
resale of the shares of Common Stock issuable upon conversion of the Preferred
Stock and related warrants (the "Underlying Shares Registration Statement").
The holder of the Preferred Stock shall effect conversions by surrendering the
certificate or certificates representing the shares of Preferred Stock to be
converted to the Company, together with the form of conversion notice attached
hereto as Exhibit A (the "Holder Conversion Notice") in the manner set forth in
Section 5(j). Each Holder Conversion Notice shall specify the number of shares
of Preferred Stock to be converted (which may not be less than 2,500) and the
date on which such conversion is to be effected, which date will be the date
the holder of Preferred Stock delivers such Notice by facsimile (the "Holder
Conversion Date"). Subject to Section 5(c) and, as to the original holder of
the Preferred Stock (or its sole designee), subject to Section 3.09 of the
Purchase Agreement (as defined in Section 7), each Holder Conversion Notice,
once given, shall be irrevocable.
(ii) If on the Conversion Date applicable to any
conversion under Section 5(a) or 5(b), (A) the Common Stock is then listed for
trading on the Nasdaq National Market, (B) the Conversion Price (as defined
below) then in effect is such that the aggregate number of shares of Common
Stock that would then be issuable upon conversion of all outstanding shares of
Preferred Stock, together with any shares of Common Stock previously issued
upon conversion of Preferred Stock, would exceed 19.9% of the then outstanding
shares of Common Stock (the "Issuable Maximum"), and (C) the Company has not
previously obtained Shareholder Approval (as defined below), then the Company
shall issue to the converting holder of Preferred Stock the Issuable Maximum
and, with respect to any shares of Common Stock that would be issuable to such
holder, in respect of the Conversion Notice at issue in excess of the Issuable
Maximum, the Company shall have the option to either (x) as promptly as
possible, but in no event later than 60 days after such Conversion Date,
convene a meeting of the holders of the Common Stock and obtain the Shareholder
Approval or (y) redeem the balance of the Preferred Stock subject to such
Conversion Notice for a redemption price equal to the product of (A) the Per
Share Market Value and (B) the Conversion Ratio (as defined in Section 7) (the
"Redemption Price"), each as calculated on the Conversion Date; provided,
however, that if the Company elects to obtain the Shareholder Approval under
paragraph (x) above and the Company fails for any reason to obtain such
Shareholder Approval within the time period set forth in (x) above, the Company
shall be obligated to redeem the Preferred Stock not converted as a
result of the provisions of this Section in accordance with the provisions of
paragraph (y) above, and in such case the interest contemplated by the
immediately succeeding sentence shall be deemed to accrue from the Conversion
Date. If the Company shall have elected to redeem shares of Preferred Stock
pursuant to this Section and fails for any reason to pay the Redemption Price
under (ii) above within seven days after the Conversion Date, the Company will
pay interest on the Redemption Price at a rate of 15% per annum, in cash to the
converting holder of Preferred
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<PAGE> 4
Stock, accruing from the Conversion Date until the Redemption Price and any
accrued interest thereon is paid in full. "Shareholder Approval" means the
approval by a majority of the total votes cast on the proposal, in person or by
proxy, at a meeting of the shareholders of the Company held in accordance with
the Company's Certificate of Incorporation and by-laws, of the issuance by the
Company of shares of Common Stock exceeding the Issuable Maximum as and to the
amount required by the rules of the Nasdaq Stock Market.
(iii) If on any Conversion Date applicable to a
conversion under Section 5(a) or Section 5(b) the average Per Share Market
Value for the five (5) Trading Days immediately preceding such Conversion Date
exceeds the Initial Conversion Price (defined in Section 5(d)(i) below) by more
than 50%, the number of shares issuable upon conversion of the Preferred Stock
subject to the Conversion Notice triggering such conversion shall be reduced by
a number of shares equal to 50% of (A) the amount by which the average Per
Share Market Value for the five (5) Trading Days immediately preceding such
Conversion Date exceeds the Initial Conversion Price, divided by (B) the
average Per Share Market Value for the five (5) Trading Days immediately
preceding such Conversion Date, times (C) the number of shares of Common Stock
which would otherwise be issuable upon such conversion, but for the reduction
provided for in this Section 5(a)(iii). For example, if the Initial Conversion
Price is equal to $6 per share, the average Per Share Market Value for the five
(5) Trading Days immediately preceding the Conversion Date is $12 and the
holder tenders for conversion 100,000 shares of Preferred Stock, then the
333,333 shares of Common Stock otherwise issuable upon such conversion shall be
reduced by 83,333, which equal 50% of (A) 12-6 divided by (B) 12, multiplied by
333,333. Therefore, the Company will deliver 250,000 shares of Common Stock
upon such conversion.
(b) Provided that ten (10) Trading Days shall have elapsed
from the date the Commission has declared the Underlying Securities
Registration Statement effective under the Securities Act, each share of the
Preferred Stock shall be convertible into shares of Common Stock at the
Conversion Ratio (subject to reduction under Section 5(a)(ii) and Section
5(a)(iii)) at the option of the Company in whole or in part at any time on or
after the expiration one year after the Original Issue Date; provided, however,
that the Company is not permitted to deliver a Company Conversion Notice (as
defined below) within ten (10) days after issuing any press release or other
public statement relating to such conversion or if the Underlying Securities
Registration Statement is not then effective (or if the use of any prospectus
thereunder is suspended) or during the continuance of any Event (as defined in
Section 5(d)(i)); and provided, further, that the Company shall have no right
to deliver a Company Conversion Notice and effect the conversion of shares of
Preferred Stock under this Section 5(b) unless either (i) all of such shares
may be converted into shares of Common Stock in accordance with Section
5(a)(ii); or (ii) all of such shares may be redeemed and the entire Redemption
Price paid in full in accordance with such Section without violating the
Delaware General Corporation Law or any agreement binding upon the Company or a
combination of (i) or (ii) above. The Company shall effect such conversion by
delivering to the holders of such shares of Preferred Stock to be
-4-
<PAGE> 5
converted a written notice in the form attached hereto as Exhibit B (the
"Company Conversion Notice"), which Company Conversion Notice, once given,
shall be irrevocable. Each Company Conversion Notice shall specify the number
of shares of Preferred Stock to be converted and the date on which such
conversion is to be effected, which date will be at least one (1) Trading Day
after the date the Company delivers such Notice by facsimile to the holder (the
"Company Conversion Date"). The Company shall give such Company Conversion
Notice in accordance with Section 5(j) below at least one (1) Trading Day
before the Company Conversion Date. Any such conversion shall be effected on a
pro rata basis among the holders of Preferred Stock. Upon the conversion of
shares of Preferred Stock pursuant to a Company Conversion Notice, the holders
of the Preferred Stock shall surrender the certificates representing such
shares at the office of the Company or of any transfer agent for the Preferred
Stock or Common Stock not later than three (3) Trading Days after the Company
Conversion Date. Each of a Holder Conversion Notice and a Company Conversion
Notice is sometimes referred to herein as a "Conversion Notice," and each of a
"Holder Conversion Date" and a "Company Conversion Date" is sometimes referred
to herein as a "Conversion Date."
(c) Not later than three (3) Trading Days after the
Conversion Date, the Company will deliver to the holder of Preferred Stock (i)
a certificate or certificates which shall be free of restrictive legends and
trading restrictions (other than those then required by law), representing the
number of shares of Common Stock being acquired upon the conversion of shares
of Preferred Stock (subject to any reduction required pursuant to Section
5(a)(ii) or Section 5(a)(iii)), and (ii) one or more certificates representing
the number of shares of Preferred Stock not converted; provided, however, that
the Company shall not be obligated to issue certificates evidencing the shares
of Common Stock issuable upon conversion of any shares of Preferred Stock (or
with respect to shares subject to redemption pursuant to Section 5(a)(ii), to
pay the Redemption Price under such Section) until certificates evidencing such
shares of Preferred Stock are either delivered for conversion to the Company or
any transfer agent for the Preferred Stock or Common Stock, or the holder of
Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security reasonably
acceptable to the Company) reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection therewith. The Company
shall, upon request of the holder of Preferred Stock, use its best efforts to
deliver any certificate or certificates required to be delivered by the Company
under this Section 5(c) electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions. In
the case of a conversion pursuant to a Holder Conversion Notice, if such
certificate or certificates are not delivered by the date required under this
Section 5(c), the holder shall be entitled by written notice to the Company at
any time on or before its receipt of such certificate or certificates
thereafter, to rescind such conversion, in which event the Company shall
immediately return the certificates representing the shares of Preferred Stock
tendered for conversion. If the Company fails to deliver to the holder such
certificate or certificates pursuant to this Section prior to the fifth (5th)
Trading Day after the Conversion Date, the Company shall
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<PAGE> 6
pay to such holder, in cash, as liquidated damages, $1,500 for each day after
such fifth (5th) Trading Day until such certificates are delivered.
(d) (i) The conversion price for each share of
Preferred Stock (the "Conversion Price") in effect on any Conversion Date shall
be the lesser of (a) (1) the average Per Share Market Value for the five (5)
Trading Days immediately preceding the date of the Purchase Agreement or (2)
the average Per Share Market Value of the five (5) Trading Days immediately
following the announcement by the Company of its earnings results for the
quarter ended September 30, 1996, whichever is lower ((1) or (2) being the
"Initial Conversion Price") and (b) 80% of the average Per Share Market Value
for the five (5) Trading Days immediately preceding the Conversion Date;
provided that, if an Underlying Securities Registration Statement is filed with
and declared effective by the Commission but thereafter ceases to be effective
at any time prior to the "Effectiveness Period" (as such term as defined in the
Registration Rights Agreement), without being succeeded within 10 Business Days
by a subsequent registration statement filed with and declared effective by the
Commission (any such failure being referred to as an "Event" other than a
failure due to the circumstances described in Section 3 of the Registration
Rights Agreement between the Company and the Purchasers whenever such Section 3
is applicable, and the date on which such 10 Business Day limit is exceeded
being referred to as an "Event Date"), the Conversion Price shall be decreased
by 1% each month (i.e. 79% for the first month commencing the day after such
Event Date and 78% for the second month commencing the day after such Event
Date) until such time as a subsequent registration statement is declared
effective by the Commission. The provisions of this Section are not exclusive
and shall in no way limit the Company's obligations under the Registration
Rights Agreement.(1)
- --------------------
(1) For each of the certificates of designation for the Series D and Series E
Preferred Stock the following paragraph (i) shall be substituted for paragraph
(i) in Section 5(d) of the Series C Designation:
(i) The conversion price for each share of Preferred Stock (the
"Conversion Price") in effect on any Conversion Date shall be the lesser of
(a)(1) in the case of any conversion pursuant to a Company Conversion Notice,
the average Per Share Market Value for the five (5) Trading Days immediately
preceding the Original Issue Date or (2) in the case of any conversion pursuant
to a Holder Conversion Notice, 101% of the average Per Share Market Value for
the ten (10) Trading Days immediately preceding the Original Issue Date (in
either such case, the "Initial Conversion Price") and (b) [ ]% of the average
Per Share Market Value for the five (5) Trading Days immediately preceding the
Conversion Date.
(ii) If the Company, at any time while any shares
of Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make any distributions on shares of its Junior Securities payable in shares of
its capital stock (whether payable in shares of its Common Stock or of capital
stock of any class), (b) subdivide outstanding shares of Common Stock into
-6-
<PAGE> 7
a larger number of shares, (c) combine outstanding shares of Common Stock into
a smaller number of shares, or (d) issue by reclassification of shares of
Common Stock any shares of capital stock of the Company, the Initial Conversion
Price designated in Section 5(d)(i) shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock of the Company
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 5(d)(ii) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any shares
of Preferred Stock are outstanding, shall issue rights or warrants to all
holders of Common Stock entitling them to subscribe for or purchase shares of
Common Stock at a price per share less than the Per Share Market Value of
Common Stock at the record date mentioned below, the Initial Conversion Price
designated in Section 5(d)(i) shall be multiplied by a fraction, of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for subscription
or purchase, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance
of such rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase at such
Per Share Market Value. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights or
warrants. However, upon the expiration of any right or warrant to purchase
Common Stock the issuance of which resulted in an adjustment in the Initial
Conversion Price designated in Section 5(d)(i) pursuant to this Section
5(d)(iii), if any such right or warrant shall expire and shall not have been
exercised, the Initial Conversion Price designated in Section 5(d)(i) shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section 5 after the issuance of such rights or
warrants) had the adjustment of the Initial Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all holders of Common
Stock (and not to holders of Preferred Stock) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Section 5(d)(iii) above), then in each such
case the Initial Conversion Price at which each share of Preferred Stock shall
thereafter be convertible shall be determined by multiplying the Initial
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
-7-
<PAGE> 8
fraction of which the denominator shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value
shall be determined by a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in good faith by the
holders of a majority in interest of the shares of Preferred Stock then
outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in which case the fair market value shall be equal to the average of
the determinations by each such Appraiser. In either case the adjustments
shall be described in a statement provided to the holders of Preferred Stock of
the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be.
(vi) Whenever the Initial Conversion Price is
adjusted pursuant to Section 5(d)(ii),(iii), (iv) or (v), the Company shall
promptly mail to the holders of Preferred Stock, a notice setting forth the
Initial Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the Company
or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the holders of Preferred
Stock then outstanding shall have the right thereafter to convert such shares
only into the shares of stock and other securities and property receivable upon
or deemed to be held by holders of Common Stock following such
reclassification, consolidation, merger, sale, transfer or share exchange, and
the holders of Preferred Stock shall be entitled upon such event to receive
such amount of securities or property as the shares of the Common Stock into
which such shares of Preferred Stock could have been converted immediately
prior to such reclassification, consolidation, merger, sale, transfer or share
exchange would have been entitled. The terms of any such consolidation,
merger, sale, transfer or share exchange shall include such terms so as to
continue to give to the holder of Preferred Stock the right to receive the
securities or property set forth in this Section 5(d)(vii) upon any conversion
following such consolidation, merger, sale,
-8-
<PAGE> 9
transfer or share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(viii) If:
(A) the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
(B) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(C) the Company shall authorize the
granting to all holders of the Common
Stock rights or warrants to subscribe
for or purchase any shares of capital
stock of any class or of any rights;
or
(D) the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company
(other than a subdivision or
combination of the outstanding shares
of Common Stock), any consolidation
or merger to which the Company is a
party, any sale or transfer of all or
substantially all of the assets of the
Company, or any compulsory share
exchange whereby the Common Stock is
converted into other securities, cash
or property; or
(E) the Company shall authorize the
voluntary or involuntary dissolution,
liquidation or winding-up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of Preferred Stock, and shall cause to be mailed
to the holders of Preferred Stock at their last respective addresses as they
shall appear upon the stock books of the Company, at least 30 calendar days
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share
-9-
<PAGE> 10
exchange, dissolution, liquidation or winding-up; provided, however, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
(e) If at any time conditions shall arise by reason of
action taken by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which might
materially and adversely affect the rights of the holders of Preferred Stock
(different than or distinguished from the effect generally on rights of holders
of any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated by the
Company, the Company shall, at least 30 calendar days prior to the effective
date of such action, mail a written notice to each holder of Preferred Stock
briefly describing the action contemplated and the material adverse effects of
such action on the rights of such holders and an Appraiser selected by the
holders of majority in interest of the Preferred Stock shall give its opinion
as to the adjustment, if any (not inconsistent with the standards established
in this Section 5), of the Conversion Price (including, if necessary, any
adjustment as to the securities into which shares of Preferred Stock may
thereafter be convertible) and any distribution which is or would be required
to preserve without diluting the rights of the holders of shares of Preferred
Stock; provided, however, that the Company, after receipt of the determination
by such Appraiser, shall have the right to select an additional Appraiser, in
which case the adjustment shall be equal to the average of the adjustments
recommended by each such Appraiser. The Board of Directors shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions or
the taking of any such action contemplated, as the case may be; provided,
however, that no such adjustment of the Conversion Price shall be made which in
the opinion of the Appraiser(s) giving the aforesaid opinion or opinions would
result in an increase of the Conversion Price to more than the Conversion Price
then in effect.
(f) The Company (i) represents and warrants that as of
the Original Issue Date, it has duly reserved solely for issuance upon
conversion of Preferred Stock, as herein provided, out of its authorized and
unissued Common Stock free from preemptive rights or any other actual or
contingent purchase rights of persons other than holder of Preferred Stock,
twice the number of shares of Common Stock as would be issuable upon conversion
of the Preferred Stock if such conversion had occurred on the Original Issue
Date and (ii) covenants that it will at all times reserve and keep available
out of its authorized and unissued Common Stock solely for the purpose of
issuance upon conversion of Preferred Stock as herein provided, free from
preemptive rights or any other actual or contingent purchase rights of persons
other than the holders of Preferred Stock, such number of shares of Common
Stock as shall be issuable (taking into account the adjustments and
restrictions of Section 5(d) hereof) upon the conversion of the aggregate of
all outstanding shares of Preferred Stock. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
-10-
<PAGE> 11
(g) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not to, or is unable to, make such a cash payment, the
holder of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(h) The issuance of certificates for shares of Common
Stock on conversion of Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(i) Shares of Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares
of preferred stock.
(j) Each Holder Conversion Notice shall be given by
facsimile and by mail, postage prepaid, addressed to the attention of the Chief
Financial Officer of the Company at the facsimile telephone number and address
of the principal place of business of the Company. Each Company Conversion
Notice shall be given by facsimile and by mail, postage prepaid, addressed to
each holder of Preferred Stock at the facsimile telephone number and address of
such holder appearing on the books of the Company or provided to the Company by
such holder for the purpose of such Company Conversion Notice, or if no such
facsimile telephone number or address appears or is so provided, at the
principal place of business of the holder. Any such notice shall be deemed
given and effective upon the earliest to occur of (i)(a) if such Conversion
Notice is delivered via facsimile at the facsimile telephone number specified
in this Section 5(j) prior to 4:30 p.m. (Eastern Standard Time) on any date,
such date (or, in the case of a Company Conversion Notice, the next Trading
Day) or such later date as is specified in the Conversion Notice, and (b) if
such Conversion Notice is delivered via facsimile at the facsimile telephone
number specified in this Section 5(j) after 11:59 p.m. (Eastern Standard Time)
on any date, the next date (or, in the case of a Company Conversion Notice, the
next Trading Day after such next day) or such later date as is specified in the
Conversion Notice, (ii) five days after deposit in the United States mails or
(iii) upon actual receipt by the party to whom such notice is required to be
given.
-11-
<PAGE> 12
Section 6. Company Redemption Options.
(a) The Company shall have the right, exercisable at any
time upon 10 Trading Days notice to the Purchaser given at any time on or after
the first anniversary of the Original Issue Date in the manner set forth in
Section 5(j) (the "Optional Redemption Notice"), to redeem, from funds legally
available therefor at the time of such redemption, all or any portion of the
shares of Preferred Stock which have not previously been converted or redeemed
at a price per share (the "Optional Redemption Price") equal to the product of
125% multiplied by (A) the average Per Share Market Value for the five Trading
Days immediately preceding (1) the date of the Optional Redemption Notice or
(2) the date of payment in full by the Company of the Optional Redemption
Price, whichever is greater, multiplied by (B) the Conversion Ratio (using for
such calculation the formula of Conversion Price for a Company Conversion
Notice) calculated on (1) the date of the Optional Redemption Notice or (2) the
date of payment by the Company of the Optional Redemption Price, whichever date
yields a lower Conversion Price denominator for the determination of the
Conversion Ratio. The entire Optional Redemption Price shall be paid in cash.
(b) Up to and including the 45th day after the Original
Issue Date, the Company shall have the right, exercisable at any time upon 1
Business Day notice to the Purchaser given at any time up to and including such
45th day in the manner set forth in Section 5(j) (the "Early Redemption
Notice"), to redeem, from funds legally available therefor at the time of such
redemption, all or any portion of the shares of Preferred Stock which have not
previously been converted or redeemed at a price per share (the "Early
Redemption Price") equal to (i) if such Early Redemption Notice is delivered on
or prior to the 15th day after the Original Issue Date the product of 115% or
(ii) if such Early Redemption Notice is delivered between the 16th and 45th day
after the Original Issue Date the product of 120%, multiplied by, in either
case, the Initial Conversion Price. The entire Early Redemption Price shall be
paid in cash.(2)
(c) If the entire Optional Redemption Price or Early
Redemption Price, as the case may be, shall not be paid within three (3)
Business Days of (i) in the case of a redemption pursuant to paragraph (a)
above, the 10th Business Day after the date of the Optional Redemption Notice
or (ii) in the case of a redemption pursuant to paragraph (b) above, the 10th
Business Day after the date of the Early Redemption Notice, as the case may be,
then the Company shall pay as liquidated damages and not as a penalty the sum
of $2,000 per day in cash until such Optional Redemption Price or Early
Redemption Price, as the case may be, together with all such liquidated
damages, is paid in full. In addition, if the Company shall have failed to pay
any portion of the Optional Redemption Price or Early Redemption Price, as the
case may be, within such three (3) Business Day period, then any holder of
Preferred Stock may at any time thereafter
- --------------------
(2) Section 6(b) shall only be included in the Series C Certificate of
Designation.
-12-
<PAGE> 13
demand that the Company (i) convert in accordance with the formula and time
frame thereafter set forth in Section 5 for a conversion at the option of the
holder all or any portion of its shares of Preferred Stock for which the
Optional Redemption Price or Early Redemption Price, as the case may be, shall
not have been paid (the "Unredeemed Shares") at a Conversion Price per share
calculated as at the date the Company provided the Optional Redemption Notice or
Early Redemption Notice, as the case may be, or the date of such conversion,
whichever is lower, or (ii) promptly return all of the Unredeemed Shares to the
holders of the Preferred Stock.
(iii) Nothing contained in this Section 6 shall
affect the holder's right to convert shares of Preferred Stock for the 10 days
from the date it receives the Optional Redemption Notice or Early Redemption
Notice.
Section 7. Definitions. For the purposes hereof, the
following terms shall have the following meanings:
"Business Day" means any day of the year on which commercial
banks are not required or authorized to be closed in New York City.
"Common Stock" means shares now or hereafter authorized of the
class of Common Stock, $.001 par value, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
"Conversion Ratio" means, at any time, a fraction, of which
the numerator is the Stated Value plus accrued but unpaid dividends, and of
which the denominator is the Conversion Price at such time.
"Junior Securities" means the Common Stock, and all other
classes of equity securities of the Company, except for the Subsequent Holder
Series.
"Original Issue Date" shall mean the date of the first
issuance of any shares of the Preferred Stock regardless of the number of
transfers of any particular shares of Preferred Stock and regardless of the
number of certificates which may be issued to evidence such Preferred Stock.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on The Nasdaq
National Market or other stock exchange on which the Common Stock has been
listed or if there is no such price on such date, then the closing bid price on
such exchange on the date nearest preceding such date, or (b) if the Common
Stock is not listed on The Nasdaq National Market or any stock exchange, the
closing bid price for a share of Common Stock in the over-the-counter market,
as reported by the Nasdaq Stock Market at the close of business on such date,
or (c) if the Common Stock is not quoted on the Nasdaq Stock Market, the
closing bid price for a share of Common Stock in the
-13-
<PAGE> 14
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), or (d) if the Common Stock is not reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices), then the average of the "Pink Sheet" quotes
for the relevant conversion period, as determined in good faith by the holder,
or (e) if the Common Stock is not publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser (as defined in Section
5(d)(iv) above) selected in good faith by the holders of a majority in interest
of the shares of the Preferred Stock; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is
traded on The Nasdaq National Market or principal stock exchange on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on The
Nasdaq National Market or any stock exchange, a day on which the Common Stock
is traded in the over-the-counter market, as reported by the Nasdaq Stock
Market, or (c) if the Common Stock is not quoted on the Nasdaq Market, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices).
-14-
<PAGE> 15
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder to Convert shares of Series C
Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of
Series C Convertible Preferred Stock indicated below into shares of Common
Stock, par value $.001 per share (the "Common Stock"), of Compression Labs,
Incorporated (the "Company") according to the conditions hereof, as of the date
written below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to
the Holder for any conversion, except for such transfer taxes, if any.
Conversion calculations:
----------------------------------------------
Date to Effect Conversion
----------------------------------------------
Number of shares of Series C
Preferred Stock to be Converted
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Number of shares of Common Stock to Issue
----------------------------------------------
Signature
----------------------------------------------
Name:
----------------------------------------------
Address:
The Company undertakes to promptly upon its receipt of this conversion notice
(and, in any case prior to the time it effects the conversion requested
hereby), notify the converting holder by facsimile and telephone of the number
of shares of Common Stock outstanding on such date and the number of shares of
Common Stock which would be issuable to the holder if the conversion requested
in this conversion notice were effected in full, whereupon, the holder may,
within one day of the notice from the Company, revoke the conversion requested
hereby in whole or in part if determines that such conversion would result in
it owning in excess of 4.9% of the outstanding shares of Common Stock on such
date, and the Company shall issue to the holder one or more certificates
representing shares of Series C Preferred Stock which have not been converted
as a result of this provision. If the holder waives the applicability of this
limitation by notice to the Company delivered upon its receipt of the Company's
notice regarding the number of outstanding shares of Common Stock or if the
holder fails to respond to the Company's notice within one day thereafter, the
Company shall effect in full the conversion requested in this notice.
<PAGE> 16
EXHIBIT B
COMPRESSION LABS, INCORPORATED
NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of Compression Labs, Incorporated
(the "Company") hereby notifies the addressee hereof that the Company hereby
elects to exercise its right to convert [ ] shares of its Series C
Convertible Preferred Stock held by the Holder into shares of Common Stock, par
value $.001 per share (the "Common Stock") of the Company according to the
terms hereof, as of the date written below. No fee will be charged to the
Holder for any conversion hereunder, except for such transfer taxes, if any
which may be incurred by the Company if shares are to be issued in the name of
a person other than the person to whom this notice is addressed.
Conversion calculations:
----------------------------------------------
Date to Effect Conversion
----------------------------------------------
Number of Shares of Series C Preferred Stock
to be Converted
----------------------------------------------
Applicable Conversion Price
----------------------------------------------
Number of Shares of Common Stock outstanding
at close of trading on Conversion Date
----------------------------------------------
Number of shares of Common Stock to Issue
----------------------------------------------
Signature
----------------------------------------------
Name:
----------------------------------------------
Address:
<PAGE> 1
EXHIBIT 99.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND NEITHER THESE
SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS THEREOF AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE
SKY LAWS.
COMPRESSION LABS, INCORPORATED
WARRANT CERTIFICATE
Dated [ ], 199[ ]
Warrants to Purchase Common Stock
COMPRESSION LABS, INCORPORATED, a Delaware corporation (the
"Company"), hereby certifies that, for value received, Infinity Investors, Ltd,
a corporation organized and existing under the laws of Nevis, West Indies
("Holder"), or its registered assigns, is the registered owner of 275,0001
Warrants (the "Warrants"), each of which will entitle the Holder thereof to
purchase one share, as adjusted from time to time as provided in Section 7, of
the Common Stock of the Company (the "Common Stock", each such share being a
"Warrant Share" and all such shares being the "Warrant Shares") at the exercise
price of $_____ per share)(2) (as
- --------------------
(1) The Warrant issuable at the Series C Closing shall cover 275,000 shares
of Common Stock. The Warrant issuable at the Series D Closing shall
cover 75,000 shares of Common Stock.
(2) The Exercise Price for the Warrant issuable at the Series C Closing
shall be equal to 135% of the Average Per Share Market Value (as defined
in the Series C Terms) for the five Trading Days (as defined in the
Series C Terms) (a) immediately preceding the Original Issue Date for
the Series C Shares (as such term is defined in the Series C Terms) or
(b) immediately following the date that the Company announces its
earnings for the quarter ended September 30, 1996, whichever is lower.
The Exercise Price for
<PAGE> 2
adjusted from time to time as provided in Section 7, the "Exercise Price") at
any time on or after October 24, 1996 (the "Initial Exercise Date") until and
including October 24, 2001 (the "Expiration Date"), all subject to the
following terms and conditions:
1. Registration of Warrants. The Company shall register
each Warrant, upon records to be maintained by the Company for that purpose, in
the name of the record holder of such Warrant from time to time. The Company
may deem and treat the registered holder of each Warrant as the absolute owner
thereof for the purpose of any exercise thereof or any distribution to the
holder thereof, and for all other purposes, and the Company shall not be
affected by the notice to the contrary.
2. Registration of Transfers and Exchanges. a. The
Company shall register the transfer of any Warrants upon records to be
maintained by the Company for that purpose, upon surrender of this Warrant
Certificate, with the Form of Assignment attached hereto duly completed and
signed, to the Company at the office specified in or pursuant to Section 3(c).
Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, evidencing the Warrants so
transferred shall be issued to the transferee and a new Warrant Certificate, in
similar form, evidencing the remaining Warrants not so transferred, if any,
shall be issued to the then registered holder thereof.
b. This Warrant Certificate is exchangeable,
upon the surrender hereof by the holder hereof at the office of the Company
specified in or pursuant to Section 3(c), for new Warrant Certificates, in
substantially the form of this Warrant Certificate, evidencing in the aggregate
the right to purchase the number of Warrant Shares which may then be purchased
hereunder, each of such new Warrant Certificates to be dated the date of such
exchange and to represent the right to purchase such number of Warrant Shares
as shall be designated by said holder hereof at the time of such surrender.
3. Duration and Exercise of Warrants. a. Warrants
shall be exercisable by the registered holder thereof on any business day
before 5:00 P.M., New York time, at any time and from time to time on or after
the Initial Exercise Date to and including the Expiration Date. At 5:00 P.M.,
New York time, on the Expiration Date, each Warrant not exercised prior thereto
shall be and become void and of no value.
b. Subject to the limitations set forth in
Section 3(c) and to the other provisions of this Warrant Certificate, including
adjustments to the number of Warrant Shares issuable on the exercise of each
Warrant and to the Exercise Price pursuant to Section 7, the holder of each
Warrant shall have the right to purchase from the Company (and the Company
- --------------------
(2) (...continued)
the Warrant issuable at the Series D Closing shall be equal to 125% of
the average Per Share Market Value for the five Trading Days immediately
preceding the Original Issue Date for the Series D Shares.
-2-
<PAGE> 3
shall be obligated to issue and sell to such holder of a Warrant) at the
Exercise Price one fully paid Warrant Share which is non-assessable.
c. Subject to Sections 2(b), 4 and 8, upon
surrender of this Warrant Certificate, with the Form of Election to Purchase
attached hereto duly completed and signed, to the Company at its office at 350
E. Plumaria Drive, San Jose, California, Attention: Corporate Secretary, or at
such other address as the Company may specify in writing to the then registered
holder of the Warrants, and upon payment of the Exercise Price multiplied by
the number of Warrant Shares then issuable upon exercise of the Warrants being
exercised in lawful money of the United States of America, all as specified by
the holder of this Warrant Certificate in the Form of Election to Purchase, the
Company shall promptly issue and cause to be delivered to or upon the written
order of the registered holder of such Warrants, and in such name or names as
such registered holder may designate, a certificate for the Warrant Shares
issued upon such exercise of such Warrants. Any person so designated to be
named therein shall be deemed to have become holder of record of such Warrant
Shares as of the Date of Exercise of such Warrants.
The "Date of Exercise" of any Warrant means the date on which
the Company shall have received (i) this Warrant Certificate, with the Form of
Election to Purchase attached hereto appropriately completed and duly signed,
and (ii) payment of the Exercise Price for such Warrant.
d. The Warrants evidenced by this Warrant
Certificate shall be exercisable, either as an entirety or, from time to time,
for part of the number of Warrants evidenced by this Warrant Certificate so
long as at least twenty-five hundred (2,500) Warrant Shares are exercised. If
less than all of the Warrants evidenced by this Warrant Certificate are
exercised at any time, the Company shall issue, at its expense, a new Warrant
Certificate, in substantially the form of this Warrant Certificate, for the
remaining number of Warrants evidenced by this Warrant Certificate.
4. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of the
Warrants represented by this Certificate; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the registration of any certificates for Warrant
Shares in a name other than that of the Holder, and the Company shall not be
required to issue or deliver the certificates for Warrant Shares unless or
until the person or persons requesting the issuance thereof shall have paid to
the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The holder shall be
responsible for all other tax liability that may arise as a result of holding or
transferring the Warrants represented by this Certificate or receiving the
Warrant Shares under this Warrant Certificate.
5. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company may in its discretion issue in exchange and
substitution for and upon cancellation
-3-
<PAGE> 4
hereof, or in lieu of and substitution for this Warrant, a new Warrant of like
tenor, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and indemnity, if requested, satisfactory to
it. Applicants for a substitute Warrant certificate also shall comply with
such other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
6. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of the Warrants, the maximum
number of Warrant Shares (as adjusted from time to time pursuant to Section 7
hereof) which may then be deliverable upon the exercise of this Warrant and all
other outstanding warrants issued and sold pursuant to the Purchase Agreement.
7. Adjustment to the Number of Warrant Shares Issuable. The
number of Warrant Shares issuable upon the exercise of this Warrant is subject
to adjustment from time to time as set forth in this Section 7. Upon each such
adjustment of the Exercise Price pursuant to this Section 7, the Holder shall
thereafter prior to the Expiration Date be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares issuable upon exercise of this
Warrant immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment. In the event the Company
and the holders of Warrants disagree as to any adjustment to the Exercise Price
hereunder, an Appraiser selected by the holders of a majority of the Warrants
shall give its opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 7), of the Exercise Price; provided,
however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to promptly select an additional Appraiser, in
which case the adjustment shall be equal to the average of the adjustments
recommended by each such Appraiser. The Board of Directors shall make the
adjustment recommended forthwith upon the receipt of such opinion or opinions;
provided, however, that no such adjustment of the Exercise Price shall be made
which in the opinion of the Appraiser(s) giving the aforesaid opinion or
opinions would result in an increase of the Exercise Price to more than the
Exercise Price then in effect.
a. If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock payable in shares of its capital
stock (whether payable in shares of its Common Stock or of capital stock of any
class), (ii) subdivide outstanding shares of Common Stock into a larger number
of shares, (iii) combine outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of shares of Common Stock
any shares of capital stock of the Company, the Exercise Price shall be
multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding before such event and of which the denominator
shall be the number of shares of Common Stock outstanding after such event.
Any adjustment made pursuant to this Section 7(a) shall become effective
immediately after the record
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<PAGE> 5
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
b. If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to the
Holder) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Section
7(d) hereof), then in each such case the Exercise Price for which the Warrant
Shares shall be purchased shall be determined by multiplying the Exercise Price
in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the Exercise Price determined as of the record date
mentioned above, and of which the numerator shall be the Exercise Price on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors of
the Company (the "Board of Directors") in good faith; provided, however, that
in the event of a distribution exceeding 10% of the net assets of the Company,
such fair market value shall be determined by a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority of the Warrants that are then
outstanding; and further provided, however, that the Company, after receipt of
the determination by such Appraiser shall have the right to select an
additional Appraiser, in which case the fair market value shall be equal to the
average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holder and all
other holders of Warrants of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.
c. In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another person, the
sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant only into the shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such reclassification, consolidation, merger, sale,
transfer or share exchange, and the Holder shall be entitled upon such event to
receive such amount of securities or property as the shares of the Common Stock
into which this Warrant could have been converted immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange would
have been entitled. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give
to the Holder the right to receive the securities or property set forth in this
Section 7(c) upon any exercise following such consolidation, merger, sale,
transfer or share exchange. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
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<PAGE> 6
d. If and whenever after the date hereof, the Company
shall issue rights or warrants to acquire or otherwise sell or distribute any
shares of Common Stock for a consideration per share less than the Exercise
Price then in effect, then, forthwith upon such issue or sale, the Exercise
Price shall be reduced to the price (calculated to the nearest cent) determined
by dividing (i) an amount equal to the sum of (A) the number of shares of
Common Stock outstanding immediately prior to such issue or sale multiplied by
the Exercise Price, and (B) the consideration, if any, received or receivable
by the Company upon such issue or sale by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
e. For the purposes of subsection (b) of this section,
the following clauses shall also be applicable:
(i) Record Date. In case the Company shall take
a record of the holders of its Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (B) to subscribe for or purchase Common Stock or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the purposes of
this subsection (e).
(iii) Certain Issues Excepted. Anything herein to
the contrary notwithstanding, the Company shall not be required to make any
adjustment of any Exercise Price in case of the issuance of shares Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock pursuant
to the Purchase Agreement, or in the event that the Company shall grant options
to purchase the Company's Common Stock pursuant to a bona fide employee stock
option, stock purchase or non-employee director plan duly adopted by its
shareholders.
f. If:
i. the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
ii. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
iii. the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights, or
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<PAGE> 7
iv. the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the Common
Stock of the Company (other than a
subdivision or combination of the
outstanding shares of Common Stock), any
consolidation or merger to which the
Company is a party, any sale or transfer of
all or substantially all of the assets of
the Company, or any compulsory share
exchange whereby the Common Stock is
converted into other securities, cash or
property, or
v. the Company shall authorize the voluntary
or involuntary dissolution, liquidation or
winding-up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained
for the purpose of exercise of this Warrant, and shall cause to be mailed to
the Holder in accordance with Section 10 hereof, at least thirty (30) days
prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
g. In any case in which this Section 7 shall
require that an adjustment be made effective as of the record date for a
specified event, the Company may elect to defer until occurrence of such event
(A) issuing to the Holder, if this Warrant is exercised after such record date,
the Warrant Shares and other capital stock of the Company, if any, issuable
upon such exercise over and above the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis of the Exercise
Price prior to adjustment and (B) paying to the Holder any amount in cash in
lieu of a fractional share pursuant to Section 8 hereof, provided, however,
that the Company shall deliver to the Holder a due bill or other appropriate
instrument evidencing the Holder's right to receive such additional Warrant
Shares, other capital stock and/or cash upon the occurrence of the event
requiring such adjustment.
h. Any determination that the Company or the Board
of Directors must make pursuant to this Section 7 shall be conclusive if made
in good faith.
8. Fractional Shares. The Company shall not be required to issue
fractional Warrant Shares on the exercise of this Warrant. The number of full
Warrant Shares which shall be
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<PAGE> 8
issuable upon the exercise of this Warrant shall be computed on the basis of
the aggregate number of Warrant Shares purchasable on exercise of this Warrant
so presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 8, be issuable on the exercise of this Warrant, the
Company shall pay an amount in cash equal to the Exercise Price multiplied by
such fraction.
9. Warrant Agent.
a. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company and the
Holder may appoint a new warrant agent. Such new warrant agent shall be a
corporation doing business under the laws of the United States or any state
thereof, in good standing and having a combined capital and surplus of not less
than U.S. $50,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment; provided that such reports are
published at least annually pursuant to law or to the requirements of a federal
or state supervising or examining authority. After acceptance in writing of
such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the warrant agent, without any further assurance, conveyance, act or
deed, but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the Company.
b. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business
shall be a successor warrant agent under this Warrant without any further act;
provided that such corporation (i) would be eligible for appointment as
successor to the warrant agent under the provisions of this Section 9 or (ii)
is a wholly-owned subsidiary of the warrant agent. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's
last address as shown on the register maintained by the warrant agent pursuant
to this Warrant.
10. Notices. All notices or other communications hereunder shall
be given, and shall be deemed duly given and received if given, by facsimile
and by mail, postage prepaid: (1) if to the Company, addressed as follows:
COMPRESSION LABS, INCORPORATED, 350 E. Plumaria Drive, San Jose, California
95134, Attention: Corporate Secretary, or to facsimile no. (408) 922-5574; or
(ii) if to the Holder, addressed to the Holder at the facsimile telephone
number and address of the Holder appearing on the Warrant Register or such
other address or facsimile number as the Holder may provide to the Company in
accordance with this Section 10. Any such notice shall be deemed given and
effective upon the earliest to occur of (i) receipt of such facsimile at the
facsimile telephone number specified in this Section 10, (ii) five (5)
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<PAGE> 9
Business Days after deposit in the United States mails or (iii) upon actual
receipt by the party to whom such notice is required to be given.
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<PAGE> 10
11. Miscellaneous.
a. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
b. Nothing in this Warrant shall be construed to give to
any person or corporation other than the Company, the Holder and any registered
holder of Warrant Shares any legal or equitable right, remedy or cause under
this Warrant; this Warrant shall be for the sole and exclusive benefit of the
Company, the Holder and any other registered holder of Warrant Shares.
c. This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
d. The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
e. In case any one or more of the provisions of this
Warrant shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
COMPRESSION LABS, INCORPORATED, in its
corporate capacity and in its capacity
as the Warrant Agent hereunder
By:
-------------------------------------
Name:
-----------------------------------
Title:
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<PAGE> 11
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant Certificate)
To Compression Labs, Incorporated:
The undersigned hereby irrevocably elects to exercise __________
Warrants evidenced by the foregoing Warrant Certificate for, and to purchase
thereunder, _____________ full shares of Common Stock issuable upon exercise of
said Warrants and delivery of $________ in cash and any applicable taxes
payable by the undersigned pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
--------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If said number of Warrants shall not be all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercise be issued in the name of
and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: , 19 Name of Holder:
----------------- ---
(Print)
-------------------------
(By:)
---------------------------
(Title:)
<PAGE> 12
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, _________________________________ hereby
sells, assigns, and transfers to each assignee set forth below all of the
rights of the undersigned in and to the number of Warrants (as defined in and
evidenced by the foregoing Warrant Certificate) set opposite the name of such
assignee below and in and to the foregoing Warrant Certificate with respect to
said Warrants and the shares of Common Stock issuable upon exercise of said
Warrants:
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
If the total of said Warrants shall not be all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not so assigned be issued in
the name of and delivered to the undersigned.
Name of Holder:
Dated: , 19 (Print)
----------------- --- -------------------------
(By:)
---------------------------
(Title:)
