SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. )(1)
PICK Communications Corp.
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
719569-949
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(CUSIP Number)
Bruce Glaser, 830 Third Avenue, Fourth Floor, New York, NY 10022
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 3, 1999
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(Date of Event Which Requires Filing
of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
Note. Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 128 Pages)
- ----------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 2 of 128 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Commonwealth Associates
13-3467952
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,245,366
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 3 of 128 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Commonwealth Associates Management Corp.
13-3468747
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,245,366
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 4 of 128 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Michael S. Falk
###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 1,632,030
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,632,030
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,877,396
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 5 of 128 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robert Priddy
###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 2,350,250
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
2,350,250
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
8,595,616
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.2%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 6 of 128 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Keith Rosenbloom
###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 177,891
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
177,891
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,423,257
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.3%
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14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 7 of 128 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Basil Asciutto
###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 93,388
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
93,388
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,338,754
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.2%
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14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 719569-949 SCHEDULE 13D Page 8 of 128 Pages
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1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Robert Beuret
###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) |_|
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 21,729
BENEFICIALLY --------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 6,245,366
PERSON --------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
21,729
--------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,245,366
--------------------------------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,267,095
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* |_|
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 9 of 128 Pages
Item 1. Security and Issuer.
This statement relates to the common stock, par value $.01 per share
("Common Stock"), of PICK Communications Corp., a Nevada corporation (the
"Company"). The address of the Company's principal executive office is 155
Route 46 West, Interchange Plaza II, Wayne, New Jersey 07470.
The shares of Common Stock that are the subject of this statement either
(A) were issued (i) as placement agent compensation in connection with a
private placement (the "Agent's Shares"), (ii) as solicitation agent in
connection with a debt restructuring (the "Restructuring") undertaken by
the Company (the "Restructuring Shares"), or (iii) were or may in the
future be issued in connection with the extension and subsequent amendment
(the "Note Shares') of $900,250 principal amount of the Company's
convertible promissory notes (the "Notes") or (B) are issuable (i) upon
exercise of five-year warrants (the "Agent's Warrants") issued as
placement agent compensation which have an exercise price of $.10 per
share, (ii) upon conversion of shares of the Company's series B
convertible preferred stock (the "Series B Preferred"), at a conversion
rate of $.10 per share or10 shares of Common Stock for each share of
Series B Preferred, (iii) upon conversion of the Notes, at a conversion
rate of $1.00 per share or one share of Common Stock for each $1.00
principal amount of Notes, (iv) upon exercise of five-year warrants issued
in connection with the private placement of the Notes (the "Private
Placement Warrants") which have an exercise price of $.10 per share or
which the Company may be required to issue as compensation for extending
and amending the Notes (the "Note Warrants") or (v) upon exercise of
five-year warrants issued in connection with the Restructuring (the
"Restructuring Warrants") which have an exercise price of $1.375 per
share. Certain of the foregoing conversion and exercise prices reflect
adjustments which were made subsequent to the date of issuance and such
prices are subject to further adjustment in certain instances.
Item 2. Identity and Background.
This statement is filed jointly by Commonwealth Associates L.P.
("Commonwealth"), a limited partnership organized under the laws of New
York, whose principal business is investment banking and advisory
services, Commonwealth Associates Management Corp., the corporate general
partner of Commonwealth ( "CAMC"), Michael S. Falk, the Chairman and
controlling equity owner CAMC, Keith Rosenbloom, Basil Ascuitto and Robert
Beuret, employees, directors and shareholders of CAMC, and Robert Priddy,
a director and shareholder of CAMC (the "Reporting Persons").
The officers of CAMC (the "CMAC Officers"), all of whom are U.S. citizens,
are :
Michael Falk Chief Executive Officer
Bruce Glaser Chief Administrative Officer
Joseph Wynne Chief Financial Officer
Basil Ascuitto Chief Operating Officer
<PAGE>
Page 10 of 128 Pages
The business address for all of the Reporting Persons other than Mr.
Priddy is 830 Third Avenue, 4th Floor, New York, New York 10022. Mr.
Priddy's is a principal of RMC Capital, 1640 Powers Ferry, Suite 125,
Marietta, Georgia 30067, an investment firm.
During the past five years, none of the Reporting Persons or CAMC Officers
has been convicted in a criminal proceeding or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding, was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Commonwealth acquired the Agent's Shares and the Agent's Warrants in 1998
for a nominal purchase price with funds provided from working capital
pursuant to an Agency Agreement dated as of July 15, 1998 with the Company
(the "Agency Agreement") filed as Exhibit (1) hereto, pursuant to which
Commonwealth acted as placement agent in connection with a $9,900,000
private placement (the "Private Placement") of Units (the "Units"), each
Unit consisting of $100,000 principal amount of Notes and 100,000 Private
Placement Warrants. In no case were any funds borrowed. The Agent's Shares
and Agent's Warrants were distributed by Commonwealth among its employees,
including the Reporting Persons (other than Mr. Priddy). The Reporting
Persons currently hold an aggregate of 431,718 Agent's Shares and 842,740
Agent's Warrants.
Commonwealth, Mr. Falk and Mr. Priddy purchased an aggregate of $900,250
principal amount of Notes and 900,250 Private Placement Warrants as
investors in the Private Placement for an aggregate purchase price of
$900,250, which amount was provided by Commonwealth from its working
capital and by Messrs. Falk and Priddy from personal funds. In no case
were any funds borrowed. Commonwealth, Mr. Falk and Mr. Priddy were
granted the right to receive an aggregate of 945,715 Note Shares and
225,062 Note Warrants for extending and then amending their Notes for no
additional cash consideration.
The Reporting Persons (other than Mr. Beuret) purchased 468,000 shares of
Series B Preferred (convertible into 4,680,000 shares of Common Stock) in
April 1999 as investors in the Company for a purchase price of $468,000,
which amount was provided by Commonwealth from its working capital and by
the other Reporting Persons from their personal funds. In no case were any
funds borrowed.
Commonwealth acquired the Restructuring Shares and the Restructuring
Warrants in May 1999 as compensation pursuant to an agreement dated April
21, 1999 with the Company (the "Restructuring Agreement") filed as Exhibit
(8) hereto, pursuant to which Commonwealth acted as solicitation agent in
connection with the Restructuring. The Restructuring Shares and
Restructuring Warrants were distributed by Commonwealth among its
employees, including the Reporting Persons (other than Mr. Priddy and Mr.
Beuret). The Reporting Persons currently hold an aggregate of 1,275,936
Restructuring Shares and 318,981 Restructuring Warrants.
<PAGE>
Page 11 of 128 Pages
Item 4. Purpose of Transaction.
The Agent's Shares and Agent's Warrants were acquired by the Reporting
Persons as compensation for services rendered in connection with the
Private Placement solely for investment purposes and not for the purpose
of acquiring control of the Company. The Notes, the Private Placement
Warrants and the Series B Preferred were acquired to make a profitable
investment. The Restructuring Shares and Restructuring Warrants were
acquired by the Reporting Persons as compensation for services rendered in
connection with the Restructuring for investment purposes and not for the
purpose of acquiring control of the Company. The granting by the Company
of the right to receive the Note Warrants and the Note Shares was part of
the Restructuring undertaken by the Company for its own purposes.
Pursuant to the Agency Agreement, Commonwealth has the right until
November 2000 to appoint an observer to attend all Board meetings. In
addition, the Agency Agreement contained restrictions on the Company's
ability while the notes were outstanding to amend its certificate of
incorporation or by-laws with shareholder approval and approval of the
holders of a majority of the Notes issued in the Private Placement.
In connection with the Restructuring, the Company and Commonwealth entered
into the Restructuring Agreement, pursuant to which Commonwealth was given
the right to appoint one designee to the Company's Board of Directors and
the Noteholders were given the right to appoint one designee (to be
selected either by Commonwealth or the holders of at least 51% of the
outstanding principal amount of the Notes). In addition, the Company
agreed to appoint Mr. Priddy to the Board, although Mr. Priddy has not yet
determined when or if he will join the Board. While Commonwealth is in
discussions with potential designees, it has not yet appointed anyone to
the Board, and the identity and timing of any designees is currently
uncertain.
Other than as set forth above, the Reporting Persons have no present plans
or proposals which relate to, or could result in, any of the matters
referred to in paragraphs (a) through (j), inclusive, of Item 4 of
Schedule 13D. The Reporting Persons may, at any time and from time to
time, review or reconsider their position and formulate plans or proposals
with respect thereto, but have no present intention of doing so.
Item 5. Interest in Securities of the Issuer.
(a)(1) Commonwealth is the beneficial owner of an aggregate of 6,245,366 shares
of Common Stock, representing approximately 13.0% of the issued and
outstanding shares of Common Stock of the Company. Commonwealth's
holdings include the right to acquire (i) 3,180,000 shares issuable upon
conversion of Series B Preferred, (ii) 671,186 shares issuable upon
exercise of Agent's Warrants, (iii) 250,250 shares issuable upon
conversion of Notes, (iv) 250,250 shares issuable upon exercise of
Private Placement Warrants, (v) 62,562 shares issuable upon exercise of
Note Warrants and (vi) 244,376 shares issuable upon exercise of
Restructuring Warrants.
<PAGE>
Page 12 of 128 Pages
(a)(2) Mr. Falk is the beneficial owner of an aggregate of 7,877,396 shares of
Common Stock, representing approximately 16.0% of the issued and
outstanding shares of Common Stock of the Company. In addition to
Commonwealth's 6,245,366 shares, Mr. Falk's holdings include the right to
acquire (i) 700,000 shares issuable upon conversion of Series B
Preferred, (ii) 104,537 shares issuable upon exercise of Agent's
Warrants, (iii) 150,000 shares issuable upon conversion of Notes, (iv)
150,000 shares issuable upon exercise of Private Placement Warrants, (v)
37,500 shares issuable upon exercise of Note Warrants, and (vi)56,074
shares issuable upon exercise of Restructuring Warrants. In his capacity
as Chairman and controlling equity owner of CAMC, Mr. Falk shares voting
and dispositive power with respect to the securities beneficially owned
by Commonwealth and may be deemed to be the beneficial owner of such
securities.
(a)(3) Mr. Priddy is the beneficial owner of an aggregate of 2,350,250 shares of
Common Stock, representing approximately 5.2% of the issued and
outstanding shares of Common Stock of the Company. Mr. Priddy's holdings
include the right to acquire (i) 700,000 shares issuable upon conversion
of Series B Preferred, (ii) 500,000 shares issuable upon conversion of
Notes, (iii) 500,000 shares issuable upon exercise of Private Placement
Warrants, and (iv) 125,000 shares issuable upon exercise of Note
Warrants. In his capacity as a director and equity owner of CAMC, Mr.
Priddy shares indirect voting and dispositive power with respect to
Commonwealth's 6,245,366 shares and may be deemed to be the beneficial
owner of such securities, although Mr. Priddy disclaims beneficial
interest in such shares other than that portion which corresponds with
his equity ownership in CAMC.
(a)(4) Mr. Rosenbloom is the beneficial owner of an aggregate of 177,891 shares
of Common Stock, representing approximately 0.4% of the issued and
outstanding shares of Common Stock of the Company. Mr. Rosenbloom's
holdings include the right to acquire (i) 50,000 shares issuable upon
conversion of Series B Preferred,(ii) 31,868 shares issuable upon
exercise of Agent's Warrants and (iii) 16,031 shares issuable upon
exercise of Restructuring Warrants. In his capacity as a director and
equity owner of CAMC, Mr. Rosenbloom shares indirect voting and
dispositive power with respect to Commonwealth's 6,245,366 shares and may
be deemed to be the beneficial owner of such securities, although Mr.
Rosenbloom disclaims beneficial interest in such shares other than that
portion which corresponds with his equity ownership in CAMC.
(a)(5) Mr. Ascuitto is the beneficial owner of an aggregate of 93,388 shares of
Common Stock, representing approximately 0.2% of the issued and
outstanding shares of Common Stock of the Company. Mr. Ascuitto's
holdings include the right to acquire (i) 50,000 shares issuable upon
conversion of Series B Preferred, (ii) 20,662 shares issuable upon
exercise of Agent's Warrants, and (iii)2,500 shares issuable upon
exercise of Restructuring Warrants. In his capacity as a director of
CAMC, Mr. Ascuitto shares voting and dispositive power with respect to
Commonwealth's 6,245,366 shares and may be deemed to be the beneficial
owner of such securities, although Mr. Ascuitto disclaims beneficial
interest in such shares other than that portion which corresponds with
his equity ownership in CAMC.
<PAGE>
Page 13 of 128 Pages
(a)(6) Mr. Beuret is the beneficial owner of an aggregate of 21,729 shares of
Common Stock, representing less than 0.1% of the issued and outstanding
shares of Common Stock of the Company. Mr. Beuret's holdings include the
right to acquire14,487 shares issuable upon exercise of Agent's Warrants.
In his capacity as a director of CAMC, Mr. Beuret shares voting and
dispositive power with respect to Commonwealth's 6,245,366 shares and may
be deemed to be the beneficial owner of such securities, although Mr.
Beuret disclaims beneficial interest in such shares other than that
portion which corresponds with his equity ownership in CAMC.
(b) Number of shares as to which each such person has:
(1) sole power to vote or to direct the vote:
(i) Mr. Falk has the sole power to vote or to direct the vote of
his1,632,030 shares.
(ii) Mr. Priddy has the sole power to vote or to direct the vote of his
2,350,250 shares.
(iii) Mr. Rosenbloom has the sole power to vote or to direct the vote of
his 177,891 shares.
(iv) Mr. Ascuitto has the sole power to vote or to direct the vote of
his 93,388 shares.
(v) Mr. Beuret has the sole power to vote or to direct the vote of his
21,729 shares.
(2) shared power to vote or to direct the vote:
Commonwealth, CAMC, Michael Falk, Robert Priddy, Keith Rosenbloom, Basil
Ascuitto and Robert Beuret share the power to vote or to direct the vote
of Commonwealth's 6,245,366 shares.
(3) sole power to dispose or to direct the disposition of:
(i) Mr. Falk has the sole power to dispose or to direct the
disposition of his 1,351,656 shares.
(ii) Mr. Priddy has the sole power to dispose or to direct the
disposition of his 2,350,250 shares.
(iii) Mr. Rosenbloom has the sole power to dispose or to direct the
disposition of his 177,891 shares.
(iv) Mr. Ascuitto has the sole power to dispose or to direct the
disposition of his 93,388 shares.
(v) Mr. Beuret has the sole power to dispose or to direct the
disposition of his 21,729 shares.
(4) shared power to dispose of or to direct the disposition of:
Commonwealth, CAMC, Michael Falk, Robert Priddy, Keith Rosenbloom, Basil
Ascuitto and Robert Beuret share the power to dispose or to direct the
disposition of Commonwealth's 6,245,366 shares.
(c) Inapplicable
<PAGE>
Page 14 of 128 Pages
(d) Inapplicable
(e) Inapplicable
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
Under the terms of the Subscription Agreements filed as Exhibits 4 and 7
hereto between the Company and the purchasers of the Notes and Private
Placement Warrants and the Company and the purchasers of the Series B
Preferred, respectively, the Company is required to prepare and file a
registration statement with the Securities and Exchange Commission with
respect to the shares issuable upon conversion of the Notes, exercise of
the Private Placement Warrants and conversion of the Series B Preferred.
Pursuant to the terms of the Agent's Warrant filed as Exhibit 5 hereto,
the Company has agreed to register the shares of Common Stock underlying
the Agent's Warrants with the SEC under certain circumstances.
Under the terms of the Restructuring Agreement filed as Exhibit 8 hereto,
the Company agreed to file a registration statement with respect to the
Restructuring Shares and Restructuring Warrants within six months of the
effective date of the Restructuring, and to use its best efforts to cause
such registration statement to become effective as soon as possible
thereafter.
<PAGE>
Page 15 of 128 Pages
Item 7. Materials to be Filed as Exhibits.
(1) Agency Agreement dated as of July 13, 1998 between Commonwealth and
the Company
(2) Form of Note, as extended and amended
(3) Form of Private Placement Warrant
(4) Subscription Agreement regarding purchase of the Company's Notes and
Private Placement Warrants
(5) Form of Agent's Warrant
(6) Certificate of Designation, Preferences and Rights of Series B 9%
Convertible Preferred Stock
(7) Subscription Agreement regarding purchase of the Company's Series B
Preferred
(8) Agreement dated April 21, 1999 between the Company and Commonwealth
(9) Joint Statement on Schedule 13D, as required by Rule 13d-1(f)(1)
under the Exchange Act
<PAGE>
Page 16 of 128 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: May 14, 1999 Commonwealth Associates L.P.
New York, New York
By: Commonwealth Associates Management Corp.,
its general partner
By: /s/ Joseph Wynne
-----------------------------------------
Joseph Wynne
Chief Financial
Dated: May 14, 1999 /s/ Michael S. Falk
New York, New York ---------------------------------------------
Michael S. Falk
Dated: May 14, 1999 /s/ Robert Priddy
Marietta, Georgia ---------------------------------------------
Robert Priddy
Dated: May 14, 1999 /s/ Keith Rosenbloom
New York, New York ---------------------------------------------
Keith Rosenbloom
Dated: May 14, 1999 /s/ Basil Ascuitto
New York, New York ---------------------------------------------
Basil Ascuitto
Dated: May 14, 1999 /s/ Robert Beuret
New York, New York ---------------------------------------------
Robert Beuret
<PAGE>
Page 17 of 128 Pages
EXHIBIT INDEX
Exhibit No. Page
- ----------- ----
(1) Agency Agreement dated as of July 13, 1998
between Commonwealth and the Company.............................. 18
(2) Form of Note, as extended and amended............................... 40
(3) Form of Private Placement Warrant................................... 60
(4) Subscription Agreement regarding purchase of
the Company's Notes and Private Placement Warrants................ 71
(5) Form of Agent's Warrant............................................. 83
(6) Certificate of Designation, Preferences and Rights of
Series B 9% Convertible Preferred Stock........................... 97
(7) Subscription Agreement regarding purchase of the
Company's Series B Preferred...................................... 103
(8) Agreement Between Commonwealth and the
Company dated April 21, 1999...................................... 120
(9) Joint Statement on Schedule 13D, as required by
Rule 13d-1(f)(1) under the Exchange Act........................... 128
Page 18 of 128 Pages
Exhibit 1 PICK COMMUNICATIONS CORP.
AGENCY AGREEMENT
Commonwealth Associates
830 Third Avenue
New York, New York 10022
July 15, 1998
Gentlemen:
PICK Communications Corp., a Nevada corporation (the "Company"), proposes
to offer for sale to "accredited investors", in a private placement, units
("Units"), each Unit consisting $100,000 principal amount of 10% senior secured
promissory notes (the "Notes") and five-year warrants to purchase 100,000 shares
of the Company's common stock, $.001 par value, at $.50 per share, subject to
adjustment (the "Warrants"). Such offering and sale are referred to herein as
the "Offering." A minimum of 20 Units ("Minimum Offering") and a maximum of 40
Units ("Maximum Offering") will be sold in the Offering at $100,000 per Unit.
The Units will be offered pursuant to those terms and conditions acceptable to
you as reflected in the Confidential Term Sheet dated July 13, 1998 (the "Term
Sheet"). Of the Units, 20 will be offered on a "best efforts - all-or-none"
basis and the remaining 20 Units will be offered on a "best efforts" basis. The
Maximum Offering may be increased by up to 20 Units at the discretion of the
Company and the Placement Agent (as defined below) in the event of
over-subscription (the "Over-Allotment Option"). The Units are being offered
pursuant to the Term Sheet and related documents in accordance with Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act") and Regulation
D promulgated thereunder.
Commonwealth Associates is sometimes referred to herein as the "Placement
Agent." The Term Sheet (including the exhibits thereto), as it may be amended
from time to time, and the form of proposed subscription agreement between the
Company and each subscriber (the "Subscription Agreement") and the exhibits
which are part of the Term Sheet and/or Subscription Agreement are collectively
referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agent a reasonable
number of copies of the Offering Documents in form and substance satisfactory to
counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units ("Subscriber")
will be required to deliver, among other things, a Subscription Agreement and a
confidential purchaser questionnaire ("Questionnaire") in the form to be
provided to offerees. Capitalized terms used herein, unless otherwise defined or
unless the context otherwise indicates, shall have the same meanings provided in
the Offering Documents.
<PAGE>
Page 19 of 128 Pages
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent of the
Company (subject to your right to have Selected Dealers, as defined in Section
1(c) hereof, participate in the Offering) during the Offering Period herein
specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the offering (the "Offering") described in the Offering
Documents. The Offering Period shall commence on the day the Offering Documents
are first made available to you by the Company for delivery in connection with
the offering for sale of the Units and shall continue until the earlier to occur
of (i) the sale of all of the Maximum Offering or (ii) August 31, 1998 (unless
extended for a period of up to 30 days under circumstances specified in the Term
Sheet). If the Minimum Offering is not sold prior to the end of the Offering
Period, the Offering will be terminated and all funds received from Subscribers
will be returned, without interest and without any deduction. The day that the
Offering Period terminates is hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in this
Agreement, Commonwealth Associates hereby accepts such agency and agrees to use
its best efforts to assist the Company in finding qualified subscribers pursuant
to the Offering described in the Offering Documents. It is understood that the
Placement Agent has no commitment to sell the Units. Your agency hereunder is
not terminable by the Company except upon termination of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities Dealers,
Inc., ("NASD") and that have executed a Selected Dealers Agreement substantially
in the form attached hereto as Schedule A, to assist you in the Offering (each
such person being hereinafter referred to as a "Selected Dealer") and you may
allow such persons such part of the compensation and payment of expenses payable
to you hereunder as you shall determine. Each Selected Dealer shall be required
to agree in writing to comply with the provisions of, and to make the
representations, warranties and covenants contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by the execution by
Subscribers of a Subscription Agreement. No Subscription Agreement shall be
effective unless and until it is accepted by the Company. Until the Closing, all
subscription funds received shall be held as described in the Subscription
Agreement. The Placement Agent shall not have any obligation to independently
verify the accuracy or completeness of any information contained in any
Subscription Agreement or the authenticity, sufficiency, or validity of any
check delivered by any prospective investor in payment for Units.
(e) The Placement Agent and its affiliates may purchase Units sold
in the Offering.
2. Representations and Warranties of the Company. The Company represents
and warrants to the Placement Agent and each Selected Dealer, if any, as
follows:
<PAGE>
Page 20 of 128 Pages
(a) Securities Law Compliance. The Offering Documents conform in all
respects with the requirements of Regulation D promulgated under the Securities
Act and with the requirements of all other published rules and regulations of
the Securities and Exchange Commission (the "Commission") currently in effect
relating to "private offerings" to "accredited investors" of the type
contemplated by the Company. The Offering Documents will not contain an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances in which
they were made, not misleading. If at any time prior to the completion of the
Offering or other termination of this Agreement any event shall occur as a
result of which it might become necessary to amend or supplement the Offering
Documents so that they do not include any untrue statement of any material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances then existing, not misleading, the
Company will promptly notify you and will supply you with amendments or
supplements correcting such statement or omission. The Company will also provide
the Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which the
Placement Agent deems necessary to comply with applicable state and federal law.
(b) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has all requisite corporate power and authority to own and lease its properties,
to carry on its business as currently conducted and as proposed to be conducted,
to execute and deliver this Agreement and to carry out the transactions
contemplated by this Agreement, as appropriate, and is duly licensed or
qualified to do business as a foreign corporation in each jurisdiction in which
the conduct of its business or ownership or leasing of its properties requires
it to be so qualified, except where the failure to be so licensed or qualified
would not, in the aggregate, have a material adverse effect on the business or
financial condition of the Company (a "Material Adverse Effect").
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company prior to the consummation of the transactions contemplated
hereby is as set forth in the Offering Documents. All shares of the Company
issued and outstanding since September 12, 1995 are validly issued, fully paid
and nonassessable and have not been issued in violation of the preemptive rights
of any stockholder of the Company. All sales of securities of the Company since
September 12, 1995 were either registered under the Securities Act and
applicable state securities laws or exempt from such registration, and no
security holder has any rescission rights with respect thereto.
(d) Warrants, Preemptive Rights, Etc. Except for the warrants to
purchase shares of Common Stock to be issued to you or your designees in
consideration for your acting as Placement Agent hereunder (the "Agent's
Warrants") and except as set forth in or contemplated by the Term Sheet or in
Schedule D hereto, there are not, nor will there be immediately after the
Closing (as hereinafter defined), any outstanding warrants, options, agreements,
convertible securities, preemptive rights to subscribe for or other commitments
pursuant to which the Company is, or may become, obligated to issue any shares
of its capital stock or other securities of the Company and this Offering will
not cause any anti-dilution adjustments to such securities or commitments except
as reflected in the Term Sheet.
<PAGE>
Page 21 of 128 Pages
(e) Subsidiaries and Investments. The Company has no subsidiaries
other than PCT Prepaid Telephone, Inc. ("PCT"), PICK, Inc., PICKNET, Inc.,
PICKSat, Inc. and PICKNET UK PLC (each a "Subsidiary" and collectively, the
"Subsidiaries"), and the Company does not own, directly or indirectly, any
capital stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity,
except as reflected in the Term Sheet. Each of the Subsidiaries is a corporation
duly organized and validly existing under the laws of its respective
jurisdiction of incorporation. The Company owns all of the capital stock of the
Subsidiaries (except for PCT which is 79% owned by the Company) free and clear
of all liens, security interests and encumbrances.
(f) Financial Statements. The financial information contained in the
Offering Documents is accurate in all material respects. The financial
statements attached to the Offering Documents are hereinafter referred to
collectively as the "Financial Statements". The Financial Statements have been
prepared in conformity with generally accepted accounting principles
consistently applied and show all material liabilities, absolute or contingent,
of the Company required to be recorded thereon and present fairly the financial
position and results of operations of the Company as of the dates and for the
periods indicated.
(g) Absence of Changes. Since the date of the Term Sheet, except
with respect to matters of which the Company has notified you in writing, the
Company has not incurred any liabilities or obligations, direct or contingent,
not in the ordinary course of business, or entered into any transaction not in
the ordinary course of business, which is material to the business of the
Company, and, except as set forth in Schedule G to this Agreement there has not
been any change in the capital stock of, or any incurrence of long-term debt by,
the Company, or any issuance of options, warrants or other rights to purchase
the capital stock of the Company, or any adverse change or any development
involving, so far as the Company can now reasonably foresee, a prospective
adverse change in the condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties which would be material to the
business or financial condition of the Company, and the Company has not become a
party to, and neither the business nor the property of the Company has become
the subject of, any material litigation whether or not in the ordinary course of
business.
(h) Title. Except as set forth on Schedule H hereto, the Company has
good and marketable title to all properties and assets, owned by it, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
not significant or important in relation to the Company's business; all of the
material leases and subleases under which the Company is the lessor or sublessor
of properties or assets or under which the Company holds properties or assets as
lessee or sublessee are in full force and effect, and the Company is not in
default in any material respect with respect to any of the terms or provisions
of any of such leases or subleases, and no material claim has been asserted by
anyone adverse to rights of the Company as lessor, sublessor, lessee or
sublessee under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease. The Company owns
or leases all such properties as are necessary to its operations as now
conducted.
<PAGE>
Page 22 of 128 Pages
(i) Proprietary Rights. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks, service
marks, copyrights, trade secrets, processes, formulations, technology or
know-how used in the conduct of its business as described in the Term Sheet and
will own or possess such rights with respect to the business to be conducted as
contemplated by the Term Sheet (the "Proprietary Rights"). The Company has not
received any notice of any claims, nor does it have any knowledge of any
threatened claims, and knows of no facts which would form the basis of any
claim, asserted by any person to the effect that the sale or use of any product
or process now used or offered by the Company or proposed to be used or offered
by the Company infringes on any patents or infringes upon the use of any such
Proprietary Rights of another person and, to the best of the Company's
knowledge, no others have infringed the Company's Proprietary Rights.
(j) Litigation. Except as set forth in the Term Sheet, there is no
material action, suit, investigation, customer complaint, claim or proceeding at
law or in equity by or before any arbitrator, governmental instrumentality or
other agency now pending or, to the knowledge of the Company, threatened against
the Company (or basis therefor known to the Company) the adverse outcome of
which would have a Material Adverse Effect. The Company is not subject to any
judgment, order, writ, injunction or decree of any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which have a Material Adverse Effect.
(k) Non-Defaults; Non-Contravention. Except as set forth in theTerm
Sheet, the Company is not in violation of or default under, nor will the
execution and delivery of this Agreement or any of the Offering Documents, the
Fund Escrow Agreement, the Agent's Warrants or Security Agreement (all as
defined herein) or consummation of the transactions contemplated herein or
therein result in a violation of or constitute a default in the performance or
observance of any obligation under (i) its Articles of Incorporation, or its
By-laws, or (ii) any indenture, mortgage, contract, material purchase order or
other agreement or instrument to which the Company is a party or by which it or
its property is bound or affected, where such violation or default would have a
Material Adverse Effect, or (iii) any material order, writ, injunction or decree
of any court of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, where
such violation or default would have a Material Adverse Effect, and there exists
no condition, event or act which constitutes, nor which after notice, the lapse
of time or both, could constitute a default under any of the foregoing, which in
either case would have a Material Adverse Effect.
(l) Taxes. The Company has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or which
it is obligated to withhold from amounts owing to any employee, creditor or
third party. The Company has properly accrued all taxes required to be accrued
by generally accepted accounting principals consistently applied. The tax
returns of the Company have never been audited by any state, local or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.
<PAGE>
Page 23 of 128 Pages
(m) Compliance With Laws; Licenses, Etc. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a Material Adverse Effect. The Company has all licenses and
permits and other governmental certificates, authorizations and permits and
approvals (collectively, "Licenses") required by every Federal, state and local
government or regulatory body for the operation of its business as currently
conducted and the use of its properties, except where the failure to be licensed
would not have a Material Adverse Effect. The Licenses are in full force and
effect and to the Company's knowledge no violations currently exist in respect
of any License and no proceeding is pending or threatened to revoke or limit any
thereof.
(n) Authorization of Agreement, Etc. This Agreement has been duly
and validly authorized, executed and delivered by the Company and the execution,
delivery and performance by the Company of this Agreement, the Subscription
Agreement, the Fund Escrow Agreement and the Security Agreement have been duly
authorized by all requisite corporate action by the Company and when delivered,
constitute or will constitute the legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms, subject to
applicable laws regarding insolvency and to principles of equity.
(o) Authorization of Notes, Warrants and Agent's Equities Etc. The
issuance, sale and delivery of the Notes, the Warrants and the shares (the
"Agent's Shares") and warrants (the "Agent's Warrants") to be issued to the
Placement Agent and/or its designees pursuant to Section 3(d) hereof
(collectively, the "Agent's Equities") have been duly authorized by all
requisite corporate action of the Company. When so issued, sold and delivered,
the Notes, the Warrants and the Agent's Equities will be duly executed, issued
and delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms and, in each case, will
not be subject to preemptive or any other similar rights of the stockholders of
the Company or others which rights shall not have been waived prior to the
initial closing of the Offering (the "Initial Closing").
(p) Authorization of Reserved Shares. The issuance, sale and
delivery by the Company of the shares of Common Stock issuable upon exercise of
the Warrants, including the Agent's Warrants (the "Reserved Shares") have been
duly authorized by all requisite corporate action of the Company, and the
Reserved Shares have been duly reserved for issuance upon exercise of all or any
of the Warrants and exercise of the Agent's Warrants and when so issued, sold,
paid for and delivered, the Reserved Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive or any
other similar rights of the stockholders of the Company or others which rights
shall not have been waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the respective Subscribers in the Subscription Documents
and (ii) that the Placement Agent has complied in all material respects with the
provisions of Regulation D promulgated under the Securities Act, the offer and
sale of the Units pursuant to the terms of this Agreement are exempt from the
registration requirements of the Securities Act and the rules and regulations
promulgated thereunder (the "Regulations"). The Company is not disqualified from
the exemption
<PAGE>
Page 24 of 128 Pages
under Regulation D by virtue of the disqualifications contained in Rule
505(b)(2)(iii) or Rule 507 promulgated thereunder.
(r) Registration Rights. Except as set forth in Schedule R hereto or
in the Term Sheet, and with respect to holders of the Units and the Agent's
Equities, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company. The
Company shall grant registration rights under the Securities Act to the
investors in the Offering and/or their transferees as more fully described in
the Subscription Agreement between the Company and the investors. The Company
shall be obligated to register the Agent's Equities contemporaneously with the
registration of the investors' securities.
(s) Brokers. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Agreement other than the Placement Agent
and Liberty Capital.
(t) Title to Units. When certificates representing the securities
comprising the Units shall have been duly delivered to the purchasers and
payment shall have been made therefor, the several purchasers shall have good
and marketable title to the Notes and Shares and/or the Reserved Shares free and
clear of all liens, encumbrances and claims whatsoever (with the exception of
claims arising through the acts or omissions of the purchasers and except as
arising from applicable Federal and state securities laws), and the Company
shall have paid all taxes, if any, in respect of the original issuance thereof.
(u) Right of First Refusal. Except for the right of first refusal
granted to the Placement Agent under Section 4(g) hereof, no person, firm or
other business entity is a party to any agreement, contract or understanding,
written or oral entitling such party to a right of first refusal with respect to
the transactions described in Section 4(g) hereof.
(v) Non-Affiliated Directors. Upon or immediately after the Initial
Closing, the Company's Board of Directors will have not less than two directors
who qualify under the criteria of the Nasdaq Stock Market as independent
directors.
(w) Securities Exchange Act Compliance. The Company has filed with
the Securities and Exchange Commission ("SEC") all filings required of a company
whose securities have been registered under the Securities Exchange Act of 1934,
as amended ("Exchange Act"). All information contained in such filings is true,
accurate and complete in all material respects. The Company covenants to
maintain the registration of its Common Stock under the Exchange Act and to make
all filings thereunder on a timely basis. For the purpose of this paragraph,
filings pursuant to Rule 12b-25 of the Exchange Act shall be deemed timely.
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been
subscribed for and funds representing the sale thereof shall have cleared, the
Initial Closing shall take place at the offices of the Placement Agent, 830
Third Avenue, New York, New York within ten (10) days following the Termination
Date (which date (the "Closing Date") may be accelerated or adjourned
<PAGE>
Page 25 of 128 Pages
by agreement between the Company and the Placement Agent). At the Initial
Closing, payment for the Units issued and sold by the Company shall be made
against delivery of the Notes and the Warrants comprising such Units. In
addition, subsequent closings (if applicable) may be scheduled at the discretion
of the Company and Placement Agent, each of which shall be deemed a "Closing"
hereunder.
(b) Conditions to Placement Agent's Obligations. The obligations of
the Placement Agent hereunder will be subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The Offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
paragraph 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Units shall have been issued, and
no proceeding for that purpose shall have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky
qualification materials nor the Term Sheet, nor any supplement thereto, will
contain an untrue statement of a fact which in the opinion of the Placement
Agent is material, or omit to state a fact, which in the opinion of the
Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) Compliance with Agreements. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing;
(iv) Corporate Action. The Company will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
this Agreement, the performance by the Company of its obligations hereunder and
the offering contemplated hereby;
(v) Opinion of Counsel. The Placement Agent shall receive the
opinion of Snow, Becker, Krauss, dated the Closing(s), substantially to the
effect that:
(A) each of the Company and each Subsidiary is validly
existing and in good standing under the laws of the state of its incorporation,
has all requisite corporate power and authority necessary to own or hold its
respective properties and conduct its business and is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or conduct of
its business requires such qualification, except where the failure to so qualify
or be licensed would not have a Material Adverse Effect;
(B) each of this Agreement, the Notes, the Warrants, the
Fund Escrow Agreement, the Subscription Agreement and the Security Agreement has
been duly and validly authorized, executed and delivered by the Company, and is
the valid and binding obligation
<PAGE>
Page 26 of 128 Pages
of the Company, enforceable against it in accordance with its terms, subject to
any applicable bankruptcy, insolvency or other laws affecting the rights of
creditors generally and to general equitable principles;
(C) the authorized, issued and outstanding capital stock
of the Company as of the date hereof (before giving effect to the transactions
contemplated by this Agreement) is as set forth in the Offering Documents. To
such counsel's knowledge, there are no outstanding warrants, options,
agreements, convertible securities, preemptive rights or other commitments
pursuant to which the Company is, or may become, obligated to issue any shares
of its capital stock or other securities of the Company other than as set forth
in the Term Sheet. Since September 12, 1995, all of the issued shares of capital
stock of the Company have been duly and validly authorized and issued, are fully
paid and nonassessable and to such counsel's knowledge have not been issued in
violation of the preemptive rights of any securityholder of the Company. The
offers and sales of such outstanding securities were either registered under the
Securities Act and applicable state securities laws or exempt from such
registration requirements. The Notes, the Warrants and the Agent's Equities have
been duly and validly authorized and issued, and the Agent's Shares are fully
paid and nonassessable;
(D) assuming (i) the accuracy of the information
provided by the Subscribers in the Subscription Documents and (ii) that the
Placement Agent has complied with the requirements of the provisions of
Regulation D promulgated under the Securities Act and the issuance and sale of
the Units is exempt from registration under the Securities Act and Regulation D
promulgated thereunder;
(E) neither the execution and delivery of this
Agreement, the Subscription Agreement, the Fund Escrow Agreement or the Security
Agreement, nor compliance with the terms hereof or thereof, nor the consummation
of the transactions herein or therein contemplated, nor the issuance of the
Notes, the Warrants or the Agent's Equities, has, nor will, conflict with,
result in a breach of, or constitute a default under the Articles of
Incorporation or By-laws of the Company, or any material contract, instrument or
document known to such counsel to which the Company is a party, or by which it
or any of its properties is bound or violate any applicable law, rule,
regulation, judgment, order or decree known to us of any governmental agency or
court having jurisdiction over the Company or any of its properties or business;
(F) there are no claims, actions, suits, investigations
or proceedings before or by any arbitrator, court, governmental authority or
instrumentality pending or, to such counsel's knowledge, threatened against or
affecting the Company or involving the properties of the Company which might
materially and adversely affect the business, properties or financial condition
of the Company or which might materially adversely affect the transactions or
other acts contemplated by this Agreement or the validity or enforceability of
this Agreement, except as set forth in or contemplated by the Offering
Documents; and
(G) such counsel has participated in the preparation of
the Offering Documents and nothing has come to the attention of such counsel to
cause them to have reason to believe that the Offering Documents contained any
untrue statement of a material fact required to be stated therein or omitted to
state any material fact required to be stated therein or
<PAGE>
Page 27 of 128 Pages
necessary to make the statements therein not misleading (except for the
financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need express no
opinion).
(vi) Security Agreement. On or prior to the Initial Closing
Date, the Placement Agent, as agent for the investors in the Offering, shall
receive a copy of a duly executed security agreement in the form previously
delivered to you (the "Security Agreement").
(vii) Officers' Certificate. The Placement Agent shall receive
a certificate of the Company, signed by the Chief Executive Officer or Chief
Financial Officer and Secretary thereof, that the representations and warranties
contained in Section 2 hereof are true and accurate in all material respects at
such Closing with the same effect as though expressly made at such Closing.
(viii) Fund Escrow Agreement. On or prior to the Initial
Closing Date, the Placement Agent shall receive a copy of a duly executed escrow
agreement in the form previously delivered to you regarding the deposit of funds
pending the Closing(s) with a bank or trust company acceptable to the Placement
Agent (the "Fund Escrow Agreement").
(ix) Lock-Up Agreements. On or prior to the Initial Closing
Date, the Placement Agent shall receive agreements from each officer and
director of the Company beneficially owing in excess of 3% of the Company's
Common Stock to the effect that such individual shall not sell, assign or
transfer any of their securities of the Company for the period of 12 months from
the final Closing without the prior written consent of the Placement Agent.
(x) Financial Projections. On or prior to the Initial Closing,
the Placement Agent shall receive two-year quarterly financial projections which
have been reviewed and approved by the Company and the Placement Agent.
(xi) Banco Popular Documents. On or prior to or on the Initial
Closing, the Company shall have obtained (i) a pay-off letter from Banco Popular
relating to the time note in the original principal amount of $750,000 (the
"Banco Popular Debt") and (ii) termination statements on Form UCC 3 terminating
the security interest in the collateral securing the Banco Popular Debt.
(c) Blue Sky. A summary blue sky survey shall be prepared by counsel
to the Placement Agent stating the extent to which and the conditions upon which
offers and sales of the Units may be made in certain jurisdictions. It is
understood that such survey may be based on or rely upon (i) the representations
of each Subscriber set forth in the Subscription Agreement delivered by such
Subscriber, (ii) the representations, warranties and agreements of the Company
set forth in Section 2 of this Agreement, (iii) the representations and
warranties of the Placement Agent, and (iv) the representations of the Company
set forth in the certificate to be delivered at the Closing pursuant to
paragraph (vii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for and
delivery of the Units at each Closing as provided in paragraph 3(a) above, the
Company shall at such
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Page 28 of 128 Pages
Closing pay to the Placement Agent (i) a commission equal to7% of the aggregate
purchase price of the Units sold; (ii) a structuring fee equal to 2% of the
aggregate purchase price of the Units sold and (iii) reimbursement of legal
fees. The Company shall also pay all expenses in connection with the
qualification of the Units under the securities or Blue Sky laws of the states
which the Placement Agent shall designate, including legal fees (not to exceed
$10,000) and filing fees. The Company will, at the Initial Closing, issue to you
or your designees (which may include any Selected Dealer or any officer of the
Placement Agent or a Selected Dealer) (i) the Agent's Shares representing that
number of shares of Common Stock equal to 5% of the gross proceeds of the
Offering (including any exercise of the Over-Allotment Option) divided by the
closing bid price on the Initial Closing Date; (ii) Agent's Warrants to purchase
at an exercise price of $.50 per share that number of shares of Common Stock
equal to 10% of the gross proceeds of the Offering (including any exercise of
the Over-Allotment Option) divided by the closing bid price on the Initial
Closing Date.
(e) Bring-Down Opinions and Certificates. If there is more than one
Closing, then at each such Closing there shall be delivered to the Placement
Agent updated opinions and certificates as described in (v) and (vii) of Section
3(b) above, respectively.
(f) No Adverse Changes. There shall not have occurred, at any time
prior to the Closing or, if applicable, any additional Closing, (i) any domestic
or international event, act or occurrence which has materially disrupted, or in
the Placement Agent's opinion will in the immediate future materially disrupt,
the securities markets; (ii) a general suspension of, or a general limitation on
prices for, trading in securities on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market; (iii) any outbreak of major
hostilities or other national or international calamity; (iv) any banking
moratorium declared by a state or federal authority; (v) any moratorium declared
in foreign exchange trading by major international banks or other persons; (vi)
any material interruption in the mail service or other means of communication
within the United States; (vii) any material adverse change in the business,
properties, assets, results of operations, or financial condition of the
Company; or (viii) any change in the market for securities in general or in
political, financial, or economic conditions which, in the Placement Agent's
reasonable judgment, makes it inadvisable to proceed with the offering, sale,
and delivery of the Units.
4. Covenants of the Company.
(a) Use of Proceeds; Deposit of Funds. The net proceeds of the
Offering will be used by the Company substantially as set forth in the Term
Sheet. Other than as specifically set forth in the Term Sheet, the Company shall
not use any of the proceeds from the Offering to repay any indebtedness of the
Company, including but not limited to indebtedness to any current executive
officers, directors or principal stockholders of the Company. Pending
utilization, the net proceeds will be invested in short-term, investment grade,
interest bearing investments, certificates of deposit or guaranteed United
States government obligations.
(b) Expenses of Offering. The Company shall be responsible for, and
shall bear all expenses directly incurred in connection with, the proposed
Offering including, but not limited to, legal fees of the Company's counsel
relating to the costs of preparing the Offering Documents
<PAGE>
Page 29 of 128 Pages
and all amendments, supplements and exhibits thereto; fees and expenses of
counsel for the Placement Agent; preparing and delivering all placement agent
and selling documents, including, but not limited to, the Agency Agreement with
the Placement Agent and the blue sky memorandum; Note and Warrant certificates;
blue sky fees, filing fees and the fees and disbursements of counsel in
connection with blue sky matters (the "Company Expenses"). Such expenses shall
not include the cost of the Placement Agent's mailing, telephone, telegraph,
travel, due diligence meetings, or other similar expenses (the "Placement Agent
expenses").
If the Placement Agent decides not to proceed with the Offering
because of a material breach by the Company of its representations, warranties,
or covenants in this Agreement or in the letter of intent dated May 26, 1998
(the "LOI") or as a result of material adverse changes in the affairs of the
Company, or failure to meet the General Conditions set forth in the LOI, the
Company will be obligated to reimburse the Placement Agent for its time, work
and expenses up to the sum of $50,000, exclusive of amounts theretofore paid
pursuant to the LOI (the "Expense Allowance"). If the Company decides not to
proceed with the Offering for any reason after the Minimum Offering has been
raised and is in escrow, the Company will be obligated to pay the Placement
Agent a break-up fee of $180,000, in addition to the Expense Allowance. In such
event, the Placement Agent will receive Agent's Warrants for the purchase of
300,000 shares at an exercise price of $.50 per share. In addition, if the
Company elects not to proceed with the proposed Offering for any reason (except
for Placement Agent's failure to close the Offering after the Minimum Offering
has been raised and is in escrow) and subsequently engages in any public
offering, private placement, merger or other similar on or prior to May 26, 1999
(other than a transaction through Liberty Capital, then the Placement Agent
shall receive the fees set forth in Section 3(d) hereof. The Placement Agent
shall have no liability to the Company for any reason should the Placement Agent
choose not to proceed with the Offering contemplated hereby.
(c) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the last Closing
or the Termination Date as a result of which the Offering Documents would
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (B) of the receipt of any notification with respect to the
modification, rescission, withdrawal or suspension of the qualification or
registration of the Units, or of any exemption from such registration or
qualification, in any jurisdiction. The Company will use its best efforts to
prevent the issuance of any such modification, rescission, withdrawal or
suspension and, if any such modification, rescission, withdrawal or suspension
is issued and you so request, to obtain the lifting thereof as promptly as
possible.
(d) Blue Sky. The Company will use its best efforts to qualify or
register the Units for offering and sale under, or establish an exemption from
such qualification or registration under, the securities or "blue sky" laws of
such jurisdictions as you may reasonably request; provided however, that the
Company will not be obligated to qualify as a dealer in securities in any
jurisdiction in which it is not so qualified. The Company will not consummate
any sale of Units in any jurisdiction in which it is not so qualified or in any
manner in which such sale may not be lawfully made.
<PAGE>
Page 30 of 128 Pages
(e) Form D Filing. The Company shall file five copies of a Notice of
Sales of Securities on Form D with the Securities and Exchange Commission (the
"Commission") no later than 15 days after the first sale of the Units. The
Company shall file promptly such amendments to such Notices on Form D as shall
become necessary and shall also comply with any filing requirement imposed by
the laws of any state or jurisdiction in which offers and sales are made. The
Company shall furnish the Placement Agent with copies of all such filings.
(f) Press Releases, Etc. The Company shall not, during the period
commencing on the date hereof and ending on the later of the last Closing and
the Termination Date, issue any press release or other communication, or hold
any press conference with respect to the Company, its financial condition,
results of operations, business, properties, assets, or liabilities, or the
Offering, without the prior consent of the Placement Agent, which consent shall
not be unreasonably withheld.
(g) Right of First Refusal. Prior to the maturity date of the Notes
and thereafter in the event the Company defaults on repayment of the Notes, if
the Company proposes to use a manager, placement agent or investment banker or
persons performing similar services for a fee, the Placement Agent shall have
the right of first refusal (the "Right of First Refusal") (i) to purchase for
the account of the Placement Agent or to act as an underwriter or agent for any
and all public or private offerings of debt securities of the Company, or any
successor to or subsidiary of the Company or other entity in which the Company
has a controlling equity interest (collectively referred to herein as the
"Company"), by the Company or any current or future officer or director of the
Company, other than an offering to any party contacted by Liberty Capital or any
party on the Middle East investor schedule attached hereto (the "Subsequent
Company Offering"). Accordingly, if during such period the Company intends to
make a Subsequent Company Offering, the Company shall notify you in writing of
such intention and of the proposed terms of the offering. The Company shall
thereafter promptly furnish you with such information concerning the business,
condition and prospects of the Company as you may reasonably request. If within
ten (10) business days of the mailing by registered mail addressed to the
Placement Agent with respect to a Subsequent Company Offering of such notice of
intention and statement of terms you do not accept in writing such offer to act
as underwriter or agent with respect to such offering upon the terms proposed,
the Company shall be free to negotiate terms with other underwriters or agents
with respect to such offering, and to effect such offering on such proposed
terms. Before the Company shall accept any proposal less favorable to the
Company from such underwriter or agent or if such subsequent Company Offering is
not consummated within three months, your preferential right shall be reinstated
and the same procedure with respect to such modified proposal as provided above
shall be adopted; provided, however, that your preferential right shall not be
reinstated after repayment of the Notes. The failure by you to exercise your
Right of First Refusal in any particular instance shall not affect in any way
such right with respect to any other Subsequent Company Offering.
(h) Charter Amendment. Prior to the maturity date of the Notes and
thereafter in the event the Company defaults on repayment of the Notes, the
Company will not issue any shares of preferred stock, other than in the private
placement contemplated by the LOI, without the approval of the holders of a
majority in principal amount of the Notes (including holders who have converted
their Notes).
<PAGE>
Page 31 of 128 Pages
(i) Key-Man Insurance. Prior to the Initial Closing Date, the
Company shall have obtained a "key-man" life insurance policy in the amount of
at least $1,000,000 on the life of Diego Leiva. Such policy will be kept in
effect for at least two years from the Initial Closing Date.
(j) Executive Compensation. The compensation of the executive
officers of the Company shall not increase until repayment of the Notes. In
addition, prior to the maturity date of the Notes and thereafter in the event
the Company defaults on repayment of the Notes, the Company shall not amend or
enter into any employment agreement containing anti-takeover provisions without
the approval of the holders of a majority in principal amount of the Notes
(including holders who have converted their Notes).
(k) Board Observer. During the period ending two years after the
Initial Closing Date, the Placement Agent shall have the option to appoint an
observer selected by the Placement Agent to attend all meetings of the Company's
Board of Directors.
(l) Restrictions on Issuance of Securities. Until the Termination
Date, the Company will not, without the prior written consent of the Placement
Agent, issue additional shares of Common Stock or grant any warrants, options or
other securities of the Company other than pursuant to agreements in existence
on the date hereof or options which may be granted to new employees or
non-officer employees.
(m) Accounting Firm. The Company shall retain an accounting firm
acceptable to the Placement Agent within three months following the Initial
Closing Date and, for a period of three years following the Initial Closing
Date, shall not effect a change in such accounting firm, without the prior
written consent of the Placement Agent, unless such new firm is a "big five"
accounting firm or Goldstein Golub & Kessler LLP.
(n) Budgets. During the period ending two years after the Initial
Closing Date, the Company shall prepare semi-annual budgets reflecting its
proposed operations and cash flow needs and submit such budgets to Commonwealth
Associates for review and to the Company Board of Directors for its approval on
a semi-annual basis.
(o) By-Laws. Prior to the maturity date of the Notes and thereafter
in the event the Company defaults on repayment of the Notes, the Company shall
not amend its By-laws without shareholder approval and the approval of the
holders of a majority in principal amount of the Notes (including holders who
have converted their Notes).
(p) Transmittal Letters. Within five days after the Closing, the
Placement Agent shall receive copies of all letters from the Company to the
investors transmitting the Notes and Warrants and shall receive a letter from
the Company confirming transmittal of the securities to the investors.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Placement
Agent and each Selected Dealer, if any, and their respective shareholders,
directors, officers, agents and
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Page 32 of 128 Pages
controlling persons (an "Indemnified Party") against any and all loss,
liability, claim, damage and expense whatsoever (and all actions in respect
thereof), and to reimburse the Placement Agent for legal fees and related
expenses as incurred (including, but not limited to the costs of investigating,
preparing or defending any such action or claim whether or not in connection
with litigation in which the Placement Agent is a party and the costs of giving
testimony or furnishing documents in response to a subpoena or otherwise),
arising out of any untrue statement or alleged untrue statement of a material
fact contained in the Offering Documents or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(b) The Company agrees to indemnify and hold harmless an Indemnified
Party to the same extent as the foregoing indemnity, against any and all loss,
liability, claim, damage and expense whatsoever directly arising out of the
exercise by any person of any right under the Securities Act or the Exchange Act
or the securities or Blue Sky laws of any state on account of violations of the
representations, warranties or agreements set forth in Section 2 hereof.
(c) Promptly after receipt by a person entitled to indemnification
pursuant to the foregoing subsection (a) or (b) (an "indemnified party") under
this Section of notice of the commencement of any action, the indemnified party
will, if a claim in respect thereof is to be made against the Company under this
Section, notify in writing the Company of the commencement thereof; but the
omission so to notify the Company will not relieve it from any liability which
it may have to the indemnified party otherwise than under this Section except to
the extent the defense of the claim is prejudiced. In case any such action is
brought against an indemnified party, and it notifies the Company of the
commencement thereof, the Company will be entitled to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to the indemnified party, and after
notice from the Company to the indemnified party of its election so to assume
the defense thereof, the Company will not be liable to the indemnified party
under this Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation (provided the Company has been advised in writing that
such investigation is being undertaken). The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the Company if the Company has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party; provided that the fees
and expenses of such counsel shall be at the expense of the Company if (i) the
employment of such counsel has been specifically authorized in writing by the
Company or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party or parties and the Company and, in
the judgment of counsel for the indemnified party, it is advisable for the
indemnified party or parties to be represented by separate counsel (in which
case the Company shall not have the right to assume the defense of such action
on behalf of the indemnified party or parties, it being understood, however,
that the Company shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for the
indemnified party or parties. No settlement of any action
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Page 33 of 128 Pages
against an indemnified party shall be made unless such indemnified party is
fully and completely released in connection therewith.
6. Contribution.
To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section (5) but
it is found in a final judicial determination, not subject to further appeal,
that such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Securities Act,
the Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee or agent
for the Company, or any controlling person of the Company), on the one hand, and
the Placement Agent and any Selected Dealers (including for this purpose any
contribution by or on behalf of an indemnified party), on the other hand, shall
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Placement Agent and the Selected Dealers, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Placement Agent and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. In no case shall the Placement Agent or a Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 3 hereof or the Selected Dealer
Agreement, as the case may be. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person, if any, who controls the Placement Agent or a Selected Dealer
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, stockholder, employee and agent of the
Placement Agent or a Selected Dealer, shall have the same rights to contribution
as the Placement Agent or the Selected Dealer, and each person, if any who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act and each officer, director, employee and agent
of the Company, shall have the same rights to contribution as the Company,
subject in each case to the provisions of this Section 6. Anything in this
Section 6 to the contrary notwithstanding, no party shall be liable for
contribution with respect to the settlement of any claim or action effected
without its written consent. This Section 6 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering without consummation
thereof shall be without obligation on the part of any party except that the
indemnification provided in Section 5 hereof and the contribution provided in
Section 6 hereof shall survive any termination and shall survive the Closing for
a period of five years.
(b) Representations, Warranties and Covenants to Survive Delivery.
The respective representations, warranties, indemnities, agreements, covenants
and other statements of
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Page 34 of 128 Pages
the Company as of the date hereof shall survive execution of this Agreement and
delivery of the Units and the termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective successors and
controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law; Resolution of Disputes. This Agreement shall be
governed by and construed in accordance with the law of the State of New York
without regard to conflict of law provisions. The Placement Agent and the
Company will attempt to settle any claim or controversy arising out of this
Agreement through consultation and negotiation in good faith and a spirit of
mutual cooperation. Should such attempts fail, then the dispute will be mediated
by a mutually acceptable mediator to be chosen by the Placement Agent and the
Company within 15 days after written notice from either party demanding
mediation. Neither party may unreasonably withhold consent to the selection of a
mediator, and the parties will share the costs of the mediation equally. Any
dispute which the parties cannot resolve through negotiation or mediation within
six months of the date of the initial demand for it by one of the parties may
then be submitted to the courts for resolution. The use of mediation will not be
construed under the doctrine of latches, waiver or estoppel to affect adversely
the rights of either party. Nothing in this paragraph will prevent either party
from resorting to judicial proceedings if (a) good faith efforts to resolve the
dispute under these procedures have been unsuccessful or (b) interim relief from
a court if necessary to prevent serious and irreparable injury.
(e) Counterparts. This Agreement may be signed in counterparts with
the same effect as if both parties had signed one and the same instrument.
(f) Notices. Any communications specifically required hereunder to
be in writing, if sent to the Placement Agent, will be sent by overnight courier
providing a receipt of delivery or by certified or registered mail to it at
Commonwealth Associates, 830 Third Avenue, New York, New York 10022, Att:
Bradford Van Siclen, with a copy to Bachner, Tally, Polevoy & Misher LLP, 380
Madison Avenue, New York, New York 10017, Att: Fran Stoller and if sent to the
Company, will be sent by overnight courier providing a receipt of delivery or by
certified or registered mail to it at Wayne Interchange Plaza II, Third Floor,
Wayne, New Jersey 07470, Att: Diego Leiva, with a copy to Snow Becker Krauss
P.C., 605 Third Avenue, New York, New York, Att: Elliott H. Lutzker, Esq.
(g) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
<PAGE>
Page 35 of 128 Pages
If you find the foregoing is in accordance with our understanding, kindly
sign and return to us a counterpart hereof, whereupon this instrument along with
all counterparts will become a binding agreement between us.
Very truly yours,
PICK COMMUNICATIONS CORP.
By:
------------------------------------------
Robert S. Bingham, Chief Financial Officer
Agreed:
COMMONWEALTH ASSOCIATES
By: COMMONWEALTH MANAGEMENT CO., INC.,
its general partner
By:
--------------------------------------
Name: Joseph Wynne
Title: Chief Financial Officer
<PAGE>
Page 36 of 128 Pages
SCHEDULE A
PICK COMMUNICATIONS CORP.
PRIVATE PLACEMENT SELLING AGREEMENT
New York, New York
, 1998
Dear Sirs:
1. PICK Communications Corp. (the "Company") is offering for sale on a
"best efforts, minimum-maximum" basis, a total of 40 units ("Units") with an
over-allotment of up to 20 additional Units, each Unit consisting of $100,000
principal amount of 10% senior secured notes (the "notes") and warrants (the
"Warrants") to purchase 100,000 shares of the Company's common stock. The Units
and the terms under which they are to be offered for sale by the Company are
more particularly described in the Private Placement Term Sheet dated July 13,
1998 (the "Term Sheet") and the form of subscription agreement between the
Company and each subscriber (the "Subscription Agreement"), the exhibits to the
Term Sheet and the Subscription Agreement, and any other documents delivered to
subscribers (herein, collectively the "Offering Documents"). Commonwealth
Associates (the "Placement Agent") has agreed to act as exclusive placement
agent to the Company for the purpose of assisting the Company in finding
subscribers who satisfy the requirements set forth in the Offering Documents and
more particularly in the Subscription Agreement (herein, "Qualified
Subscribers") pursuant to the offering ("Private Placement") described in the
Offering Documents.
2. The Units are to be offered to a limited number of subscribers by the
Company at the price per Unit set forth in the Offering Documents (the
"Subscription Price"), in accordance with the terms of offering thereof set
forth in the Offering Documents.
3. We are extending the right, subject to the terms and conditions hereof,
to assist the Company in finding Qualified Subscribers to purchase a portion of
the Units, to certain dealers who are actually engaged in the investment banking
or securities business and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") (such dealers who shall
agree to assist in locating Qualified Subscribers for Units hereunder being
herein called "Selected Dealers"), at the Subscription Price, for which they
will receive a commission of ____% of the Subscription Price for Units purchased
by Qualified Subscribers presented to the Company by them. The Selected Dealers
have agreed to comply with the provisions of all applicable Rules of Fair
Practice of the NASD. We may be included among the Selected Dealers.
4. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the Private Placement of the
Units.
<PAGE>
Page 37 of 128 Pages
5. If you desire to present to the Company any Qualified Subscribers for
Units, your application should reach us promptly by telephone or telegraph at
830 Third Avenue, New York, New York 10022, Attention: Brad Van Siclen,
telephone number 212-829-5800. We reserve the right to reject subscriptions in
whole or in part, to make allotments and to close the subscription books at any
time without notice. The Units allotted to the Qualified Subscribers presented
by you will be confirmed, subject to the terms and conditions of this Agreement.
6. The privilege of assisting the Company in finding Qualified Subscribers
for the Units is extended to you only so long as the Company may lawfully sell
the Units to residents in the state in which any such Qualified Subscribers
reside pursuant to the terms of the Offering Documents.
7. Any Units offered under the terms of this Agreement and the Offering
Documents may only be offered and sold subject to the securities or blue sky
laws of the various states or other jurisdictions.
You agree to advise us from time to time, upon request, of the number of
sets of Offering Documents delivered to qualified subscribers by you hereunder
at the time of such request.
No expenses shall be charged to Selected Dealers.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the offer or sale
of the Units other than as contained in the Offering Documents.
8. On becoming a Selected Dealer, and in assisting the Company in finding
Qualified Subscribers for the Units, you agree to comply with all the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act")
specifically with respect to the requirements of Regulation D thereunder. You
confirm that you are familiar with Rules 501 and 502 under the 1933 Act relating
to the limitations on the manner in which a private placement may be conducted
pursuant to Regulation D under the 1933 Act.
9. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Units have been qualified
or are exempt from registration requirements for offer and sale under the
respective securities or blue sky laws of such states and other jurisdictions,
but we do not assume any obligation or responsibility as to the right of any
Selected Dealer to offer the Units in any state or other jurisdiction or as to
the eligibility of the Units for sale therein. We will, if requested, file a
Further State Notice in respect of the Units pursuant to Article 23-A of the
General Business Law of the State of New York.
10. No Selected Dealer is authorized to act as our agent or an agent of
the Company or otherwise to act on our behalf in assisting the Company in
finding Qualified Subscribers or otherwise or to furnish any information or make
any representation except as contained in the Offering Documents.
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Page 38 of 128 Pages
11. Nothing will constitute the Selected Dealers an association or other
separate entity or partners with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim to the
contrary. We shall not be under any liability for or in respect of value,
validity or form of the components of the Units or the delivery of the Notes and
Warrants comprising the Units, or the performance by anyone of any agreement on
its part, or the qualification of the Units for offer or sale under the laws of
any jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and for obligations expressly assumed
by us in this Agreement and no obligation on our part shall be implied herefrom.
The foregoing provisions shall not be deemed a waiver of any liability imposed
under the federal securities laws.
12. Payment for the Units subscribed for hereunder is to be made by
Qualified Subscribers at the Subscription Price during the term of the Private
Placement set forth in the Offering Documents at the office of Commonwealth
Associates, 830 Third Avenue, New York, New York 10022, by a certified or
official bank check, payable to the order of U.S. Trust Company of New York, as
Escrow Agent for PICK Communications.
13. Notice to us should be addressed to Commonwealth Associates, 830 Third
Avenue, New York, New York 10022, Attention: Bradford Van Siclen. Notices to you
shall be deemed to have been duly given if mailed to you at the address to which
this letter is addressed.
14. If you desire to assist the Company in finding Qualified Subscribers
pursuant to the terms set forth above, please confirm your application by
signing and returning to us your confirmation on the duplicate copy of this
letter enclosed herewith, even though you may have previously advised us thereof
by telephone or telegraph. Our signature hereon may be by facsimile.
Very truly yours,
COMMONWEALTH ASSOCIATES
By: COMMONWEALTH MANAGEMENT CO., INC.,
its general partner
By:
----------------------------------------
Name: Joseph Wynne
Title: Chief Financial Officer
<PAGE>
Page 39 of 128 Pages
Commonwealth Associates
830 Third Avenue
New York, New York 10022
We hereby present to PICK Communications Corp. (the "Company") Qualified
Subscribers for Units in accordance with the terms and conditions stated in the
foregoing letter. We hereby acknowledge receipt of the Offering Documents
referred to in the first paragraph thereof relating to said Units. We confirm
that we are a dealer actually engaged in the investment banking or securities
business and that we are a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). We hereby agree to comply with all of
the applicable provisions of the Rules of Fair Practice of the NASD.
By:
---------------------------------
Authorized Officer
Address:
Dated:
---------------------------
Page 40 of 128 Pages
Exhibit 2
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT
THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES
ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH
TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL
BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.
----------------------------------------------------------------
PICK COMMUNICATIONS CORP.
No. _________ $______________
10% Senior Secured Note
PICK Communications Corp., a Nevada corporation (the "Company"), for value
received, hereby promises to pay to the order of ___________________ (the
"Payee") on the earlier of (i) completion by the Company of an equity financing
resulting in gross proceeds of $5,000,000 or more or (ii) November 28, 1998 (the
"Maturity Date") at the offices of the Company, the principal sum of
________________ Dollars ($______________) or such lesser principal amount as
shall at such time be outstanding hereunder (the "Principal Amount"). The
Maturity Date set forth in (ii) above may be extended by up to 60 days (the
"Extension Period") at the sole discretion of the Company (the "Extension
Option"). Each payment by the Company pursuant to this Note shall be made
without set-off or counterclaim and shall be made in lawful currency of the
United States of America and in immediately available funds. Interest on this
Note shall accrue on the Principal Amount outstanding from time to time at a
rate per annum computed in accordance with Section 2 hereof.
Accrued and unpaid interest shall be payable (i) upon maturity (whether at
the Maturity Date, by acceleration or otherwise); provided, however, that if the
Extension Option is exercised, accrued and unpaid interest shall be payable
within five days thereafter; (ii) upon any prepayment, on the amount prepaid and
(iii) after maturity until paid in full (after as well as before judgment), on
demand. Each of the dates referred to in clauses (i), (ii), and (iii) is
sometimes hereinafter referred to as an "Interest Payment Date." All
computations of interest hereunder shall be made based on the actual number of
days elapsed in a year of 360 days (including the first day but excluding the
last day during which any such Principal Amount is outstanding).
The amount of all repayments of principal, interest rates applicable
thereto and interest accrued thereon shall be recorded on the records of the
Payee and, prior to any transfer of, or any action to collect, this Note shall
be endorsed on this Note. Any such recordation or endorsement shall constitute
prima facie evidence of the accuracy of the information so recorded or endorsed,
but the failure to record any such amount or rate shall not limit or otherwise
affect the obligations of the Company hereunder to make payments of principal or
interest when due. All payments by
<PAGE>
Page 41 of 128 Pages
the Company hereunder shall be applied first to pay any interest which is due,
but unpaid, then to reduce the Principal Amount.
The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees to pay to the holder hereof, on
demand, all costs and expenses (including reasonable legal fees and expenses)
incurred in connection with the enforcement and collection or this Note.
This Note is issued pursuant to a Subscription Agreement between the
Company and the Payee (the "Subscription Agreement"), a copy of which agreement
is available for inspection at the Company's principal office. Notwithstanding
any provision to the contrary contained herein, this Note is subject and
entitled to certain terms, conditions, covenants and agreements contained in the
Subscription Agreement. Any transferee of this Note, by its acceptance hereof,
assumes the obligations of the Payee in the Subscription Agreement with respect
to the conditions and procedures for transfer of this Note. Reference to the
Subscription Agreement shall in no way impair the absolute and unconditional
obligation of the Company to pay both principal hereof and interest hereon as
provided herein.
In consideration for the loan evidenced by this Note and other identical
notes in the aggregate principal amount of up to $6,000,000 (the "Notes"), the
Company shall issue to the holders of the Notes (the "Holders") five-year
warrants to purchase 100,000 shares of the Company's common stock, $.001 par
value (the "Common Stock") at an exercise price of $.50 per share for each
$100,000 Principal Amount of Notes held.
The obligations of the Company under the Notes are secured by liens on the
Company's assets as set forth in and pursuant to a Security Agreement of even
date herewith.
1. Prepayment. The Principal Amount of this Note may be prepaid, in whole
or in part, only in the event and to the extent the Company obtains proceeds
from a debt or equity financing.
2. Computation of Interest.
A. Base Interest Rate. Subject to subsection B below, the
outstanding Principal Amount shall bear interest at the rate of 10% per annum.
B. Penalty Interest Rate. In the event the Extension Option is
exercised or the Note is otherwise not repaid on the Maturity Date, the rate of
interest applicable to the unpaid Principal Amount shall be retroactively
adjusted to 18% per annum; provided, that in no event shall the interest rate
exceed the Maximum Rate provided in Section 2C below.
C. Maximum Rate. In the event that it is determined that, under the
laws relating to usury applicable to the Company or the indebtedness evidenced
by this Note ("Applicable Usury Laws"), the interest charges and fees payable by
the Company in connection herewith or in connection with any other document or
instrument executed and delivered in connection herewith cause the effective
interest rate applicable to the indebtedness evidenced by this Note to exceed
the maximum rate allowed by law (the "Maximum Rate"), then such interest
<PAGE>
Page 42 of 128 Pages
shall be recalculated for the period in question and any excess over the Maximum
Rate paid with respect to such period shall be credited, without further
agreement or notice, to the Principal Amount outstanding hereunder to reduce
said balance by such amount with the same force and effect as though the Company
had specifically designated such extra sums to be so applied to principal and
the Payee had agreed to accept such extra payment(s) as a premium-free
prepayment. All such deemed prepayments shall be applied to the principal
balance payable at maturity. In no event shall any agreed-to or actual exaction
as consideration for this Note exceed the limits imposed or provided by
Applicable Usury Laws in the jurisdiction in which the Company is resident
applicable to the use or detention of money or to forbearance in seeking its
collection in the jurisdiction in which the Company is resident.
3. Covenants of Company
A. Affirmative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 3A:
(i) Taxes and Levies. The Company will promptly pay and discharge
all taxes, assessments, and governmental charges or levies imposed upon the
Company or upon its income and profits, or upon any of its property, before the
same shall become delinquent, as well as all claims for labor, materials and
supplies which, if unpaid, might become a lien or charge upon such properties or
any part thereof; provided, however, that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings and
the Company shall set aside on its books adequate reserves in accordance with
generally accepted accounting principles ("GAAP") with respect to any such tax,
assessment, charge, levy or claim so contested;
(ii) Maintenance of Existence. The Company will do or cause to be
done all things reasonably necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws
applicable to the Company, except where the failure to comply would not have a
material adverse effect on the Company;
(iii) Maintenance of Property. The Company will at all times
maintain, preserve, protect and keep its property used or useful in the conduct
of its business in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements and
improvements thereto as shall be reasonably required in the conduct of its
business;
(iv) Insurance. The Company will, to the extent necessary for the
operation of its business, keep adequately insured by financially sound
reputable insurers, all property of a character usually insured by similar
corporations and carry such other insurance as is usually carried by similar
corporations;
(v) Books and Records. The Company will at all times keep true and
correct books, records and accounts reflecting all of its business affairs and
transactions in accordance with GAAP. Such books and records shall be open at
reasonable times and upon reasonable notice to the inspection of the Payee or
its agents; and
<PAGE>
Page 43 of 128 Pages
(vi) Notice of Certain Events. The Company will give prompt written
notice (with a description in reasonable detail) to the Payee of:
(a) the occurrence of any Event of Default or any event which, with
the giving of notice or the lapse of time, would constitute an Event of
Default; and
(b) the occurrence of any event of default or any event which, with
the giving of notice or the lapse of time, would constitute an event of
default under any document or instrument evidencing or governing any
material indebtedness (i.e. in excess of $100,000 principal amount) of the
Company and the delivery of any notice effecting the acceleration of any
such indebtedness.
B. Negative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 3B:
(i) Liquidation, Dissolution. The Company will not liquidate or
dissolve, consolidate with, or merge into or with, any other corporation or
other entity, except that any wholly-owned subsidiary may merge with another
wholly-owned subsidiary or with the Company (so long as the Company is the
surviving corporation and no Event of Default shall occur as a result thereof);
(ii) Sales of Assets. The Company will not sell, transfer, lease or
otherwise dispose of, or grant options, warrants or other rights with respect
to, all or a substantial part of its properties or assets to any person or
entity, provided that this clause (ii) shall not restrict any disposition made
in the ordinary course of business and consisting of
(a) capital goods which are obsolete or have no remaining useful
life; or
(b) finished goods inventories.
(iii) Redemptions. The Company will not redeem or repurchase any
outstanding equity securities of the Company, except for (a) repurchases of
unvested or restricted shares of Common Stock at cost from employees,
consultants or members of the Board of Directors pursuant to repurchase options
of the Company (1) currently outstanding or (2) hereafter entered into pursuant
to a stock option plan or restricted stock plan approved by the Company's Board
of Directors or (b) rescission offers contemplated in the Term Sheet or
necessary or appropriate to address violations of applicable securities laws;
(iv) Indebtedness. The Company will not create, incur, assume or
suffer to exist, contingently or otherwise, any indebtedness which is not
expressly subordinated in right of payment to the Notes, except as set forth in
(v) below;
(v) Negative Pledge. The Company will not create, incur, assume or
suffer to exist any mortgage, pledge, hypothecation, assignment, security
interest, encumbrance, lien (statutory or other), preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and
<PAGE>
Page 44 of 128 Pages
any financing lease) (each, a "Lien") upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:
(a) Liens granted to secure indebtedness incurred to finance
the acquisition (whether by purchase or capitalized lease) of tangible
assets, but only on the assets acquired with the proceeds of such
indebtedness;
(b) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without penalty
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
(c) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not
overdue or being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
(d) Liens (other than Liens arising under the Employee
Retirement Income Security Act of 1974, as amended, or Section 412(n) of
the Internal Revenue Code of 1986, as amended) incurred in the ordinary
course of business in connection with workers' compensation, unemployment
insurance or other forms of governmental insurance or benefits, or to
secure performance of tenders, statutory obligations, leases and contracts
(other than for borrowed money) entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds; and
(e) judgment Liens to the extent not covered by insurance
which do not exceed $100,000 and are in existence less than 30 days after
the entry thereof or with respect to which execution has been stayed;
(vi) Investments. The Company will not purchase, own, invest in or
otherwise acquire, directly or indirectly, any stock or other securities or make
or permit to exist any investment or capital contribution or acquire any
interest whatsoever in any other person or entity or permit to exist any loans
or advances for such purposes except for existing investments as described in
the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1998,
and investments in direct obligations of the United States of America or any
agency thereof, obligations guaranteed by the United States of America and
certificates of deposit or other obligations of any bank or trust company
organized under the laws of the United States or any state thereof and having
capital and surplus of at least $500,000,000; provided, however, that nothing
contained in this clause (v) shall preclude the Company from making acquisitions
for the purpose of expanding its business.
(vii) Transactions with Affiliates. The Company will not enter into
any transaction, including, without limitation, the purchase, sale, lease or
exchange of property, real or personal, or the rendering of any service, with
any person or entity affiliated with the Company, except in the ordinary course
of and pursuant to the reasonable requirements of its business and
<PAGE>
Page 45 of 128 Pages
upon fair and reasonable terms not less favorable than would be obtained in a
comparable arms-length transaction with any other person or entity not
affiliated with the Company;
(viii) Dividends. The Company will not declare or pay any cash
dividends or distributions on its outstanding capital stock.
4. Events of Default
A. The term "Event of Default" shall mean any of the events set
forth in this Section 4A:
(i) Non-Payment of Obligations. The Company shall default in the
payment of the principal or accrued interest of this Note as and when the same
shall become due and payable, whether by acceleration or otherwise.
(ii) Non-Performance of Affirmative Covenants. The Company shall
default in the due observance or performance of any covenant set forth in
Section 3A, which default shall continue uncured for five (5) business days.
(iii) Non-Performance of Negative Covenants. The Company shall
default in the due observance or performance of any covenant set forth in
Section 3B.
(iv) Bankruptcy, Insolvency, etc. The Company shall:
(a) become insolvent or generally fail or be unable to pay, or admit
in writing its inability to pay, its debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Company or any
of its property, or make a general assignment for the benefit of
creditors;
(c) in the absence of such application, consent or acquiesce in,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or for any part of its
property;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Company, and, if such case or
proceeding is not commenced by the Company or converted to a voluntary
case, such case or proceeding shall be consented to or acquiesced in by
the Company or shall result in the entry of an order for relief; or
(e) take any corporate or other action authorizing, or in
furtherance of, any of the foregoing.
<PAGE>
Page 46 of 128 Pages
(v) Cross-Default. The Company shall default in the payment when due
of any amount payable under any other obligation of the Company for money
borrowed in excess of $100,000, exclusive of indebtedness which was past due at
July 10, 1998.
(vi) Cross-Acceleration. Any senior debt or any other indebtedness
of the Company in an aggregate principal amount exceeding $100,000 (i) shall be
duly declared to be or shall become due and payable prior to the stated maturity
thereof or (ii) shall not be paid as and when the same becomes due and payable
including any applicable grace period.
(vii) Warrants. The Company shall violate any material
representation, warranty or obligation under the warrants described elsewhere
herein.
B. Action if Bankruptcy. If any Event of Default described in
clauses (iv)(a) through (d) of Section 4A shall occur, the outstanding principal
amount of this Note and all other obligations hereunder shall automatically be
and become immediately due and payable, without notice or demand.
C. Action if Other Event of Default. If any Event of Default (other
than any Event of Default described in clauses (iv)(a) through (d) of Section
4A) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the holder of the Note may, upon notice to the Company, declare all
or any portion of the outstanding principal amount of the Notes together with
interest accrued thereon to be due and payable and any or all other obligations
hereunder to be due and payable, whereupon the full unpaid principal amount
hereof, such accrued interest and any and all other such obligations which shall
be so declared due and payable shall be and become immediately due and payable,
without further notice, demand, or presentment.
5. Conversion of the Note.
A. Optional Conversion. If the Event of Default described in clause
4A(i) shall occur, the Payee shall have the right to convert all, but not less
than all, of the outstanding Principal Amount of this Note, together with
accrued interest, into shares of the Company's Common Stock on either of two
occasions. The first option exercise period will be the 10-day period following
the date on which the Company defaults in payment of the Notes (the "Default
Date"), during which time the Payee shll have the right to convert at a per
share conversion price equal to the lower of 50% of the closing bid price on the
the Default Date or $.25. The second option exercise period will be the 10-day
period following the effective date of a registration statement covering the
resale of the shares of Common Stock issuable upon conversion of the Notes (the
"Effective Date"), during which time the conversion price per share will be the
lower of 50% of the closing bid price on the the Effective Date or $.25. The
shares of Common Stock issuable upon conversion of this Note at either such
conversion price (the "Conversion Price") are referred to herein as the
"Conversion Shares."
B. Adjustment of Conversion Price. In case the Company shall (i)
declare a dividend or make a distribution on its outstanding shares of Common
Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding
shares of Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
<PAGE>
Page 47 of 128 Pages
number of shares, the applicable Conversion Price in effect at the time of the
record date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the number of shares determined by multiplying the Conversion Price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action. Such adjustment shall be made successively whenever any event listed
above shall occur.
C. Mechanics of Conversion. Before the Payee shall be entitled to
convert this Note into Conversion Shares, the Payee shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Company, and shall give written notice to the Company at its principal corporate
office, of the election to convert the same and shall state therein the name or
names in which the certificate or certificates for the Conversion Shares are to
be issued. The Company shall, as soon as practicable thereafter, issue and
deliver to the Payee, or to the nominee or nominees of Payee, a certificate or
certificates for the number of Conversion Shares to which such holder shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
Note to be converted, and the person or persons entitled to receive the
Conversion Shares issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of
such date.
D. Cash Payments. No fractional shares (or scrip representing
fractional shares) of Common Stock shall be issued upon conversion of this Note.
In the event that the conversion of the Principal Amount of this Note would
result in the issuance of a fractional share of Common Stock, the Company shall
pay a cash adjustment in lieu of such fractional share to the holder of this
Note based upon the Conversion Price.
7. Amendments and Waivers.
A. The provisions of this Note may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Company and the holders of not less than 50% in principal
amount of the Notes (the "Required Holders"); provided, however, that no such
amendment, modification or waiver:
(i) which would modify this Section 7A, change the definition of
"Required Holders", extend the Maturity Date for more than 90 days beyond
the Extension Period, or subject the Payee under each Note to any
additional obligations shall be made without the consent of the Payee of
each Note, or
(iii) which would reduce the amount of any payment of principal of
or interest on any Principal Amount payable hereunder (or reduce the
Principal Amount of or rate of interest payable hereunder) shall be made
without the consent of the holder of each Note so affected.
B. No failure or delay on the part of the Payee in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or
<PAGE>
Page 48 of 128 Pages
right. No notice to or demand on the Company in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or approval by the
Payee shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
C. To the extent that the Company makes a payment or payments to the
Payee, and such payment or payments or any part thereof are subsequently for any
reason invalidated, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all rights
and remedies therefor, shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
D. After any waiver, amendment or supplement under this section
becomes effective, the Company shall mail to the holders of the Notes a copy
thereof.
8. Miscellaneous
A. Registered Holder. The Company may consider and treat the person
in whose name this Note shall be registered as the absolute owner thereof for
all purposes whatsoever (whether or not this Note shall be overdue) and the
Company shall not be affected by any notice to the contrary. In case of transfer
of this Note by operation of law, the transferee agrees to notify the Company of
such transfer and of its address, and to submit appropriate evidence regarding
such transfer so that this Note may be registered in the name of the transferee.
This Note is transferable only on the books of the Company by the holder hereof,
in person or by attorney, on the surrender hereof, duly endorsed. Communications
sent to any registered owner shall be effective as against all holders or
transferees of the Note not registered at the time of sending the communication.
B. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Sections 5-1401 and 5-1402 of
the General Obligations Law of the State of New York shall apply to this Note
and the Company hereby waives any right to stay or dismiss on the basis of forum
non conveniens any action or proceeding brought before the courts of the State
of New York sitting in New York County or of United States of America for the
Southern District of New York and hereby submits to the jurisdiction of such
courts.
C. Notices. All notices required or permitted under this Note shall
be given in accordance with the Subscription Agreement.
D. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR THE COMPANY.
<PAGE>
Page 49 of 128 Pages
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASING THIS
NOTE.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by its duly authorized officer.
PICK COMMUNICATIONS CORP.
By
-------------------------------
Name: Raymond M. Brennan
Title: Vice President
<PAGE>
Page 50 of 128 Pages
EXTENSION AGREEMENT
EXTENSION AGREEMENT made as of this 26th day of January, 1999 between PICK
Communications Corp. (the "Company") and Commonwealth Associates L.P., as agent
for the holders of the Company's outstanding 10% Senior Secured Notes in the
aggregate principal amount of $9,900,000 (the "Notes") issued to investors in a
private placement by the Company pursuant to the terms of a Confidential Term
Sheet dated June 13, 1998, as supplemented. Capitalized terms not defined herein
shall have the meanings set forth in the Notes.
WHEREAS, the Company exercised the Extension Option, as a result of which
the current Maturity Date of the Notes is January 27, 1999; and
WHEREAS, the Company and Commonwealth believe it is in the mutual best
interests of the Company and the Holders that the Maturity Date be extended on
the terms and subject to the conditions contained in this Agreement; and
WHEREAS, Commonwealth has obtained the consents of the Required Holders
necessary to implement the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree that:
1. Extension of Maturity Date. The Maturity Date of the Notes is hereby
extended to March 29, 1999 provided one of the following shall have occurred on
or prior to 5:00 p.m. New York time on February 4, 1999:
A. The Company receives proceeds evidenced by instruments which are
expressly subordinated in right of payment to the Notes and uses not less than
40% of such proceeds to repay at least $2,500,000 of the Notes on a pro rata
basis.
B. Commonwealth issues a letter of intent to the Company setting
forth the terms upon which it will use its best efforts to complete a
substantial financing for the Company, as managing placement agent, and the
Company executes such letter of intent.
C. In the event the condition set forth in 1A above occurs, the
Company agrees that if additional funds are raised from the sale of equity or
subordinated debt prior to the Maturity Date, at least 40% of the proceeds will
be used to repay the Notes on a pro rata basis.
D. If neither condition set forth in 1A or 1B occurs, the Maturity
Date of the Notes is hereby extended only to February 5, 1999.
2. Amendment of Conversion Provision. Section 5A of the Notes is deleted
in its entirety and replaced with the following new Section 5A:
Optional Conversion. If the Event of Default described in clause 4A(i) or
clause 4A(iv) shall occur, the Payee shall have the right to convert any
or all of the outstanding Principal
<PAGE>
Page 51 of 128 Pages
Amount of this Note, together with accrued interest, into shares of the
Company's Common Stock during the 180-day period following the date on
which the Company defaults in payment of the Notes (the "Default Date") at
a per share conversion price equal to the lower of 50% of the closing bid
price on the Default Date or $.25. The Payee shall also have the right to
convert any or all of the outstanding Principal Amount of this Note,
together with accrued interest, into shares of the Company's Common Stock
during the 30-day period following either (i) the effective date of a
registration statement covering the resale of the shares of Common Stock
issuable upon conversion of the Notes (the "Effective Date") or (ii) the
date on which the Conversion Shares become eligible for resale pursuant to
the provisions of Rule 144 under the Securities Act (the "144 Date"),
during which time the conversion price per share will be the lower of $.25
or 50% of the closing bid price on the Effective Date or 144 Date. The
shares of Common Stock issuable upon conversion of this Note at any such
conversion price (the "Conversion Price") are referred to herein as the
"Conversion Shares."
3. Warrants. As further consideration for the extension of the Maturity
Date granted hereunder, the Company shall issue to the Holders five-year
warrants to purchase 25,000 shares of Common Stock at an exercise price of $.50
per share for each $100,000 principal amount of Notes held. The Warrants will be
canceled without any further action by the Holders if neither of the events set
forth in Section 1A or 1B of this Agreement occurs. The Holders shall, in such
event, promptly return the Warrants to the Company.
4. Miscellaneous.
A. Except as expressly amended by this Agreement, the Notes remain
in full force and effect and the Company hereby reconfirms its obligations
thereunder.
B. Nothing in this Agreement shall constitute or be deemed to
constitute a waiver by any holder of the Notes of any Events of Default (or
events which, with the giving of notice or passage of time would constitute
Events of Default (each, a "Default")) which may currently exist under the
Notes, whether know or unknown by such holder. The Holders expressly reserve all
rights and remedies they may have under the Notes, any documents executed in
connection with the Notes and applicable law with respect to any Defaults or
Events of Default which may now or hereafter exist. Nothing herein shall be
construed to be an agreement of any Holder to forbear for any period from
exercising any such rights or remedies.
C. The amendments to the Notes set forth herein shall be construed
strictly as written, shall be effective only with respect to the subject matter
hereof and shall neither imply nor constitute the granting of, nor obligate any
holder to grant, any further amendments or any waiver with respect to the Notes
or any documents executed in connection with the Notes.
D. The execution by Commonwealth Associates, acting in its capacity
as agent for the holders of the Notes, of this endorsement shall be effective as
the act of the Holders and a copy of this Agreement may be attached to each Note
as evidence of the Amendment effected hereby.
<PAGE>
Page 52 of 128 Pages
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PICK COMMUNICATIONS CORP.
By:
----------------------------------
Name: Diego Leiva
Title:
COMMONWEALTH ASSOCIATES L.P.
By: Commonwealth Associates Management Corp.
By:
----------------------------------------
Name:
Title:
<PAGE>
Page 53 of 128 Pages
AMENDMENT TO EXTENSION AGREEMENT
AMENDMENT TO EXTENSION AGREEMENT ("Amendment Agreement") made as of this
4th day of February, 1999 between PICK Communications Corp. (the "Company") and
Commonwealth Associates L.P. ("Commonwealth"), as agent for the holders of the
Company's outstanding 10% Senior Secured Notes in the aggregate principal amount
of $9,900,000 (the "Notes") issued to investors in a private placement by the
Company pursuant to the terms of a Confidential Term Sheet dated July 13, 1998,
as supplemented. Capitalized terms not defined herein shall have the meanings
set forth in the Notes.
WHEREAS, the Company and Commonwealth are parties to an Extension
Agreement dated January 26, 1999 (the "Agreement"); and
WHEREAS, the Company and Commonwealth believe it is in the mutual best
interests of the Company and the Holders that the Agreement be amended on the
terms and subject to the conditions contained in this Amendment Agreement; and
WHEREAS, Commonwealth has previously obtained the consents of the
Required Holders necessary to implement the terms of the Agreement and this
Amendment Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree that
paragraph 1 of the Agreement be deleted in its entirety and replaced with the
following new paragraph 1:
1. Extension of Maturity Date. The Maturity Date of the Notes is hereby
extended to March 29, 1999 provided one of the following shall have occurred on
or prior to 5:00 New York time on March 1, 1999:
A. The Company receives proceeds evidenced by instruments which are
expressly subordinated in right of payment to the Notes and uses not less than
40% of such proceeds to repay at least $2,500,000 of the Notes on a pro rata
basis; provided that the parties agree that the first $5,000,000 of financing
raised by the Company after the date hereof will be used for working capital
only and not for the repayment of principal or interest on the Notes and that no
fees will be paid by the Company in connection with the first $5,000,000 of
financing.
B. Commonwealth issues a letter of intent to the Company setting
forth the terms upon which it will use its best efforts to complete a
substantial financing for the Company, as managing placement agent, and the
Company executes such letter of intent.
C. In the event the condition set forth in 1A above occurs, the
Company agrees that if additional funds are raised from the sale of equity or
subordinated debt prior to the Maturity Date, at least 40% of the proceeds will
be used to repay the Notes on a pro rata basis.
D. If neither condition set forth in 1A or 1B occurs, the Maturity
Date of the Notes is hereby extended only to March 1, 1999.
2. Consideration for Extension. In consideration for the extension granted
pursuant to this Amendment Agreement, the Company will immediately issue to the
holders of the Notes (i) an
<PAGE>
Page 54 of 128 Pages
aggregate of 500,000 shares of the Company's Common Stock and (ii) the warrants
set forth in Section 3 of the Agreement. The shares of Common Stock and warrants
will be distributed pro-rata to the Noteholders.
3. Access to Company. As further consideration of the extension granted by
this Amendment Agreement, the Company agrees to give Commonwealth complete,
unlimited access to its books, records and personnel in order to enable
Commonwealth to complete the due diligence necessary to satisfy Commonwealth as
to the prospects of the Company.
4. Miscellaneous.
A. Except as expressly amended by this Amendment Agreement, the
Agreement remains in full force and effect.
B. Except as expressly amended by this Amendment Agreement and the
Agreement, the Notes remain in full force and effect and the Company hereby
reconfirms its obligations thereunder.
C. Nothing in this Amendment Agreement shall constitute or be deemed
to constitute a waiver by any holder of the Notes of any Events of Default (or
events which, with the giving of notice or passage of time would constitute
Events of Default (each, a "Default")) which may currently exist under the
Notes, whether know or unknown by such holder. The Holders expressly reserve all
rights and remedies they may have under the Notes, any documents executed in
connection with the Notes and applicable law with respect to any Defaults or
Events of Default which may now or hereafter exist. Nothing herein shall be
construed to be an agreement of any Holder to forbear for any period from
exercising any such rights or remedies.
D. The execution by Commonwealth Associates, acting in its capacity
as agent for the holders of the Notes, of this Amendment Agreement shall be
effective as the act of the Holders and a copy of this Amendment Agreement may
be attached to each Note as evidence of the Amendment Agreement effected hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PICK COMMUNICATIONS CORP.
By:
----------------------------------------
Diego Leiva, Chairman of the Board
COMMONWEALTH ASSOCIATES L.P.
By: Commonwealth Associates Management Corp.
By:
----------------------------------------
Michael Falk, Chairman
<PAGE>
Page 55 of 128 Pages
SECOND AMENDMENT TO EXTENSION AGREEMENT
SECOND AMENDMENT TO EXTENSION AGREEMENT ("Amendment Agreement") made as of
this 26th day of February, 1999 between PICK Communications Corp. (the
"Company") and Commonwealth Associates L.P. ("Commonwealth"), as agent for the
holders of the Company's outstanding 10% Senior Secured Notes in the aggregate
principal amount of $9,900,000 (the "Notes") issued to investors in a private
placement by the Company pursuant to the terms of a Confidential Term Sheet
dated July 13, 1998, as supplemented. Capitalized terms not defined herein shall
have the meanings set forth in the Notes.
WHEREAS, the Company and Commonwealth are parties to an Extension
Agreement dated January 26, 1999, as amended by an Amendment to Extension
Agreement dated February 4, 1999 (together, the "Agreement"); and
WHEREAS, the Company and Commonwealth believe it is in the mutual best
interests of the Company and the Holders that the Agreement be further amended
on the terms and subject to the conditions contained in this Amendment
Agreement; and
WHEREAS, Commonwealth has previously obtained the consents of the Required
Holders necessary to implement the terms of the Agreement and this Amendment
Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree that
paragraph 1 of the Agreement be deleted in its entirety and replaced with the
following new paragraph 1:
1. Extension of Maturity Date. The Maturity Date of the Notes is hereby
extended to March 31, 1999.
2. Miscellaneous.
A. Except as expressly amended by this Amendment Agreement, the
Agreement remains in full force and effect.
B. Except as expressly amended by this Amendment Agreement and the
Agreement, the Notes remain in full force and effect and the Company hereby
reconfirms its obligations thereunder.
C. Nothing in this Amendment Agreement shall constitute or be deemed
to constitute a waiver by any holder of the Notes of any Events of Default (or
events which, with the giving of notice or passage of time would constitute
Events of Default (each, a "Default")) which may currently exist under the
Notes, whether know or unknown by such holder. The Holders expressly reserve all
rights and remedies they may have under the Notes, any documents executed in
connection with the Notes and applicable law with respect to any Defaults or
Events of Default which may now or hereafter exist. Nothing herein shall be
construed to be an agreement of any Holder to forbear for any period from
exercising any such rights or remedies.
D. The execution by Commonwealth Associates, acting in its capacity
as agent for the holders of the Notes, of this Amendment Agreement shall be
effective as the act of the
<PAGE>
Page 56 of 128 Pages
Holders and a copy of this Amendment Agreement may be attached to each Note as
evidence of the Amendment Agreement effected hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PICK COMMUNICATIONS CORP.
By:
----------------------------------------
Raymond Brennan,
COMMONWEALTH ASSOCIATES L.P.
By: Commonwealth Associates Management Corp.
By:
----------------------------------------
Michael Falk, Chairman
<PAGE>
Page 57 of 128 Pages
AMENDED NOTE
This amended note ("Amended Note") made as of April 30, 1999 by PICK
Communications Corp. (the "Company"), a Nevada corporation, is to be attached to
and made a part of that certain 10% Senior Secured Note (the "Note") made by the
Company to the order of ________________________ (the "Payee") in the original
principal amount of $_____________ payable on April 27, 1999, together with
unpaid interest of $________________ through April 29, 1999, or an aggregate of
$__________________ (the "Principal Amount").
NOW, THEREFORE, in consideration of $1.00 and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed that the Note shall be amended and modified as follows:
1. The Principal Amount of this Amended Note shall equal the principal
amount plus accrued and unpaid interest on the original Note. The interest rate
on this Amended Note shall revert to the original 10% non-default interest rate.
The Amended Notes will contain identical terms and conditions as the original
Notes, except all references to Note shall be changed to Amended Note and the
Note shall be amended as follows:
2. The Maturity Date will be April 27, 2002. In addition, the Company
shall have the option to extend the Maturity Date for one additional year (the
"Extended Maturity Date"), in which event the Conversion Price (as defined
below) shall be adjusted as described below.
3. The third full paragraph on page 2 of the Note is deleted in its
entirety and in lieu thereof the following words are substituted therefor:
In consideration for the loan (the "Restructuring") evidenced by this
Amended Note and other identical Amended Notes in the aggregate principal amount
of up to $9,900,000, the Company shall grant to the holders of Amended Notes
(the "Holders"), a right to: (a) exchange, at any time during the two-year
period from the date of this Amended Note, each existing warrant previously
issued to the Holder for one share of the Company's common stock, $.001 par
value (the "Common Stock"), which shares shall be registered by the Company with
the Securities and Exchange Commission as promptly as practicable, but no later
than June 30, 1999, and (b) elect to either receive one share of Common Stock
for each one dollar ($1.00) principal amount of the Amended Note or have the
Conversion Price (as defined below) reduced from $1.00 per share to $.50 per
share, commencing upon the date when such additional shares issued under this
subsection have been registered by the Company with the Securities and Exchange
Commission (within six months of the date of this Amended Note) and for a
two-year period thereafter.
4. Section 1 of the Note is hereby deleted in its entirety and in lieu
thereof the following words are substituted therefor;
Prepayment. The Principal Amount of the Amended Note may not be prepaid
prior to the Maturity Date.
5. Section 2B of the Note is hereby deleted in its entirety.
<PAGE>
Page 58 of 128 Pages
6. The following words are hereby deleted from the fifth line of Section
3B(vi) of the Note: "Quarterly Report on From 10-Q for the period ended March
31, 1998" and the words "Annual Report on Form 10-K for the year ended December
31, 1998" are hereby substituted in lieu thereof.
7. Section 4 A(v) of the Note is hereby amended to read as follows:
Cross-Default. The Company shall default in the payment when due of any
amount payable under any other obligation of the Company for money borrowed in
excess of $100,000, exclusive of indebtedness which was past due at April 27,
1999, or owed to any Noteholder who does not consent to the terms of this
Amended Note.
8. Section 4A(vi) of the Note is hereby amended to read as follows:
(vi) Cross-Acceleration. Any senior debt or any other indebtedness of the
Company in an aggregate principal amount exceeding $100,000, exclusive of any
Notes not converted into an Amended Note (i) shall be duly declared to be or
shall become due and payable prior to the stated maturity thereof or (ii) shall
not be paid as and when the same becomes due and payable including any
applicable grace period.
9. Section 5A of the Note is deleted in its entirety and in lieu thereof
the following words are substituted therefor:
5. A (i) Optional Conversion/Conversion Price. Each Amended Note shall be
convertible at any time at the option of the holder thereof into shares of
Common Stock at a per share conversion price equal to $1.00 (the "Conversion
Price"). In the event that: (i) within 12 months after the Restructuring the
Company issues any shares, options, warrants, or other convertible securities
(other than options issued pursuant to the Company's employee stock option plan)
for a purchase price, exercise price or conversion price, as the case may be,
less than the Conversion Price, other than any shares issued pursuant to any
authorized or outstanding options, warrants or other convertible securities
(including the Notes and the Series B and Series D Preferred Stock) as of the
date of the Restructuring, or any shares, options, warrants, or other
convertible securities issued to Commonwealth, or (ii) the average closing bid
price for the Common Stock for the 15 trading days immediately preceding the one
year anniversary of the effective date of the Restructuring is less than the
Conversion Price, then the Conversion Price shall be reset to such lower price
but in no event less than $.50. In the event that the Company elects to extend
the maturity date for an additional year, the Conversion Price shall be reduced
to 50% of the average closing bid price for the Common Stock for the 15 trading
days immediately preceding the date of extension.
A. (ii) Mandatory Conversion. The Notes shall be automatically converted
into shares of Common Stock in the event that the closing bid price for the
Common Stock has exceeded $1.50 per share for 20 consecutive trading days. Such
conversion shall be conditioned upon the shares of Common Stock to be issued
upon such conversion being fully registered for resale.
<PAGE>
Page 59 of 128 Pages
IN WITNESS WHEREOF, the Company has caused this Amended Note to be duly
executed in its corporate name by its duly authorized officer as of the date
first above written.
PICK COMMUNICATIONS CORP.
By:
---------------------------------
Thomas M. Malone,
Chief Executive Officer
Attest:
- ------------------------
James H. Season,
Chief Financial Officer
The Payee hereby consents to the execution of this Amended Note and agrees
to be bound thereby.
--------------------------------
Page 60 of 128 Pages
Exhibit 3 WARRANT TO PURCHASE COMMON STOCK
OF
PICK COMMUNICATIONS CORP.
This is to Certify That, FOR VALUE RECEIVED, ____________, or
assigns ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from PICK Communications Corp., a Nevada corporation ("Company"),
___________ (________) fully paid, validly issued and nonassessable shares of
Common Stock of the Company ("Common Stock") at a price equal to $.50 per share
at any time or from time to time during the period from July 31, 1998 until July
29, 2003, subject to adjustment as set forth herein. The number of shares of
Common Stock to be received upon the exercise of this Warrant and the price to
be paid for each share of Common Stock may be adjusted from time to time as
hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price". This Warrant, together with warrants of
like tenor, constituting in the aggregate warrants (the "Warrants") to purchase
up to 6,000,000 shares of Common Stock, was originally issued in connection with
a private offering of the Company's securities (the "Private Placement") through
Commonwealth Associates ("Commonwealth") in consideration for loans evidenced by
10% senior secured promissory notes issued in the Private Placement (the
"Notes").
(a) EXERCISE OF WARRANT; CANCELLATION OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any
time or from time to time on or after July 31, 1998 and until July 29, 2003 (the
"Exercise Period"), subject to the provisions of Section (j)(2) hereof;
provided, however, that (i) if either such day is a day on which banking
institutions in the State of New York are authorized by law to close, then on
the next succeeding day which shall not be such a day, and (ii) in the event of
any merger, consolidation or sale of substantially all the assets of the Company
as an entirety, resulting in any distribution to the Company's stockholders,
prior to July 29, 2003, the Holder shall have the right to exercise this Warrant
commencing at such time through July 29, 2003 into the kind and amount of shares
of stock and other securities and property (including cash) receivable by a
holder of the number of shares of Common Stock into which this Warrant might
have been exercisable immediately prior thereto. This Warrant may be exercised
by presentation and surrender hereof to the Company at its principal office, or
at the office of its stock transfer agent, if any, with the Purchase Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the warrants, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificate for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of
<PAGE>
Page 61 of 128 Pages
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
(2) At any time during the Exercise Period, the Holder may, at
its option, exchange this Warrant, in whole or in part (a "Warrant Exchange"),
into the number of Warrant Shares determined in accordance with this Section
(a)(2), by surrendering this Warrant at the principal office of the Company or
at the office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any
Warrant Exchange, this Warrant shall represent the right to subscribe for and
acquire the number of Warrant Shares (rounded to the next highest integer) equal
to (i) the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to
the quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the current market value of a share of Common
Stock. Current market value shall have the meaning set forth Section (c) below,
except that for purposes hereof, the date of exercise, as used in such Section
(c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq National Market, the current
market value shall be the last reported sale price of the Common
Stock on such exchange or market on the last business day prior to
the date of exercise of this Warrant or if no such sale is made on
such day, the average closing bid and asked prices for such day on
such exchange or market; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq SmallCap
Market, the current market value shall be the average of the closing
bid and asked prices for such day on such market and if the Common
Stock is not so traded, the current market value shall be the mean
of the last reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
<PAGE>
Page 62 of 128 Pages
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal year of
the Company ending prior to the date of the exercise of the Warrant,
determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. Subject to the provisions of Section l
hereof, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying
the Exercise Price by a fraction, the denominator of which shall be
the number of shares of Common Stock outstanding after giving effect
<PAGE>
Page 63 of 128 Pages
to such action, and the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(2) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less
than the current market price of the Common Stock (as defined in
Subsection (8) below) on the record date mentioned below, or less
than the Exercise Price on such record date the Exercise Price shall
be adjusted so that the same shall equal the lower of (i) the price
determined by multiplying the Exercise Price in effect immediately
prior to the date of such issuance by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered)
would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription
or purchase (or into which the convertible securities so offered are
convertible) or (ii) in the event the Subscription Price is equal to
or higher than the current market price but is less than the
Exercise Price, the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of
shares outstanding on the record date mentioned below and the number
of additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered (or
the aggregate conversion price of the convertible securities so
offered) would purchase at the Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding
on the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into
which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or
warrants are issued and shall become effective immediately after the
record date for the determination of shareholders entitled to
receive such rights or warrants; and to the extent that shares of
Common Stock are not delivered (or securities convertible into
Common Stock are not delivered) after the expiration of such rights
or warrants the Exercise Price shall be readjusted to the Exercise
Price which would then be in effect had the adjustments made upon
the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (1) above) or subscription
rights or warrants (excluding those referred to in Subsection (2)
above),
<PAGE>
Page 64 of 128 Pages
then in each such case the Exercise Price in effect thereafter shall
be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as
defined in Subsection (8) below), less the fair market value (as
determined by the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market
price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment
shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(4) In case the Company shall issue shares of its Common Stock
(excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by the Company's
Board of Directors and approved by its shareholders, if such shares
would otherwise be included in this Subsection (4), (but only to the
extent that the aggregate number of shares excluded hereby and
issued after the date hereof, shall not exceed 5% of the Company's
Common Stock outstanding at the time of any issuance), (iii) upon
exercise of options and warrants outstanding at July 29, 1998, and
this Warrant (iv) to shareholders of any corporation which merges
into the Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such merger, or
(v) issued in a bona fide public offering pursuant to a firm
commitment underwriting, but only if no adjustment is required
pursuant to any other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect to the
transaction giving rise to such rights] for a consideration per
share (the "Offering Price") less than the current market price per
share (as defined in Subsection (8) below) on the date the Company
fixes the offering price of such additional shares or less than the
Exercise Price, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the lower of (i) the price
determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received
(determined as provided in Subsection (7) below) for the issuance of
such additional shares would purchase at such current market price
per share of Common Stock, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after the
issuance of such additional shares or (ii) in the event the Offering
Price is equal to or higher than the current market price per share
but less than the Exercise Price, the price determined by
multiplying the Exercise Price in effect immediately prior to the
date of issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of
Common Stock which the aggregate consideration received (determined
as provided in subsection (7) below) for the issuance of such
additional shares would purchase at the Exercise Price in effect
immediately prior to the date of
<PAGE>
Page 65 of 128 Pages
such issuance, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively
whenever such an issuance is made.
(5) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock (excluding securities
issued in transactions described in Subsections (2) and (3) above)
for a consideration per share of Common Stock (the "Conversion
Price") initially deliverable upon conversion or exchange of such
securities (determined as provided in Subsection (7) below) less
than the current market price per share (as defined in Subsection
(8) below) in effect immediately prior to the issuance of such
securities, or less than the Exercise Price, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal the
lower of (i) the price determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities and
the number of shares of Common Stock which the aggregate
consideration received (determined as provided in Subsection (7)
below) for such securities would purchase at such current market
price per share of Common Stock, and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance and the maximum number of shares
of Common Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
price or rate or (ii) in the event the Conversion Price is equal to
or higher than the current market price per share but less than the
Exercise Price, the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of
shares outstanding immediately prior to the issuance of such
securities and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in
subsection (7) below) for such securities would purchase at the
Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to
the issuance of such securities and the maximum number of shares of
Common Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
price or rate. Such adjustment shall be made successively whenever
such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and
(5) above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(7) For purposes of any computation respecting consideration
received pursuant to Subsections (4) and (5) above, the following
shall apply:
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Page 66 of 128 Pages
(A) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(B) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by the
Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be
conclusive; and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case
to be determined in the same manner as provided in clauses (A)
and (B) of this Subsection (7)).
(8) For the purpose of any computation under Subsections (2),
(3), (4) and (5) above, the current market price per share of Common
Stock at any date shall be determined in the manner set forth in
Section (c) hereof except that the current market price per share
shall be deemed to be the higher of (i) the average of the prices
for 30 consecutive business days before such date or (ii) the price
on the business day immediately preceding such date.
(9) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least five cents ($0.05) in such price; provided, however, that any
adjustments which by reason of this Subsection (9) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All
calculations under this Section (f) shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by this
Section (f), as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of
Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any
Federal Income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Warrants).
(10) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days after
any request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed
<PAGE>
Page 67 of 128 Pages
to the Holders at their last addresses appearing in the Warrant
Register, and shall cause a certified copy thereof to be mailed to
its transfer agent, if any. In the event the Company does not
provide the Holder with such notice and information within 10 days
of a request by the Holder, then notwithstanding the provisions of
this Section (f), the Exercise Price shall be immediately adjusted
to equal the lowest Offering Price, Subscription Price or Conversion
Price, as applicable, since the date of this Warrant, and the number
of shares issuable upon exercise of this Warrant shall be adjusted
accordingly. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be
the regular accountants employed by the Company) to make any
computation required by this Section (f), and a certificate signed
by such firm shall be conclusive evidence of the correctness of such
adjustment.
(11) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares of
the Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Subsections (1) to (9), inclusive
above.
(12) In the event the Company defaults in the payment of the
Notes and fails to file a registration statement to register the
Warrant Shares within 90 days after the Extension Period (as defined
and described in the Notes), the Exercise Price of this Warrant
shall be adjusted downward by 10% per month until such registration
statement is filed.
(13) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated
in the similar Warrants initially issuable pursuant to this
Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the holder or any
holder of a Warrant executed and delivered pursuant to Section (a) and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common
<PAGE>
Page 68 of 128 Pages
Stock or (ii) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any other rights or
(iii) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
<PAGE>
Page 69 of 128 Pages
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The holder will
have registration rights with respect to the Warrant Shares as more particularly
set forth in the subscription agreement executed in connection with the Private
Placement.
PICK COMMUNICATIONS CORP.
By:
----------------------------------
Raymond M. Brennan, Vice President
Dated: July 31, 1998
Attest:
- ------------------------------------------
Robert S. Bingham, Chief Financial Officer
<PAGE>
Page 70 of 128 Pages
PURCHASE FORM
Dated______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof.
---------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name________________________________________
(Please typewrite or print in block letters)
Address_____________________________________
Signature___________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED,_________________________ hereby sells, assigns
and transfers unto
Name________________________________________
(Please typewrite or print in block letters)
Address_____________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint Attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
Date___________________
Signature______________
Page 71 of 128 Pages
Exhibit 4 PICK COMMUNICATIONS CORP.
SUBSCRIPTION AGREEMENT made as of this 31st day of July, 1998
between PICK Communications Corp., a Nevada corporation with offices at Wayne
Interchange Plaza II, Third Floor, Wayne, New Jersey 07470 (the "Company") and
the undersigned (the "Subscriber").
WHEREAS, the Company desires to issue a minimum of 20 and a maximum
of 40 units ("Units") in a private placement, each Unit consisting of $100,000
principal amount of 10% senior secured promissory notes (the "Notes") in the
form attached as Exhibit (ii) to the Confidential Term Sheet dated July 13, 1998
(the "Term Sheet") and warrants to purchase 100,000 shares of the Company's
Common Stock (the "Warrants") in the form attached as Exhibit (iii) to the Term
Sheet on the terms and conditions hereinafter set forth and the Subscriber
desires to acquire the number of Units set forth on the signature page hereof;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter set forth, the parties hereto do hereby agree as
follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from the Company
such number of Units as is set forth upon the signature page hereof at a price
equal to $100,000 per Unit, and the Company agrees to sell such Units to the
Subscriber for said purchase price subject to the Company's right to sell to the
Subscriber such lesser number of Units as the Company may, in its sole
discretion, deem necessary or desirable. The purchase price is payable by
certified or bank check made payable to United States Trust Company of New York,
as Escrow Agent for PICK Communications, or by wire transfer of funds,
contemporaneously with the execution and delivery of this Subscription
Agreement. The Notes and Warrants will be delivered by the Company within 10
days following the consummation of this offering as set forth in Article III
hereof. The Subscriber understands however, that this purchase of Units is
contingent upon the Company making sales of a minimum of 20 Units ($2,000,000
principal amount of Notes and 2,000,000 Warrants) prior to the Termination Date
as defined in Article III hereof.
1.2 The Subscriber recognizes that the purchase of Units
involves a high degree of risk in that (i) an investment in the Company is
highly speculative and only investors who can afford the loss of their entire
investment should consider investing in the Company and the Units; (ii) he may
not be able to liquidate his investment; (iii) transferability of the securities
comprising the Units is extremely limited; and (iv) an investor could suffer the
loss of his entire investment, as well as other risk factors as more fully set
forth herein and in the Term Sheet.
1.3 The Subscriber represents and warrants that he is an
"accredited investor" as such term in defined in Rule 501 of Regulation D
promulgated under the United States Securities Act of 1933, as amended (the
"Act"), as indicated by his responses to the Investor Questionnaire, and that he
is able to bear the economic risk of an investment in the Units. The Subscriber
further represents and warrants that the information furnished in the Investor
Questionnaire is accurate and complete in all material respects.
<PAGE>
Page 72 of 128 Pages
1.4 The Subscriber acknowledges that he has prior investment
experience, including investment in non-listed and non-registered securities, or
he has employed the services of an investment advisor, attorney or accountant to
read all of the documents furnished or made available by the Company both to him
and to all other prospective investors in the Units and to evaluate the merits
and risks of such an investment on his behalf, and that he recognizes the highly
speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful review of
the Term Sheet and all exhibits thereto and other documents furnished in
connection with this transaction (collectively, the "Offering Documents") and
hereby represents that he has been furnished by the Company during the course of
this transaction with all information regarding the Company which he has
requested or desires to know; and that such information and documents have, in
his opinion, afforded the Subscriber with all of the same information that would
be provided him in a registration statement filed under the Act; that he has
been afforded the opportunity to ask questions of and receive answers from duly
authorized officers or other representatives of the Company concerning the terms
and conditions of the offering, and any additional information which he had
requested.
1.6 The Subscriber acknowledges that this offering of Units
may involve tax consequences (including, but not limited to, the possible need
to recognize interest income relating to the Warrants) and that the contents of
the Offering Documents do not contain tax advice or information. The Subscriber
acknowledges that he must retain his own professional advisors to evaluate the
tax and other consequences of an investment in the Units.
1.7 The Subscriber acknowledges that this offering of Units
has not been reviewed by the United States Securities and Exchange Commission
("SEC") because of the Company's representations that this is intended to be a
nonpublic offering pursuant to Sections 4(2) or 3(b) of the Act. The Subscriber
represents that the Notes and Warrants comprising his Units are being purchased
for his own account, for investment and not for distribution or resale to
others. The Subscriber agrees that he will not sell or otherwise transfer the
Notes or the Warrants unless they are registered under the Act or unless an
exemption from such registration is available.
1.8 The Subscriber understands that the Notes and Warrants
comprising the Units have not been registered under Act by reason of a claimed
exemption under the provisions of the Act which depends, in part, upon his
investment intention. In this connection, the Subscriber understands that it is
the position of the SEC that the statutory basis for such exemption would not be
present if his representation merely meant that his present intention was to
hold such securities for a short period, such as the capital gains period of tax
statutes, for a deferred sale, for a market rise, assuming that a market
develops, or for any other fixed period. The Subscriber realizes that, in the
view of the SEC, a purchase now with an intent to resell would represent a
purchase with an intent inconsistent with his representation to the Company, and
the SEC might regard such a sale or disposition as a deferred sale to which such
exemptions are not available.
1.9 The Subscriber understands that Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a one year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under
<PAGE>
Page 73 of 128 Pages
the Securities Exchange Act of 1934, as amended, or its dissemination to the
public of any current financial or other information concerning the Company, as
is required by the Rule as one of the conditions of its availability. The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register the securities comprising the Units under the Act, with
the exception of certain registration rights set forth in Article IV herein. The
Subscriber consents that the Company may, if it desires, permit the transfer of
the Warrants or the shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") out of his name only when his request for
transfer is accompanied by an opinion of counsel reasonably satisfactory to the
Company that neither the sale nor the proposed transfer results in a violation
of the Act or any applicable state "blue sky" laws (collectively "Securities
Laws") and subject to the provisions of Section 1.10 hereof. The Subscriber
agrees to hold the Company and its directors, officers and controlling persons
and their respective heirs, representatives, successors and assigns harmless and
to indemnify them against all liabilities, costs and expenses incurred by them
as a result of any misrepresentation made by him contained herein or in the
Investor Questionnaire or any sale or distribution by the undersigned Subscriber
in violation of any Securities Laws
1.10 The Subscriber agrees not to sell or otherwise dispose of
the Warrants or the Warrant Shares in the public market for 12 months from the
initial closing of this offering without the prior written consent of the
Commonwealth Associates (the "Placement Agent").
1.11 The Subscriber consents to the placement of a legend on
any certificate or other document evidencing the Notes, the Warrants and the
Warrant Shares stating that they have not been registered under the Act and
setting forth or referring to the restrictions on transferability and sale
thereof.
1.12 The Subscriber understands that the Company will review
this Subscription Agreement and the Investor Questionnaire and otherwise review
the financial standing of the Subscriber; and it is agreed that the Company
reserves the unrestricted right to reject or limit any subscription.
1.13 The Subscriber hereby represents that the address of
Subscriber furnished by him at the end of this Subscription Agreement is the
undersigned's principal residence if he is an individual or its principal
business address if it is a corporation or other entity.
1.14 The Subscriber acknowledges that if he is a Registered
Representative of an NASD member firm, he must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.15 The Subscriber acknowledges that at such time, if ever,
as the Warrant Shares are registered, sales of such securities will be subject
to state securities laws, including those of states which may require any
securities sold therein to be sold through a registered broker-dealer or in
reliance upon an exemption from registration.
1.16 The Subscriber acknowledges that the maximum number of
Units to be sold pursuant to the Term Sheet may be increased by up to 20
additional Units in the event of over-subscription (the "Over-Allotment Units").
<PAGE>
Page 74 of 128 Pages
1.17 If the undersigned Subscriber is a partnership,
corporation, trust or other entity, such partnership, corporation, trust or
other entity further represents and warrants that: (i) it was not formed for the
purpose of investing in the Company; (ii) it is authorized and otherwise duly
qualified to purchase and hold the Units; and (iii) that this Subscription
Agreement has been duly and validly authorized, executed and delivered
constitutes the legal, binding and enforceable obligation of the undersigned.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that
prior to the consummation of this offering and at the Closing Date:
(a) The Company is a corporation duly organized, existing and
in good standing under the laws of the State of Nevada and has the corporate
power to conduct the business which it conducts and proposes to conduct and is
qualified to do business in New Jersey.
(b) The execution, delivery and performance of this
Subscription Agreement by the Company will have been duly approved by the Board
of Directors of the Company and all other actions required to authorize and
effect the offer and sale of the Units and the securities contained therein will
have been duly taken and approved.
(c) The Notes and Warrants have been duly and validly
authorized and when issued and paid for in accordance with the terms hereof,
will be duly and validly issued and fully paid and non assessable.
(d) The Company will at all times have authorized and reserved
a sufficient number of Warrant Shares to provide for exercise of the Warrants.
(e) The Company has obtained, or is in the process of
obtaining, all licenses, permits and other governmental authorizations necessary
to the conduct of its business; such licenses, permits and other governmental
authorizations obtained are in full force and effect; and the Company is in all
material respects complying therewith.
(f) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could materially
adversely affect the business, property, financial condition or operations of
the Company.
(g) The Company is not in violation of or default under, nor
will the execution and delivery of this Subscription Agreement, the issuance of
the Notes or the Warrants, and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions herein or therein
contemplated, result in a violation of, or constitute a default under, the
Company's articles of incorporation or by-laws, any material obligations,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound or any
material order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign.
<PAGE>
Page 75 of 128 Pages
(h) The financial information contained in the Offering
Documents presents fairly the financial condition of the Company as of the dates
and for the periods indicated.
III. TERMS OF SUBSCRIPTION
3.1 The subscription period will begin as of July 13, 1998 and
will terminate at 11:59 PM Eastern time on August 31, 1998, unless extended by
the Company and the Placement Agent for up to an additional 30 days (the
"Termination Date"). Of the Units, 20 will be offered on a "best efforts-all or
none" basis and the remaining 20 Units will be offered on a "best efforts" basis
as more particularly set forth in the Term Sheet. The minimum subscription per
subscriber shall be one Unit ($100,000), provided, however, that smaller
investments may be accepted at the discretion of the Placement Agent and the
Company.
3.2 Placement of the Units will be made by Commonwealth
Associates which will receive (i) a placement fee in the amount of 7% of the
purchase price of the Units placed; (ii) a structuring fee in the amount of 2%
of the purchase price of the Units placed; (iii) equity in the Company in the
form of (a) that number of shares of Common Stock equal to 5% of the gross
proceeds of the Offering divided by the closing bid price on the Initial Closing
Date; and (b) warrants to purchase at an exercise price of $.50 per share that
number of shares of Common Stock equal to 10% of the gross proceeds of the
Offering divided by the closing bid price on the Initial Closing Date; and (iii)
reimbusement of legal fees. Additional compensation in the form of fees and
equity will be paid to a financial advisor as described in the Term Sheet.
3.3 Pending the sale of the Units, all funds paid hereunder
shall be deposited by the Company in escrow with United States Trust Company of
New York. If the Company shall not have obtained subscriptions (including this
subscription) for purchases of 20 Units for an aggregate purchase price of
$2,000,000 on or before the Termination Date, then this subscription shall be
void and all funds paid hereunder by the Subscriber, with interest, shall be
promptly returned to the Subscriber, subject to paragraph 3.5 hereof. If 20
Units are sold at or prior to the Termination Date, then all subscription
proceeds shall be paid over to the Company within ten days thereafter. In such
event, placements of additional Units may continue until the Termination Date,
with subsequent releases of funds to be at the mutual consent of the Company and
the Placement Agent.
3.4 The Subscriber hereby authorizes and directs the Company
to deliver certificates representing the securities to be issued to such
Subscriber pursuant to this Subscription Agreement either (a) to the residential
or business address indicated in the Confidential Purchaser Questionnaire or (b)
directly to the Subscriber's account maintained with the Placement Agent, if
any. (If the Subscriber does not desire the securities to be delivered to such
account, the Subscriber should delete Subsection (b) of this Section 3.4.)
3.5 The Subscriber hereby authorizes and directs the Company
to return any funds, plus interest, for unaccepted subscriptions to the same
account from which the funds were drawn, including any customer account
maintained with the Placement Agent.
3.6 If the Subscriber is not a United States person, such
Subscriber hereby represents that it has satisfied itself as to the full
observance of the laws of its jurisdiction in
<PAGE>
Page 76 of 128 Pages
connection with any invitation to subscribe for the Securities or any use of
this Agreement, including (i) the legal requirements within its jurisdiction for
the purchase of the Securities, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any,
that may be relevant to the purchase, holding, redemption, sale or transfer of
the Securities. Such Subscriber's subscription and payment for, and his or her
continued beneficial ownership of the Securities, will not violate any
applicable securities or other laws of the Subscriber's jurisdiction.
IV. REGISTRATION RIGHTS
4.1 The Company hereby agrees with the holders of the Notes,
the Warrants and the Warrant Shares or their transferees (collectively, the
"Holders") that no later than 30 days after its Annual Report on Form 10-K for
the year ending December 31, 1998 has been filed with the SEC, it will file a
registration statement covering the resale of the Warrant Shares on Form S-3 or
such other form as the Company desires, pursuant to the Act, and the Company
will use its best efforts to cause such registration to become effective as
promptly as practicable thereafter. In the event the Company fails to repay the
Notes prior to the end of the Extension Period (as defined and described in the
Term Sheet), the Company hereby agrees to file the registration statement
required under this Section 4.1 within the 90-day period following the Extension
Period.
The obligation of the Company under this Section 4.1 shall be limited to
one registration statement.
4.2 Registration Procedures. The Company will, until such time
as the Warrant Shares may be sold under Rule 144 without volume limitation:
(a) prepare and file with the SEC a registration
statement with respect to such securities, and use its best efforts to cause
such registration statement to become and remain effective;
(b) prepare and file with the SEC such amendments to
such registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective;
(c) furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holders may reasonably request in
writing within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
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Page 77 of 128 Pages
(e) notify the Holders, promptly after it shall receive
notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(f) notify the Holders promptly of any request by the
SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the
request of any Holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such Holders (and
concurred in by counsel for the Company), is required under the Act or the rules
and regulations thereunder in connection with the distribution of Common Stock
by such Holders;
(h) prepare and promptly file with the SEC and promptly
notify such Holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(i) advise the Holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
4.3 Expenses.
(a) With respect to the registration required pursuant
to Section 4.1 hereof, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering (as specified in paragraph (b)
below) in connection therewith shall be borne by the Company, provided, however,
that the Holders shall bear their pro rata share of the underwriting discount
and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be
borne by the Company as provided in paragraph (a) above shall include, without
limitation, all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 4.3(a) above). Fees and
disbursements of counsel and accountants for the Holders and any other expenses
incurred by the Holders not expressly included above shall be borne by the
Holders.
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Page 78 of 128 Pages
4.4 Indemnification.
(a) The Company will indemnify and hold harmless each
Holder of Warrant Shares which are included in a registration statement pursuant
to the provisions of Section 4.1 hereof, its directors and officers, and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or such underwriter within the meaning of the Act, from and
against, and will reimburse such Holder and each such underwriter and
controlling person with respect to, any and all loss, damage, liability, cost
and expense to which such Holder or any such underwriter or controlling person
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expenses
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by such Holder, such underwriter or such controlling person in writing
specifically for use in the preparation thereof.
(b) Each Holder of Warrant Shares included in a
registration pursuant to the provisions of Section 4.1 hereof will indemnify and
hold harmless the Company, its directors and officers, any controlling person
and any underwriter from and against, and will reimburse the Company, its
directors and officers, any controlling person and any underwriter with respect
to, any and all loss, damage, liability, cost or expense to which the Company or
any controlling person and/or any underwriter may become subject under the Act
or otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
Holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 4.4 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if counsel for the indemnifying party
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concludes that a single counsel cannot under applicable legal and ethical
considerations, represent both the indemnifying party and the indemnified party,
the indemnified party or parties have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of said paragraph
(a) or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the provisions of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at its registered office, Wayne
Interchange Plaza II, Third Floor, Wayne, New Jersey 07470, Attention: Chief
Executive Officer and to the Subscriber at his address indicated on the last
page of this Subscription Agreement. Notices shall be deemed to have been given
on the date of mailing, except notices of change of address, which shall be
deemed to have been given when received.
5.2 This Subscription Agreement shall not be changed, modified
or amended except by a writing signed by the parties to be charged, and this
Subscription Agreement may not be discharged except by performance in accordance
with its terms or by a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the State of New York. The parties hereby agree
that any dispute which may arise between them arising out of or in connection
with this Subscription Agreement shall be adjudicated before a court located in
New York City and they hereby submit to the exclusive jurisdiction of the courts
of the State of New York located in New York, New York and of the federal courts
in the Southern District of New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now
or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Subscription Agreement or
any acts or omissions relating to the sale of the securities hereunder, and
consent to the service of process in any such action or legal proceeding by
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Page 80 of 128 Pages
means of registered or certified mail, return receipt requested, in care of the
address set forth below or such other address as the undersigned shall furnish
in writing to the other.
5.5 This Subscription Agreement may be executed in
counterparts. Upon the execution and delivery of this Subscription Agreement by
the Subscriber, this Subscription Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Units as herein provided;
subject, however, to the right hereby reserved to the Company to enter into the
same agreements with other subscribers and to add and/or to delete other persons
as subscribers.
5.6 The holding of any provision of this Subscription
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Subscription Agreement, which shall
remain in full force and effect.
5.7 It is agreed that a waiver by either party of a breach of
any provision of this Subscription Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
5.9 The Company agrees not to disclose the names, addresses or
any other information about the Subscribers, except as required by law,
provided, that the Company may use information relating to the Subscriber in any
registration statement under the Act with respect to the Warrant Shares.
VI. BLUE SKY LEGENDS
California
The sale of securities which are the subject of this agreement
has not been qualified with the Commissioner of Corporations of the State of
California and the issuance of such securities or the payment or receipt of any
part of the consideration for such securities prior to such qualification is
unlawful, unless the sale of securities is exempt from qualification by Section
25100, 25102 or 25105 of the California Corporations Code. The rights of all
parties to this agreement are expressly conditioned upon such qualification
being obtained, unless the sale is so exempt.
Connecticut
The undersigned acknowledges that the Securities have not been
registered under the Connecticut Uniform Securities Act, as amended (the "Act")
and are subject to restrictions on transferability and sale of securities as set
forth herein. The undersigned hereby agrees that such Securities will not be
transferred or sold without registration under the Act or exemption therefrom.
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Page 81 of 128 Pages
Maine
These securities are being sold pursuant to an exemption from
registration with the bank superintendent of the State of Maine under Section
10502(2)(r) of Title 32 of the Maine revised statutes. These securities may be
deemed restricted securities and as such the holder may not be able to resell
the securities unless pursuant to registration under state or federal securities
laws or unless an exemption under such laws exists.
Missouri
The undersigned acknowledges that the Securities have not been
registered under the Missouri Uniform Securities Act, as amended (the "Act") and
are subject to restrictions on transferability and sale of securities as set
forth herein. The undersigned hereby acknowledges that such Securities may be
disposed of only through a licensed broker-dealer. It is a felony to sell
securities in violation of the Missouri Securities Act.
Pennsylvania
The undersigned hereby acknowledges that the Issuer is relying
upon the exemption from registration of securities set forth in Section 203(d)
of the Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act")
in connection with the sale of the Securities to the undersigned.
In accordance with the requirements of Section 203(d) of the
Pennsylvania Act, the undersigned hereby agrees not to sell his Securities
within twelve (12) months from the date of purchase except pursuant to Section
204.01 of the Blue Sky Regulations of the Pennsylvania Securities Act of 1972.
Additionally, the undersigned is aware of the right of withdrawal under Section
207(m) of the Act described in the cover pages of the Term Sheet.
Texas
The undersigned hereby acknowledges that the Securities cannot
be sold unless they are subsequently registered under the Securities Act of
1933, as amended, and the Texas Securities Act, or an exemption from
registration is available. The undersigned further acknowledges that because the
Securities are not readily transferable, he must bear the economic risk of his
investment for an indefinite period of time.
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Page 82 of 128 Pages
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
- ------------------------------ ------------------------------------
Signature of Subscriber Signature of Co-Subscriber
- ------------------------------ ------------------------------------
Name of Subscriber Name of Co-Subscriber
[please print]
- ------------------------------ ------------------------------------
Address of Subscriber Address of Co-Subscriber
- ------------------------------ ------------------------------------
Social Security or Taxpayer Social Security or Taxpayer
Identification Number of Subscriber Identification Number of
Co-Subscriber
- ------------------------------
Subscriber's Account Number
at Commonwealth Associates
- ------------------------------
Number of Units Subscribed For
*If Subscriber is a Registered Representative
with an NASD member firm, have the following
acknowledgement signed by the appropriate party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Rule 3050 of the NASD Subscription Accepted:
Conduct Rules.
PICK COMMUNICATIONS CORP.
- ------------------------------
Name of NASD Member Firm By:
--------------------------------
Name: Raymond M. Brennan
Title: Vice President
By
---------------------------
Authorized Officer
Page 83 of 128 Pages
Exhibit 5 WARRANT TO PURCHASE COMMON STOCK
OF
PICK COMMUNICATIONS CORP.
This is to Certify That, FOR VALUE RECEIVED, _______________, or
assigns ("Holder"), is entitled to purchase, subject to the provisions of this
Warrant, from PICK Communications Corp., a Nevada corporation ("Company"),
______________________________ fully paid, validly issued and nonassessable
shares of Common Stock of the Company ("Common Stock") at a price equal to $.50
per share at any time or from time to time during the period from July 29, 1998
until July 29, 2003, subject to adjustment as set forth herein. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price". This Warrant was originally issued pursuant
to an agency agreement ("Agency Agreement") between the Company and Commonwealth
Associates ("Commonwealth"), in connection with a private offering (the "Private
Placement") of the Company's 10% senior secured notes (the "Notes") through
Commonwealth pursuant to the terms of a confidential term sheet dated July 13,
1998 (the "Term Sheet").
(a) EXERCISE OF WARRANT; CANCELLATION OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any
time or from time to time on or after July 29, 1998 and until July 29, 2003 (the
"Exercise Period"), subject to the provisions of Section (j)(2) hereof;
provided, however, that (i) if either such day is a day on which banking
institutions in the State of New York are authorized by law to close, then on
the next succeeding day which shall not be such a day, and (ii) in the event of
any merger, consolidation or sale of substantially all the assets of the Company
as an entirety, resulting in any distribution to the Company's stockholders,
prior to July 29, 2003, the Holder shall have the right to exercise this Warrant
commencing at such time through July 29, 2003 into the kind and amount of shares
of stock and other securities and property (including cash) receivable by a
holder of the number of shares of Common Stock into which this Warrant might
have been exercisable immediately prior thereto. This Warrant may be exercised
by presentation and surrender hereof to the Company at its principal office, or
at the office of its stock transfer agent, if any, with the Purchase Form
annexed hereto duly executed and accompanied by payment of the Exercise Price
for the number of Warrant Shares specified in such form. As soon as practicable
after each such exercise of the warrants, but not later than seven (7) days from
the date of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificate for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of
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Page 84 of 128 Pages
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
(2) At any time during the Exercise Period, the Holder may, at
its option, exchange this Warrant, in whole or in part (a "Warrant Exchange"),
into the number of Warrant Shares determined in accordance with this Section
(a)(2), by surrendering this Warrant at the principal office of the Company or
at the office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any
Warrant Exchange, this Warrant shall represent the right to subscribe for and
acquire the number of Warrant Shares (rounded to the next highest integer) equal
to (i) the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to
the quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the current market value of a share of Common
Stock. Current market value shall have the meaning set forth Section (c) below,
except that for purposes hereof, the date of exercise, as used in such Section
(c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve
for issuance and/or delivery upon exercise of this Warrant such number of shares
of its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq National Market, the current
market value shall be the last reported sale price of the Common
Stock on such exchange or market on the last business day prior to
the date of exercise of this Warrant or if no such sale is made on
such day, the average closing bid and asked prices for such day on
such exchange or market; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq SmallCap
Market, the current market value shall be the average of the closing
bid and asked prices for such day on such market and if the Common
Stock is not so traded, the current market value shall be the mean
of the last reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
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Page 85 of 128 Pages
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the current market value shall be an amount, not less than
book value thereof as at the end of the most recent fiscal year of
the Company ending prior to the date of the exercise of the Warrant,
determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. Subject to the provisions of Section l
hereof, the Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrants shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying
the Exercise Price by a fraction, the denominator of which shall be
the number of shares of Common Stock outstanding after giving effect
<PAGE>
Page 86 of 128 Pages
to such action, and the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(2) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock
entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less
than the current market price of the Common Stock (as defined in
Subsection (8) below) on the record date mentioned below, or less
than the Exercise Price on such record date the Exercise Price shall
be adjusted so that the same shall equal the lower of (i) the price
determined by multiplying the Exercise Price in effect immediately
prior to the date of such issuance by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered)
would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number
of shares of Common Stock outstanding on such record date and the
number of additional shares of Common Stock offered for subscription
or purchase (or into which the convertible securities so offered are
convertible) or (ii) in the event the Subscription Price is equal to
or higher than the current market price but is less than the
Exercise Price, the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of
shares outstanding on the record date mentioned below and the number
of additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered (or
the aggregate conversion price of the convertible securities so
offered) would purchase at the Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding
on the record date mentioned below and the number of additional
shares of Common Stock offered for subscription or purchase (or into
which the convertible securities so offered are convertible). Such
adjustment shall be made successively whenever such rights or
warrants are issued and shall become effective immediately after the
record date for the determination of shareholders entitled to
receive such rights or warrants; and to the extent that shares of
Common Stock are not delivered (or securities convertible into
Common Stock are not delivered) after the expiration of such rights
or warrants the Exercise Price shall be readjusted to the Exercise
Price which would then be in effect had the adjustments made upon
the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (1) above) or subscription
rights or warrants (excluding those referred to in Subsection (2)
above),
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Page 87 of 128 Pages
then in each such case the Exercise Price in effect thereafter shall
be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which
shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as
defined in Subsection (8) below), less the fair market value (as
determined by the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such rights or
warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market
price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment
shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(4) In case the Company shall issue shares of its Common Stock
(excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (ii) upon exercise of options granted to the
Company's employees under a plan or plans adopted by the Company's
Board of Directors and approved by its shareholders, if such shares
would otherwise be included in this Subsection (4), (but only to the
extent that the aggregate number of shares excluded hereby and
issued after the date hereof, shall not exceed 5% of the Company's
Common Stock outstanding at the time of any issuance), (iii) upon
exercise of options and warrants outstanding at July 29, 1998, and
this Warrant (iv) to shareholders of any corporation which merges
into the Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such merger, or
(v) issued in a bona fide public offering pursuant to a firm
commitment underwriting, but only if no adjustment is required
pursuant to any other specific subsection of this Section (f)
(without regard to Subsection (9) below) with respect to the
transaction giving rise to such rights] for a consideration per
share (the "Offering Price") less than the current market price per
share (as defined in Subsection (8) below) on the date the Company
fixes the offering price of such additional shares or less than the
Exercise Price, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the lower of (i) the price
determined by multiplying the Exercise Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received
(determined as provided in Subsection (7) below) for the issuance of
such additional shares would purchase at such current market price
per share of Common Stock, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after the
issuance of such additional shares or (ii) in the event the Offering
Price is equal to or higher than the current market price per share
but less than the Exercise Price, the price determined by
multiplying the Exercise Price in effect immediately prior to the
date of issuance by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the issuance of such additional shares and the number of shares of
Common Stock which the aggregate consideration received (determined
as provided in subsection (7) below) for the issuance of such
additional shares would purchase at the Exercise Price in effect
immediately prior to the date of
<PAGE>
Page 88 of 128 Pages
such issuance, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively
whenever such an issuance is made.
(5) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock (excluding securities
issued in transactions described in Subsections (2) and (3) above)
for a consideration per share of Common Stock (the "Conversion
Price") initially deliverable upon conversion or exchange of such
securities (determined as provided in Subsection (7) below) less
than the current market price per share (as defined in Subsection
(8) below) in effect immediately prior to the issuance of such
securities, or less than the Exercise Price, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal the
lower of (i) the price determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities and
the number of shares of Common Stock which the aggregate
consideration received (determined as provided in Subsection (7)
below) for such securities would purchase at such current market
price per share of Common Stock, and the denominator of which shall
be the sum of the number of shares of Common Stock outstanding
immediately prior to such issuance and the maximum number of shares
of Common Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
price or rate or (ii) in the event the Conversion Price is equal to
or higher than the current market price per share but less than the
Exercise Price, the price determined by multiplying the Exercise
Price in effect immediately prior to the date of issuance by a
fraction, the numerator of which shall be the sum of the number of
shares outstanding immediately prior to the issuance of such
securities and the number of shares of Common Stock which the
aggregate consideration received (determined as provided in
subsection (7) below) for such securities would purchase at the
Exercise Price in effect immediately prior to the date of such
issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to
the issuance of such securities and the maximum number of shares of
Common Stock of the Company deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange
price or rate. Such adjustment shall be made successively whenever
such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and
(5) above, the number of Shares purchasable upon exercise of this
Warrant shall simultaneously be adjusted by multiplying the number
of Shares initially issuable upon exercise of this Warrant by the
Exercise Price in effect on the date hereof and dividing the product
so obtained by the Exercise Price, as adjusted.
(7) For purposes of any computation respecting consideration
received pursuant to Subsections (4) and (5) above, the following
shall apply:
<PAGE>
Page 89 of 128 Pages
(A) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for
any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in
connection therewith;
(B) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by the
Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be
conclusive; and
(C) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock,
the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof (the consideration in each case
to be determined in the same manner as provided in clauses (A)
and (B) of this Subsection (7)).
(8) For the purpose of any computation under Subsections (2),
(3), (4) and (5) above, the current market price per share of Common
Stock at any date shall be determined in the manner set forth in
Section (c) hereof except that the current market price per share
shall be deemed to be the higher of (i) the average of the prices
for 30 consecutive business days before such date or (ii) the price
on the business day immediately preceding such date.
(9) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at
least five cents ($0.05) in such price; provided, however, that any
adjustments which by reason of this Subsection (9) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All
calculations under this Section (f) shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such
changes in the Exercise Price, in addition to those required by this
Section (f), as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of
Common Stock, or any subdivision, reclassification or combination of
Common Stock, hereafter made by the Company shall not result in any
Federal Income tax liability to the holders of Common Stock or
securities convertible into Common Stock (including Warrants).
(10) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly but no later than 10 days after
any request for such an adjustment by the Holder, cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant, and, if requested,
information describing the transactions giving rise to such
adjustments, to be mailed
<PAGE>
Page 90 of 128 Pages
to the Holders at their last addresses appearing in the Warrant
Register, and shall cause a certified copy thereof to be mailed to
its transfer agent, if any. In the event the Company does not
provide the Holder with such notice and information within 10 days
of a request by the Holder, then notwithstanding the provisions of
this Section (f), the Exercise Price shall be immediately adjusted
to equal the lowest Offering Price, Subscription Price or Conversion
Price, as applicable, since the date of this Warrant, and the number
of shares issuable upon exercise of this Warrant shall be adjusted
accordingly. The Company may retain a firm of independent certified
public accountants selected by the Board of Directors (who may be
the regular accountants employed by the Company) to make any
computation required by this Section (f), and a certificate signed
by such firm shall be conclusive evidence of the correctness of such
adjustment.
(11) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (1) above, the Holder of this
Warrant thereafter shall become entitled to receive any shares of
the Company, other than Common Stock, thereafter the number of such
other shares so receivable upon exercise of this Warrant shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Subsections (1) to (9), inclusive
above.
(12) In the event the Company defaults in the payment of the
Notes and fails to file a registration statement to register the
Warrant Shares within 90 days after the Extension Period (as defined
and described in the Notes), the Exercise Price of this Warrant
shall be adjusted downward by 10% per month until such registration
statement is filed.
(13) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of this
Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated
in the similar Warrants initially issuable pursuant to this
Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the holder or any
holder of a Warrant executed and delivered pursuant to Section (a) and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common
<PAGE>
Page 91 of 128 Pages
Stock or (ii) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any other rights or
(iii) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior the date specified in
(x) or (y) below, as the case may be, a notice containing a brief description of
the proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if any is
to be fixed, as of which the holders of Common Stock or other securities shall
receive cash or other property deliverable upon such reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance. Any
such provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) The Company hereby agrees that no later than 30 days after
its Annual Report on Form 10-K for the year ending December 31, 1998
has been filed with the SEC, it will file a registration statement
covering the resale of the Warrant Shares on Form S-3 or such other
form as the Company desires, pursuant to the Securities Act of 1933
(the "Act'), and the Company will use its best efforts to cause such
registration to become effective as promptly as practicable
thereafter. In the event the
<PAGE>
Page 92 of 128 Pages
Company fails to repay the Notes prior to the end of the Extension
Period (as defined and described in the Term Sheet), the Company
hereby agrees to file the registration statement required under this
Section (j)(1) within the 90-day period following the Extension
Period.
(2) The Company will, until such time as the Warrant Shares
may be sold under Rule 144 without volume limitation:
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective;
(c) furnish to the Holders participating in such registration
and to the underwriters of the securities being registered
such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such
other documents as such underwriters may reasonably request in
order to facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as the
Holders may reasonably request in writing within twenty (20)
days following the original filing of such registration
statement, except that the Company shall not for any purpose
be required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the Holders, promptly after it shall receive notice
thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a
part of such registration statement has been filed;
(f) notify the Holders promptly of any request by the SEC for
the amending or supplementing of such registration statement
or prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the request
of any Holders, any amendments or supplements to such
registration statement or prospectus which, in the opinion of
counsel for such Holders (and concurred in by counsel for the
Company), is required under the Act or the rules and
regulations thereunder in connection with the distribution of
Common Stock by such Holders;
(h) prepare and promptly file with the SEC and promptly notify
such Holders of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be
delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as
then in effect
<PAGE>
Page 93 of 128 Pages
would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were
made, not misleading; and
(i) advise the Holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order
by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued.
(3) All fees, costs and expenses of and incidental to such
registration, inclusion and public offering in connection therewith
shall be borne by the Company, provided, however, that the Holders
shall bear their pro rata share of the underwriting discount and
commissions and transfer taxes. The fees, costs and expenses of
registration to be borne by the Company as provided above shall
include, without limitation, all registration, filing, and NASD
fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, and all legal fees and disbursements
and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are
to be registered and qualified (except as provided above). Fees and
disbursements of counsel and accountants for the Holders and any
other expenses incurred by the Holders not expressly included above
shall be borne by the Holders.
(4) The Company will indemnify and hold harmless each Holder
of Warrant Shares which are included in a registration statement
pursuant to the provisions of Section (j)(1) hereof, its directors
and officers, and any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or such
underwriter within the meaning of the Act, from and against, and
will reimburse such Holder and each such underwriter and controlling
person with respect to, any and all loss, damage, liability, cost
and expense to which such Holder or any such underwriter or
controlling person may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided,
however, that the Company will not be liable in any such case to the
extent that any such loss, damage, liability, cost or expenses
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such Holder, such underwriter or such
controlling person in writing specifically for use in the
preparation thereof.
(5) Each Holder of Warrant Shares included in a registration
pursuant to the provisions of Section (j)(1) hereof will indemnify
and hold harmless the
<PAGE>
Page 94 of 128 Pages
Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its
directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or
expense to which the Company or any controlling person and/or any
underwriter may become subject under the Act or otherwise, insofar
as such losses, damages, liabilities, costs or expenses are caused
by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in
which they were made, not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance
upon and in strict conformity with written information furnished by
or on behalf of such Holder specifically for use in the preparation
thereof.
(6) Promptly after receipt by an indemnified party pursuant to
the provisions of Sections (j)(4) or (5) of notice of the
commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a
claim thereof is to be made against the indemnifying party pursuant
to the provisions of said Sections (j)(4) or (5), promptly notify
the indemnifying party of the commencement thereof; but the omission
to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified
<PAGE>
Page 95 of 128 Pages
party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party,
provided, however, if counsel for the indemnifying party concludes
that a single counsel cannot under applicable legal and ethical
considerations, represent both the indemnifying party and the
indemnified party, the indemnified party or parties have the right
to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party pursuant to the
provisions of said Sections (j)(4) or (5) for any legal or other
expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the provisions of the preceding sentence,
(ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of
the indemnifying party.
PICK COMMUNICATIONS CORP.
By:
------------------------------------------
Raymond M. Brennan, Vice President Officer
Dated: January 19, 1999
Attest:
- ------------------------------------------
Robert S. Bingham, Chief Financial Officer
<PAGE>
Page 96 of 128 Pages
PURCHASE FORM
Dated_______________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing shares of Common Stock and hereby makes
payment of in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name________________________________________
(Please typewrite or print in block letters)
Address_____________________________________
Signature___________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED,______________________________hereby sells,
assigns and transfers unto
Name________________________________________
(Please typewrite or print in block letters)
Address_____________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint Attorney, to transfer the same on the books of the
Company with full power of substitution in the premises.
Date________________________
Signature___________________
Page 97 of 128 Pages
Exhibit 6
CERTIFICATE OF DESIGNATION, NUMBER, POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS,
LIMITATIONS, RESTRICTIONS, AND OTHER DISTINGUISHING CHARACTERISTICS
OF SERIES B CONVERTIBLE PREFERRED STOCK
OF
PICK COMMUNICATIONS CORP.
It is hereby certified that:
1. The name of the company (hereinafter called the "Company") is PICK
Communications Corp., a Nevada company whose address is 155 Route 46 West, Wayne
Interchange Plaza II, Third Floor, Wayne, NJ 07470.
2. The articles of incorporation of the Company authorizes the issuance of ten
million (10,000,000) shares of Preferred Stock, of a par value of $.001 per
share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue any or all of said shares in one or more
series and by resolution or resolutions to establish the designation, number,
full or limited voting powers, or the denial of voting powers, preferences and
relative, participation, optional, and other special rights and the
qualifications, limitations, restrictions, and other distinguishing
characteristics of each series to be issued.
3. The Board of Directors of the Company authorized seventy thousand (70,000) of
the ten million (10,000,000) shares of Preferred Stock of the Company be
designated Series A Convertible Preferred Stock, $.001 par value per share, none
of which shares have been issued (the "Series A Convertible Preferred Stock").
4. The Board of Directors of the Company, pursuant to the authority expressly
vested in it as aforesaid, has adopted the following resolutions creating a
Series B issue of Convertible Preferred Stock:
RESOLVED, that two million (2,000,000) of the ten million (10,000,000)
authorized shares of Preferred Stock of the Company shall be designated Series B
Convertible Preferred Stock, $.001 par value per share, and shall possess the
rights and privileges set forth below:
SECTION 1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series B Convertible Preferred
Stock" (the "Series B Convertible Preferred Stock") and the number of shares
constituting the Series B Convertible Preferred Stock shall be two million
(2,000,000). Such number of shares may be increased or decreased by resolution
of the Board of Directors; provided, however, that no decrease shall reduce the
number of shares of Series B Convertible Preferred Stock to a number less than
the number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series B Convertible Preferred Stock.
SECTION 2. RANK.
The Series B Convertible Preferred Stock shall rank: (i) prior to all of the
Company's Common Stock, par value $.001 per share ("Common Stock"); (ii) prior
to any class or series of capital stock of the Company including the Series A
Convertible Preferred Stock hereafter created specifically ranking by its terms
junior to any Series B Convertible Preferred Stock of whatever subdivision
(collectively, with the Common Stock, "Junior Securities"); (iii) on parity with
any class or series of capital stock of the Company hereafter created
specifically ranking by its terms on parity with the Series B Convertible
Preferred Stock ("Parity Securities") in each case as to distributions of assets
upon liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (all such distributions being referred to collectively as
"Distributions").
SECTION 3. DIVIDENDS.
The holders of Series B Convertible Preferred Stock ("Holders") shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Company, out of the funds of the Company legally available therefor, dividends.
ratably with any declaration or payment of any dividend with holders of the
Common Stock or other junior securities of this Corporation, when, as and if
declared by the Board of Directors, based on the number of shares of Common
Stock into which each share of Series B Preferred Stock is then convertible.
<PAGE>
Page 98 of 128 Pages
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the Holders of shares of Series B Convertible
Preferred Stock shall be entitled to receive, immediately after any
distributions to securities ("Senior Securities") required by the Company's
Certificate of Incorporation or any certificate of designation of preferences,
and prior and in preference to any distribution to Junior Securities, but in
parity with any distribution of Parity Securities, an amount per share equal to
the sum of $1.00 for each outstanding share of Series B Convertible Preferred
Stock (the "Original Series B Issue Price"). If upon the occurrence of such
event, the assets and funds thus distributed among the Holders of the Series B
Convertible Preferred Stock and Parity Securities shall be insufficient to
permit the payment to such Holders of the full preferential amounts due to the
Holders of the Series B Convertible Preferred Stock and the Parity Securities,
respectively, then the entire assets and funds of the Company legally available
for distribution shall be distributed among the Holders of the Series B
Convertible Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Company's Certificate of Incorporation and any certificate of designation of
preferences.
(b) Upon the completion of the distribution required by subsection 4(a), if
assets remain in this Company, they shall be distributed to holders of Parity
Securities (unless holders of Parity Securities have received distributions
pursuant to subsection (a) above) and Junior Securities in accordance with the
Company's Certificate of Incorporation including any duly adopted certificate(s)
of designation of preferences.
(c) A consolidation or merger of the Company with or into any other corporation
or corporations, or a sale, conveyance or disposition of all or substantially
all of the assets of the Company or the effectuation by the Company of a
transaction or series of related transactions in which more than 50% of the
voting power of the Company is disposed of, shall not be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 4, but
shall instead be treated pursuant to Section 6 hereof.
SECTION 5. CONVERSION. THE RECORD HOLDERS OF THIS SERIES B CONVERTIBLE PREFERRED
STOCK SHALL HAVE CONVERSION RIGHTS AS FOLLOWS (THE "CONVERSION RIGHTS"):
Holder's Right to Convert.
(i) The record Holder of this Series B Convertible Preferred Stock shall be
entitled (at the times and in the amounts set forth below), at the office of the
Company or any transfer agent for the Series B Convertible Preferred Stock, to
convert portions of the Series B Convertible Preferred Stock held by such Holder
(but only in multiples of $1,000) into that number of unrestricted, fully-paid
and non-assessable shares of Common Stock at the Conversion Rate as set forth
below. The number of shares of Common Stock into which this Series B Convertible
Preferred Stock may be converted is hereinafter referred to as the "Conversion
Number" for such Series B Convertible Preferred Stock. The record Holder of this
Series B Convertible Preferred Stock shall be entitled to convert the initial
number of shares of Series B Convertible Preferred Stock held by such Holder
beginning on the date of the closing (the "Closing") of a sale of such Series B
Convertible Preferred Stock that occurs pursuant to the offering (the
"Offering") of the Series B Convertible Preferred Stock by the Company. The
following formula sets forth the number of shares (Conversion Number) issued
upon conversion of one (1) share of Series B Convertible Preferred Stock:
Conversion Number = 1
---------------
Conversion Rate
where,
Conversion Rate = $.10 per share.
(ii) Mechanics of Conversion. In order to convert Series B Convertible Preferred
Stock into full shares of Common Stock, the Holder shall (i) transmit facsimile
copy of the fully executed notice of conversion in the form attached hereto
("Notice of Conversion") to the Company at such office that he elects to convert
the same (Facsimile number (973) 812- 4181), which notice shall specify the
number of shares of Series B Convertible Preferred Stock to be converted and
shall contain a calculation of the Conversion Rate (together with a copy of the
first page of each certificate to be converted) to the Company or its designated
transfer agent prior to midnight, New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion and
(ii) surrender the original certificate or certificates therefor, duly endorsed,
and deliver the original Notice of Conversion by either overnight courier or
2-day courier, to the office of the Company or of any transfer agent for the
Series B Convertible Preferred Stock; provided, however, that the Company shall
not be obligated to issue certificates evidencing the shares of Common Stock
issuable
<PAGE>
Page 99 of 128 Pages
upon such conversion unless either the certificates evidencing such Series B
Convertible Preferred Stock are delivered to the Company or its transfer agent
as provided above, or the Holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed. Upon receipt by the
Company of evidence of the loss, theft, destruction or mutilation of the
certificate or certificates ("Stock Certificates") representing shares of Series
B Convertible Preferred Stock, and (in the case of loss, theft or destruction)
of indemnity or security reasonably satisfactory to the Company, and upon
surrender and cancellation of the Stock Certificate(s), if mutilated, the
Company shall execute and deliver new Stock Certificate(s) of like tenor and
date. No fractional shares of Common Stock shall be issued upon conversion of
this Series B Convertible Preferred Stock. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company shall pay cash to such
Holder in an amount equal to such fraction multiplied by the Conversion Rate
then in effect. In the case of a dispute as to the calculation of the Conversion
Rate, the Company's calculation shall be deemed conclusive absent manifest
error.
The Company shall use all reasonable efforts to issue and deliver within three
(3) business days after delivery to the Company of the stock certificates, or
after such agreement and indemnification, to such Holder of Series B Convertible
Preferred Stock at the address of the Holder on the books of the Company, a
certificate or certificates for the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid. The date on which conversion occurs
(the "Date of Conversion") shall be deemed to be the date set forth in such
Notice of Conversion, provided (i) that the advance copy of the Notice of
Conversion is faxed to the Company before midnight, New York City time, on the
Date of Conversion, and (ii) that the original Stock Certificates representing
the shares of Series B Convertible Preferred Stock to be converted are received
by the transfer agent or the Company within five (5) business days thereafter.
The person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. If the original Stock
Certificates representing the Series B Convertible Preferred Stock to be
converted are not received by the transfer agent or the Company within five (5)
business days after the Date of Conversion or if the facsimile of the Notice of
Conversion is not received by the Company or its designated transfer agent prior
to the Conversion Notice Deadline, the Notice of Conversion, at the Company's
option, may be declared null and void.
Following conversion of shares of Series B Convertible Preferred Stock, such
shares of Series B Convertible Preferred Stock will no longer be outstanding.
(b) Reservation of Stock Issuable Upon Conversion. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the Series B
Convertible Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all then outstanding
Series B Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series B Convertible Preferred
Stock, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(c) Adjustment to Conversion Rate.
(i) If, prior to the conversion of all Series B Convertible Preferred Stock,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Company shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity, then the Holders of Series B Convertible Preferred
Stock shall thereafter have the right to purchase and receive upon conversion of
Series B Convertible Preferred Stock, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Series B Convertible Preferred Stock held by
such Holders had such merger, consolidation, exchange of shares,
recapitalization or reorganization not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holders of the Series B Convertible Preferred Stock to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the number of shares issuable upon conversion of the Series B Convertible
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any shares of stock or securities thereafter deliverable upon the
exercise hereof. The Company shall not effect any transaction described in this
subsection 5(c) unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Holders
of the Series B Convertible Preferred Stock such shares of
<PAGE>
Page 100 of 128 Pages
stock and/or securities as, in accordance with the foregoing provisions, the
Holders of the Series B Convertible Preferred Stock may be entitled to purchase.
(ii) If, prior to the conversion of all Series B Convertible Preferred Stock,
the Company issues or sells any shares of Common Stock or other equity
securities or securities convertible into or exercisable for equity securities,
other than the shares of Common Stock underlying options or warrants outstanding
as of the Closing, for a consideration per share less than the Conversion Rate
in effect immediately prior to such issuance or sale, then immediately after the
date the Holders receive written notice from the Company of such issuance or
sale, the Conversion Rate then in effect shall be reduced to an amount equal to
the consideration per share of Common Stock in such issuance or sale.
(iii) If, any adjustment under this subsection 5(c) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares of Common
Stock issuable upon conversion shall be the next higher number of shares.
SECTION 6. CORPORATE CHANGE.
The Conversion Rate shall be appropriately adjusted to reflect, as deemed
equitable and appropriate by the Company, any stock dividend, stock split or
share combination of the Common Stock. In the event of a merger, reorganization,
recapitalization or similar event of or with respect to the Company (a
"Corporate Change") (other than a Corporate Change in which or substantially all
of the consideration received by the holders of the Company's equity securities
upon such Corporate Change consists of cash or assets other than securities
issued by the acquiring entity or any affiliate thereof), this Series B
Convertible Preferred Stock shall be assumed by the acquiring entity and
thereafter this Series B Convertible Preferred Stock shall be convertible into
such class and type of securities as the Holder would have received had the
Holder converted this Series B Convertible Preferred Stock immediately prior to
such Corporate Change.
SECTION 7. VOTING RIGHTS.
(a) In addition to any other rights provided for herein or by law, the holders
of Series B Preferred Stock shall be entitled to vote, together with the holders
of Common Stock as one class, on all matters as to which holders of Common Stock
shall be entitled to vote, in the same manner and with the same effect as such
Common Stock holders. In any such vote each share of Series B Preferred Stock
shall entitle the holder thereof to the number of votes per share that equals
the number of whole shares of Common Stock into which each such share of Series
B Preferred Stock is then convertible, calculated to the nearest share.
(b) So long as at least twenty percent (20%) of the Series B Preferred Stock
remains outstanding, the consent of the holders of two-thirds of the then
outstanding Series B Preferred Stock, voting as one class, either expressed in
writing or at a meeting called for that purpose, shall be necessary to permit
effect or validate the creation and issuance of any series of preferred stock or
other security of the Company which is senior as to Distributions to the Series
B Preferred Stock.
(c) So long as at least twenty percent (20%) of the Series B Preferred Stock
remains outstanding, the consent of two-thirds of the holders of the then
outstanding Series B Preferred Stock, voting as one class, either expressed in
writing or at a meeting called for that purpose, shall be necessary to repeal,
amend or otherwise change this Certificate of Designation or the Articles of
Incorporation of the Company, as amended, in a manner which would alter or
change the powers, preferences, rights, privileges, restrictions and conditions
of the Series B Preferred Stock so as to adversely affect the Series B Preferred
Stock.
(d) Each share of the Series B Preferred Stock shall entitle the holder thereof
to one vote on all matters to be voted on by the holders of the Series B
Preferred Stock, as set forth above.
(e) In the event that the holders of the Series B Preferred Stock are required
to vote as a class on any other matter, the affirmative vote of holders of not
less than fifty percent (50%) of the outstanding shares of Series B Preferred
Stock shall be required to approve each such matter to be voted upon, and if any
matter is approved by such requisite percentage of holders of Series B Preferred
Stock, such matter shall bind all holders of Series B Preferred Stock.
<PAGE>
Page 101 of 128 Pages
SECTION 8. STATUS OF CONVERTED STOCK.
In the event any shares of Series B Convertible Preferred Stock shall be
converted pursuant to Section 5 hereof, the shares so converted shall be
canceled, shall return to the status of authorized, but unissued Convertible
Preferred Stock of no designated series, and shall not be issuable by the
Company as Series B Convertible Preferred Stock.
SECTION 9. MISCELLANEOUS.
(a) There is no sinking fund with respect to the Series B Preferred Stock.
(b) The shares of the Series B Preferred Stock shall not have any preferences,
voting powers or relative, participating, optional, preemptive or other special
rights except as set forth above in this Certificate of Designation, and in the
Articles of Incorporation of the Company, as amended.
FURTHER RESOLVED, that the statements contained in the foregoing resolutions
creating and designating the said Series B Convertible Preferred Stock and
fixing the number, powers, preferences and relative, optional, participating,
and other special rights and the qualifications, limitations, restrictions, and
other distinguishing characteristics thereof shall, upon the effective date of
said series, be deemed to be included in and be a part of the certificate of
incorporation of the Company pursuant to the provisions of Chapter 78 of the
Nevada Revised Statutes.
Signed on March ____, 1999
- ------------------------------------
Diego Leiva, President
Attest:
----------------------------
Raymond Brennan, Secretary
STATE OF NEW JERSEY )
) ss.
COUNTY OF PASSAIC )
The foregoing instrument was subscribed before me, a notary public for the
State of New Jersey, this ____ day of March 1999, by Diego Leiva and Raymond
Brennan, who are personally known to me.
------------------------------
Notary Public
My commission expires:
<PAGE>
Page 102 of 128 Pages
NOTICE OF CONVERSION
(To be executed by the Registered Holder
in order to Convert the Series B Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert __________ shares of Series
B Convertible Preferred Stock, represented by stock certificate No(s). ________
(the "Convertible Preferred Stock Certificates") into shares of common stock
("Common Stock") of PICK Communications Corp., (the "Company") according to the
conditions of the Certificate of Designation of Series B Convertible Preferred
Stock, as of the date written below. If shares are to be issued in the name of a
person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any.
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Series B Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Act or pursuant to an exemption from
registration under the Act.
Conversion Calculations:
Date of Conversion
Applicable Conversion Rate
Signature
Name
Address
- --------------------------------------------------------------------------------
No shares of Common Stock shall be issued until the original Convertible
Preferred Stock Certificate(s) to be converted and the Notice of Conversion are
received by the Company's Attorney or Transfer Agent. The original Stock
Certificates representing the Series B Convertible Preferred Stock to be
converted and the Notice of Conversion must be received by the Company's
Attorney or Transfer Agent by the fifth business day following the Date of
Conversion, or the Notice of Conversion, at the Company's option, may be
declared null and void.
- --------------------------------------------------------------------------------
Page 103 of 128 Pages
Exhibit 7
PICK COMMUNICATIONS CORP.
SUBSCRIPTION AGREEMENT (the "Subscription Agreement" or the "Agreement")
made as of this __ day of March, 1999, between PICK Communications Corp., a
Nevada corporation with offices at 155 Route 46 West, Wayne Interchange Plaza
II, Third Floor, Wayne, New Jersey 07470 (the "Company") and the undersigned
(the "Subscriber").
WHEREAS, the Company is a party to an agreement dated March 3, 1999 with
Commonwealth Associates L.P. ("Commonwealth") and Diego Leiva (the "Purchase
Agreement") pursuant to which Commonwealth and/or Permitted Designees (as
defined in the Purchase Agreement) are entitled to purchase shares of Series B
Convertible Preferred Stock (the "Shares") of the Company for a purchase price
of $1.00 per share (subject to adjustment); and
WHEREAS, the Subscriber represents that the Subscriber is either
Commonwealth, an officer, employee or affiliate of Commonwealth, or a Permitted
Designee; and
WHEREAS, the Company and the Subscriber wish to set forth additional terms
and conditions relating to the Subscriber's purchase of the Shares.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. SUBSCRIPTION FOR SHARES AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER
1.1 The Company is currently taking all required steps to effect a change
in its authorized capital stock, by either a reverse split and/or an increase in
the authorized shares, to provide sufficient authorized shares for all its
currently outstanding shares on a fully diluted basis, as well as the Shares
covered by the Purchase Agreement and any other required issuances. The Company
has obtained the approval its shareholders and its Board of Directors and is in
the process of complying with Securities and Exchange Commission (the "SEC" or
the "Commission") requests to effect the proposed change. In any event, Diego
Leiva has also agreed to escrow seven million of his shares for the benefit of
Commonwealth and/or the Permitted Designees until the number of authorized
shares is amended if Commonwealth and/or the Permitted Designees and/or the
Holders (as defined in the Purchase Agreement) are unable to obtain common stock
upon conversion of their Preferred Stock and/or Notes (as defined in the
Purchase Agreement).
1.2 The Subscriber represents and warrants that the Subscriber is an
"accredited investor" as such term in defined in Rule 501 of Regulation D
promulgated under the United States Securities Act of 1933, as amended (the
"Act") and is able to bear the economic risk of an investment in the Shares.
1.3 The Subscriber acknowledges that the Subscriber has prior investment
experience, including investment in non-listed and non-registered securities, or
the Subscriber has employed the
<PAGE>
Page 104 of 128 Pages
services of an investment advisor, attorney or accountant to read all of the
documents furnished or made available by the Company and to evaluate the merits
and risks of such an investment.
1.4 The Subscriber represents that the Shares are being purchased for
investment and not for distribution or resale to others. The Subscriber agrees
not to sell or otherwise transfer the Shares unless they are registered under
the Act or unless an exemption from such registration is available.
1.5 The Subscriber understands that Rule 144 (the "Rule") promulgated
under the Act requires, among other conditions, a one year holding period prior
to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the Act.
The Subscriber understands that the Company makes no representation or warranty
regarding its fulfillment in the future of any reporting requirements under the
Securities Exchange Act of 1934, as amended, or its dissemination to the public
of any current financial or other information concerning the Company, as is
required by the Rule as one of the conditions of its availability. The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register the Shares under the Act, with the exception of certain
registration rights relating to the shares of Common Stock issuable upon
conversion of the Shares (the "Underlying Shares") set forth in the Purchase
Agreement and Article IV herein. The Subscriber consents that the Company may,
if it desires, permit the transfer of the Shares out of the Subscriber's name
only when the request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively " Securities Laws"). The Subscriber agrees to hold the
Company and its directors, officers and controlling persons and their respective
heirs, representatives, successors and assigns harmless and to indemnify them
against all liabilities, costs and expenses incurred by them as a result any
sale or distribution by the undersigned Subscriber in violation of any
Securities Laws
1.6 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Shares stating that they have not
been registered under the Act and setting forth or referring to the restrictions
on transferability and sale thereof.
1.7 The Subscriber hereby represents that the address of Subscriber
furnished by him at the end of this Subscription Agreement is the undersigned's
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.
1.8 The Subscriber acknowledges that if he is a Registered Representative
of an NASD member firm, he must give such firm the notice required by the NASD's
Rules of Fair Practice, receipt of which must be acknowledged by such firm on
the signature page hereof.
1.9 The Subscriber acknowledges that at such time, if ever, as the
Underlying Shares are registered, sales of the Underlying Shares will be subject
to state securities laws, including those of states which may require any
securities sold therein to be sold through a registered broker-dealer or in
reliance upon an exemption from registration.
1.10 If the undersigned Subscriber is a partnership, corporation, trust or
other entity, such partnership, corporation, trust or other entity further
represents and warrants that: (i) it was not formed for the purpose of investing
in the Company; (ii) it is authorized and otherwise duly qualified
<PAGE>
Page 105 of 128 Pages
to purchase and hold the Shares; and (iii) that this Subscription Agreement has
been duly and validly authorized, executed and delivered constitutes the legal,
binding and enforceable obligation of the undersigned.
II. RISK FACTORS
An investment in the Shares involves a high degree of risk. This
Subscription Agreement contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of the
Company's management as well as assumptions made by and information currently
available to the Company's management. When used in this Subscription Agreement,
the words "anticipate", "believe", "estimate", "expect" and similar expressions,
as they relate to the Company or the Company's management, are intended to
identify forward-looking statements. Such statements reflect the current view of
the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.
Significant and Continuing Losses
The Company has experienced significant operating losses since it
commenced full operations in 1994. The Company incurred net losses of
approximately $1,251,000, $1,071,000 and $9,500,000 for the years ended December
31, 1994, 1995, and 1997 and $8,067,000 for the nine-month period ended
September 30, 1998. Although the Company had net income of $1,636,000 in 1996,
this resulted from non-cash, non-operating income, which was offset in 1997 by
non-cash non-operating losses.
The Company significantly curtailed its operations during the first half
of 1998, while it installed and tested two new switches which should allow the
Company to better control its operations. Consequently total revenues amounted
to approximately $6,239,000 for the nine month period ended September 30, 1998,
compared to $7,591,000 for the comparable period last year. While the new
switches are fully operational, there can be no assurance that the Company will
be able to return in the foreseeable future to the level of sales it had at the
end of 1997. The Company will continue to have a high level of operating
expenses and will be required to make significant up-front expenditures in
connection with its proposed expansion and development of new products
(including, but not limited to, salaries of executive, marketing and other
personnel). The Company expects to incur additional losses until such time as it
is able to generate sufficient revenues to finance its operations and the costs
of expansion. There can be no assurance that the Company will be able to
generate such revenues and operate profitably.
Immediate Need for the Proceeds of the Offering and Additional Financing
The Company is without cash on hand to meet its current obligations. The
Company will not be able to sustain its operations without funding such as the
sale of the Shares. The Company has an immediate need for the proceeds of the
sale of the Shares in order to pay outstanding past-due payables, meet its
immediate payroll obligations and finance its current business operations.
<PAGE>
Page 106 of 128 Pages
As of February 17, 1999, the Company had approximately $20 million of
short term indebtedness, including, approximately $8 million of trade payables,
$2 million of a short-term loan which was extended buy may become due and
payable immediately and $9.9 million of 18% senior secured notes (the "Notes"),
plus accrued interest, currently due on March 31, 1999.
At September 30, 1998, the Company had a working capital deficit of
$13,977,767 and a stockholders' deficit of $11,796,854. During 1998, the Company
obtained interim financing, loans and advances in the aggregate amount of
approximately $12,900,000.
The proceeds of the sale of the Shares will be sufficient to enable the
Company to continue operations on an extremely limited basis only. The Company
needs substantial financing to repay the Notes and for additional working
capital. In the event that the Company is unable to obtain such additional
financing, the Noteholders can declare a default and cause the Company to
curtail its operations, sell assets, and/or be forced to seek protection under
the Federal bankruptcy laws. In such an event, the owners of the Shares hereby
can lose their entire investment in the Company.
Exclusive of the $1,000,000 purchase price of the Shares, the Company has
no firm arrangements with respect to additional financing, and it is not
anticipated that existing stockholders will provide any portion of the Company's
future financing requirements. While the Company has had discussions with
potential sources of financing, there can be no assurance that additional
financing, will be available to the Company on commercially reasonable or
acceptable terms, if at all. The failure to secure necessary financing would be
expected to have a material adverse impact on the Company as set forth above.
Qualified Financial Statements Based on Obtaining Financing and Attaining
Successful Operations.
The Company has incurred operating losses and negative cash flow from
operations in 1997, 1996 and 1995 as stated in the Financial Statements and had
a working capital deficiency of $7,406,000 at December 31, 1997. These operating
losses and negative cash flow have continued in 1998 and 1999. In addition,
substantially all of the debts of the Company are short term. The Company's
Former Accountants issued a qualified report on the Company's financial
statements as at and for the year ended December 31, 1997. The report states
that without the Company extending the payout terms, negotiating additional
long-term financing arrangements and additional equity, or increasing revenues
and/or decreasing expenses, these facts, among others, may indicate that the
Company will be unable to continue as a going concern for a reasonable period of
time. See "Report of Certified Public Accountants" and "Note l4 of Notes to
Financial Statements" contained in the Company's Annual Report on Form 10-K.
Restated Financial Statements
The Company's financial statements as of March 31, 1997 were restated in
June 1998. The Company initially did not report any gains or losses on the
disposition of marketable equity securities for transactions consummated in the
first quarter of 1997, as the Company believed that it was not appropriate to
recognize losses on the acquisition of its and its subsidiary's common stock or
on the exchange of one investment in marketable equity securities for a similar
investment. While the
<PAGE>
Page 107 of 128 Pages
Company believed its initial reporting was correct when made, the Company
subsequently determined that it would have been preferable to record these
transactions based upon the fair value of the assets exchanged, resulting in the
recognition of approximately $9,400,000 in non-cash, non-operating losses. The
effect of the restatement for the quarter ended March 31, 1997, was to reduce
net income of $948,711 to a net loss of $7,626,903. These transactions do not
have a cash or operating effect on the Company's results of operations, and, to
date, have not adversely affected the price of the Company's Common Stock.
Dependence on Limited Number of Clients
The Company's prepaid telephone calling card business largely depends upon
its relationship with Blackstone Calling Card, Inc. ("Blackstone"). Under the
terms of the Company's agreement with Blackstone (the "Blackstone Agreement"),
Blackstone had agreed to purchase, after a six month phase-in period ending
October 27, 1998, a minimum face value of $5,000,000 per month from the Company,
which was expected to result in net revenues of approximately $3,000,000 per
month to the Company. It is anticipated that the Blackstone Agreement will have
to be amended to lower the purchase minimum amount and the corresponding revenue
to the Company due to the fact that the Company has not received sufficient
capacity from Gulfsat Communications Company ("Gulfsat") to terminate
Blackstone's requirements. Gulfsat has increased the availability of minutes to
the Company, however, not enough to satisfy Blackstone's requirements.
The termination of business by Blackstone could have a material adverse
effect on the Company. The Blackstone Agreement is subject to termination by
either party without cause at the end of year one or upon 60 days' prior notice
by Blackstone if the Company fails to maintain overall network quality.
In 1997, approximately 19% and 13% of the Company's revenues were from two
customers, Trescom and DC Communications Corp. During the first nine months of
1998, approximately 65% of the Company's revenues were from Blackstone.
Limited Operating History
The Company was organized in April 1984 and had no operations when it
acquired control of Public Info/Comm Kiosk, Inc. ("Kiosk") in September 1995, in
a reverse merger. The Company has a limited operating history upon which an
evaluation of the Company's future performance and prospects can be made. The
Company's prospects must be considered in light of the risks, expenses, delays,
problems and difficulties frequently encountered in the establishment of a new
business in the telecommunications industry, which is an evolving industry
characterized by intense competition.
Competition
The Company faces intense competition in the marketing and sale of its
prepaid telephone calling card products and long distance services. The
Company's telephone debit cards and long distance services compete for consumer
recognition with other prepaid phone cards, credit calling cards and long
distance telephone services which have achieved significant international,
national and regional consumer loyalty. Many of these products and services are
marketed by companies which are well-established, have reputations for success
in the development and sale of products and
<PAGE>
Page 108 of 128 Pages
services and have significantly greater financial, marketing, distribution,
personnel and other resources than the Company, thereby permitting such
companies to implement extensive advertising and promotional campaigns, both
general and in response to efforts by additional competitors to enter into new
markets and introduce new products and services. Certain of these competitors,
including AT&T, MCI, Sprint and the "Baby Bells," such as Bell Atlantic and Bell
South, dominate the telecommunications industry and have the financial resources
to enable them to withstand substantial price competition, which is expected to
increase significantly. These and other large telephone companies, as well as
retailers, such as Southland Corp., have entered into the telephone debit card
segment of the industry. In addition, because the prepaid phone card segment of
the industry has no substantial barriers to entry, competition from smaller
competitors in the Company's target markets is also expected to continue to
increase significantly.
The telecommunications industry is characterized by frequent introduction
of new products and services, and is subject to changing consumer preferences
and industry trends, which may adversely affect the Company's ability to plan
for future design, development and marketing of its products and services. The
markets for telecommunications products and services are also characterized by
rapidly changing technology and evolving industry standards, often resulting in
product obsolescence or short product life cycles. The proliferation of new
telecommunications technologies, including personal communication services,
cellular telephone products and services and telephone debit cards employing
alternative technologies, may reduce demand for telephone debit cards generally.
The Internet services business is highly competitive and there are few
significant barriers to entry. Currently, the Company competes with a number of
national and local Internet service providers ("ISPs"). In addition, a number of
multinational corporations, including giant communications carriers such as
AT&T, MCI, Sprint and some of the regional Bell operating companies, are
offering, or have announced plans to offer, Internet access or on-line services.
The Company also faces significant competition from Internet access
consolidators such as Verio, Inc. and from on-line service firms such as America
Online ("AOL"), CompuServe, and Prodigy. The Company believes that new
competitors which may include computer software and services, telephone, media,
publishing, cable television and other companies, are likely to enter the
on-line services market.
Many of the Company's Internet service competitors possess financial
resources significantly greater than those of the Company and, accordingly,
could initiate and support prolonged price competition to gain market share. If
significant price competition were to develop, the Company might be forced to
lower its prices, which has occurred in the last year, possibly for a protracted
period, which would have a material adverse effect on its financial condition
and results of operations and could threaten its economic viability. In
addition, the Company believes that the Internet service and on-line service
businesses will further consolidate in the future, which could result in
increased price and other competition in the industry and consequently adversely
impact the Company.
The Company believes that the primary competitive factors among Internet
access providers are price, customer support, technical expertise, local
presence in a market, ease of use, variety of value-added services and
reliability. The Company believes it will be able to compete favorably in these
areas. The Company's success in the high-speed direct market will depend heavily
upon its ability to provide high quality Internet connectivity and value-added
Internet services targeted in
<PAGE>
Page 109 of 128 Pages
select target markets. Other factors that will affect the Company's success in
these markets include the Company's continued ability to attract additional
experienced marketing, sales and management talent, and the expansion of
support, training and field service capabilities.
The Company is not presently aware of any competitor offering the same
prepaid cellular telephone technology. Although the Company has a patent on such
product, larger, more established entities with greater financial and personnel
resources than those of the Company have entered into direct competition with
the Company offering competing non-infringing products. Accordingly, there can
be no assurance that the Company will be able to market the product or compete
effectively.
The Company believes that it competes on the basis of price and service.
The Company's success will depend on the Company's ability to anticipate and
respond to rapid changes in consumer preferences and the introduction of new
products, as well as its ability to retain its favorable gross margins. There
can be no assurance that the Company will be able to compete successfully in its
markets.
Uncertainty of Market Acceptance
Achieving market acceptance for the Company's products and services
requires substantial marketing efforts and the expenditure of significant funds
to create both awareness and demand by large corporations, advertisers and
marketers, retailers and consumers. The Company's success depends, in large
part, on its ability to attract large corporations to advertise and promote
their products and services using the Company's telephone debit cards, as well
as the level of acceptance and usage by consumers. Because demand by large
corporations, advertisers and marketers, retailers and consumers may be
interrelated, any lack or lessening of demand by any one of these consuming
entities could adversely affect overall market acceptance of the Company's
products and services. There can be no assurance that substantial markets will
develop for prepaid cellular phones or any new products, nor can there be any
assurance that the Company will be able to meet its current marketing objectives
or succeed in positioning itself as a key player in the telecommunications
industry.
Risks Associated with Marketing Strategy and Rapid Expansion
The Company grew from approximately $1.6 million of net sales in 1995 to
$9.0 million of net sales in 1997 (prior to the decrease in sales during 1998
discussed elsewhere herein). This has placed demands on the management,
employees, operations and physical resources of the organization. Although the
Company intends to continue to pursue a strategy of growth and will seek to
expand its distribution capabilities to achieve greater penetration in new and
emerging telecommunications markets, unless the Company is able to repay its
short-term indebtedness it will be without the required funds to do so, and has
limited experience in effecting expansion. Implementation of the Company's
proposed expansion will depend on, among other things, the Company's ability to
establish additional distribution arrangements targeting several market
segments, and hire and retain skilled management, financial, marketing, and
other personnel.
The Company's marketing strategy and plans are subject to change as a
result of a number of factors, including, but not limited to, progress or delays
in the Company's marketing efforts, changes in market conditions (including the
emergence of significant supplementary markets), the nature of
<PAGE>
Page 110 of 128 Pages
possible distribution arrangements which may become available to it in the
future and competitive factors. The Company may also seek to expand its
operations through the possible acquisition of companies in businesses which the
Company believes are complementary with its business. However, there can be no
assurance that the Company will be able to implement successfully its business
strategy or otherwise expand its operations, or that the Company will ultimately
effect any acquisition or integrate successfully into its operations any
acquired business.
In order to manage any future growth, the Company will be required to
continue to improve its operating systems, attract and retain skilled management
and technical personnel and successfully manage growth (including monitoring
operations, controlling costs and maintaining effective quality, and service
controls). If the Company is unable to effectively manage its growth, the
Company's business, operating results and financial conditions could be
adversely affected.
Dependence on Satellites and Third-Party Long Distance Carriers; Possible
Service Interruptions and Equipment Failures
The Company is currently dependent on a limited number of satellites and
domestic and international long distance carriers to provide access to long
distance telephone service on a cost effective basis. The Company has entered
into interconnect agreements or arrangements with satellites and long distance
carriers, pursuant to which the Company leases phone lines and transmission
facilities necessary to transmit consumer calls. Although the Company believes
that it currently has sufficient access to transmission facilities, satellites
and long distance networks on favorable terms and believes that its
relationships with such third parties are satisfactory, any increase in the
rates charged by such third parties would materially adversely affect the
Company's operating margins. Failure to obtain continuing access to such
facilities, satellites and networks would also have a material adverse effect on
the Company, including possibly requiring the Company to significantly curtail
or cease its operations.
In addition, the Company's operations require that its switching
facilities and its satellites and carriers' long distance networks operate on a
continuous basis. It is not atypical for these facilities to experience service
interruptions and equipment failures which could last for a significant period
of time. It is possible that the Company's switching facilities and its
satellites and carriers' long-distance networks may, from time to time,
experience service interruptions or equipment failures. Such interruptions
occurred during the fourth quarter of 1996, when it lost access to its AT&T
switching facilities during a period when it did not have access to an
alternative carrier, and in the first quarter of 1998 when the Company was in
the process of bringing its own leased switches on line. In addition to having a
material adverse effect on the Company's results of operations such
interruptions adversely affect consumer confidence, as well as the Company's
reputation.
Government Regulations
Long distance telecommunication services are subject to regulation by the
Federal Communications Commission (the "FCC") and by state regulatory
authorities. Among other things, these regulatory authorities impose regulations
governing the rates, terms and conditions for interstate and intrastate
telecommunication services. The federal law governing regulation of interstate
telecommunications are the Communications Acts of 1934 and 1996 (the
"Communications Acts"), which applies to all "common carriers," including AT&T,
MCI and Sprint, as well as entities, such
<PAGE>
Page 111 of 128 Pages
as the Company, which resell the transmission services provided through the
facilities of other common carriers. In general, under the Communications Acts,
common carriers are required to charge reasonable rates and are prohibited from
engaging in unreasonable practices in the provision of their services. Common
carriers are also prohibited from engaging in unreasonable discrimination in
their rates, charges and practices.
The Communications Acts require each common carrier to file tariffs with
the FCC. A tariff is a list of services offered, the terms under which the
services are offered, and the rates, or range of rates, charged for services.
Upon filing a tariff, the service provider is required to provide the services
at the rates and under the terms and conditions specified in the tariff. Failure
to file a tariff could result in fines and penalties. The Company believes it
has filed all required tariffs with the FCC.
In addition to federal regulation, resellers of long distance services may
be subject to regulation by the various state regulatory authorities. The scope
of such regulation varies from state to state, with certain states requiring the
filing and regulatory approval of various certifications and state tariffs. As
the Company expands the geographic scope of its long distance operations, it
intends to obtain operating authority as may be required to provide long
distance service.
The Company believes that it is in substantial compliance with all
material laws, rules and regulations governing its operations and has obtained
or is in the process of obtaining all licenses, tariffs and approvals necessary
for the conduct of its business. In the future, legislation enacted by Congress,
court decisions relating to the telecommunications industry, or regulatory
actions taken by the FCC or the states in which the Company operates could
adversely impact the Company's business. Changes in existing laws and
regulations, particularly relaxation of existing regulations resulting in
significantly increased price competition, may have a significant impact on the
Company's activities and on the Company's operating results. Adoption of new
statutes and regulations and the Company's expansion into new geographic markets
could require the Company to alter its methods of operations, at costs which
could be substantial, or otherwise limit the types of services offered by the
Company. There can be no assurance that the Company will be able to comply with
additional applicable laws, regulations and licensing requirements.
Future Dependence on the Internet; Developing Market
The Company's ability to derive revenues by providing online commerce and
Internet services will depend, in part, upon a developed and robust industry and
the infrastructure for providing Internet access and carrying Internet traffic.
There can be no assurance that the necessary infrastructure, such as a reliable
network backbone, or complementary products, such as high speed modems, will be
developed or that the Internet will become a viable commercial marketplace in
those segments targeted by the Company. Critical issues concerning the
commercial use of the Internet, including security, reliability, cost, ease of
use and access, and quality of service, remain unresolved and may impact the
growth of Internet use. In the event that the necessary infrastructure or
complementary products are not developed or the Internet does not become a
viable commercial marketplace, the future business, operating results and
financial condition of the Company could be adversely affected if the Company
were to expend significant proceeds for the development of Internet services.
<PAGE>
Page 112 of 128 Pages
Dependence on Key Personnel
The development of new telecommunications products and services or
improvements of the Company's existing products is dependent to a significant
degree on the efforts of the Company's Chief Executive Officer, Diego Leiva, as
well as certain other officers of the Company. The loss of Mr. Leiva's services
for any reason would be expected to have a material adverse effect on the
Company. In addition, the Company has obtained a $1 million key-man life
insurance policy on Mr. Leiva's life. The Company's future success is also
dependent on, among other factors, the successful recruitment and retention of
key personnel. Competition for skilled and technical talent is intense. There
can be no assurance that the Company will be successful in attracting and
retaining such personnel. Any failure by the Company to retain existing key
employees or to hire new employees when necessary could have a potential adverse
effect upon the Company's business, financial condition and results of
operations.
Possible Inability to Recognize Deferred Revenue
The sale of long distance telephone service through prepaid phone cards
may be subject to "escheat" laws in various states. These laws generally provide
that payments or deposits received in advance or in anticipation of the
provision of utility (including telephone) services that remain unclaimed for a
specific period of time after the termination of such services are deemed
"abandoned property" and must be remitted to the state. Although the Company is
not aware of any case in which such laws have been applied to the sale of
prepaid phone cards, and does not believe that such laws are applicable, in the
event that such laws are deemed applicable, the Company may be unable to
recognize the portion of its deferred revenue remaining upon the expiration of
phone cards with unused calling time. In such event, the Company may be required
to deliver such amounts to certain states in accordance with these laws, which
could have a material adverse effect on the Company.
Control by Management
Diego Leiva, the Company's Chief Executive Officer, his affiliates and
other officers and directors of the Company currently own beneficially
approximately 50% of the Company's shares of Common Stock giving effect to all
currently exercisable options and warrants but not the conversion of the Notes
or the Shares. Therefore, these stockholders may have the ability to elect all
of the Company's Directors and to control the outcome of all other issues
submitted to the Company's stockholders.
Difficulty of Trading and Obtaining Quotations for Common Stock
The Company's Common Stock is currently traded in the over-the-counter
market in the so-called "pink sheets," and is quoted on the National Association
of Securities Dealers, Inc.'s Electronic Bulletin Board under the symbol "PICK."
As a result of trading in the over-the-counter market, an investor would likely
find it more difficult to dispose of, or to obtain quotations as to the price of
the Common Stock.
<PAGE>
Page 113 of 128 Pages
Penny Stock Regulation
The trading of the Company's Common Stock is currently subject to Rule
15g-9 promulgated under the Exchange Act for non-Nasdaq and non-exchange listed
securities. Under such rule, brokers-dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities are
exempt from this rule if the market price is at least $5.00 per share.
The SEC has adopted regulations that generally define a "penny stock" to
be an equity security that has a market price of less than $5.00 per share or an
exercise price of less than $5.00 per share subject to certain exceptions. Such
exceptions include equity securities listed on Nasdaq and equity securities
issued by an issuer that has (i) net tangible assets of at least $2,000,000, if
such issuer has been in continuous operation for more than three years, or (ii)
net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average revenue of at
least $6,000,000 for the preceding three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a risk disclosure schedule explaining the penny
stock market and the risks associated therewith.
The Company's Common Stock is currently a penny stock as defined in the
Exchange Act and as such, the market liquidity for the Common Stock is limited
to the ability of broker-dealers to sell Common Stock in compliance with the
above-mentioned disclosure requirements .
Restrictions on Transferability
Neither the Shares nor the Underlying Shares have been registered under
the Act or under any state securities laws and they cannot be sold, transferred,
pledged, assigned, hypothecated or otherwise disposed of without registration
under the Act and such laws unless, in the opinion of counsel satisfactory to
the Company, any such sale, transfer, assignment, pledge or hypothecation will
not violate the registration requirements under the Act or state securities
laws. While the Company expects this to occur by the beginning of April 1999,
there can be no assurance the Company will obtain such approval. The Rule will
not be available for any public sale of the Common Stock unless the requirements
thereunder are satisfied, including, but not limited to, the one-year holding
period, which commences from the date of purchase of the Shares and that the
Company is current in its filings with the SEC. The Company did not timely file
its Form 10-K for December 31, 1997 or its Form 10-Q for March 31, 1998,
although its Form 10-Q for June 30, 1998 and September 30, 1998 were filed on a
timely basis. In the event that the Company has not filed a report required to
be filed, an investor hereunder may not be able to sell his Shares under Rule
144 until the time when such report is filed.
The Company has agreed to file a registration statement registering the
Common Stock offered hereby and that issuable upon exercise of the Warrants
within 30 days from the filing with the Commission of the Company's Form 10-K
for the fiscal year ended December 31, 1998, unless a private placement is still
taking place which must be concluded prior to filing a registration statement
with the SEC. There can be no assurance that the Company will file such
registration statement on a timely basis or that any such registration statement
will be declared effective.
<PAGE>
Page 114 of 128 Pages
Shares Eligible For Future Sale
Of the shares of the Company's Common Stock outstanding, approximately
21,169,711 are "restricted securities," as that term is defined in the
Securities Act, and may be sold in compliance with the provisions of the Rule.
III. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that:
(a) The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Nevada and has the corporate power
to conduct the business which it conducts and proposes to conduct and is
qualified to do business in New Jersey.
(b) The execution, delivery and performance of this Subscription
Agreement by the Company has been duly approved by the Board of Directors of the
Company and the Company will file an Information Statement with the SEC and a
Designation (as defined in the Purchase Agreement) by March 12, 1999 and,
thereafter, will use its best efforts to effect such changes outlined in the
Information Statement.
(c) The Shares have been duly and validly authorized and when issued
and paid for in accordance with the terms hereof, will be duly and validly
issued and fully paid and non assessable.
(d) Except as set forth in Section 1.1 above, the Company will at
all times have authorized and reserved a sufficient number of shares of Common
Stock to provide for conversion of the Shares.
(e) The Company has obtained, or is in the process of obtaining, all
licenses, permits and other governmental authorizations necessary to the conduct
of its business; such licenses, permits and other governmental authorizations
obtained are in full force and effect; and the Company is in all material
respects complying therewith.
(f) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could materially
adversely affect the business, property, financial condition or operations of
the Company.
(g) The Company is not in violation of or default under, nor will
the execution and delivery of this Subscription Agreement, the issuance of the
Shares, and the incurrence of the obligations herein and therein set forth and
the consummation of the transactions herein or therein contemplated, result in a
violation of, or constitute a default under, the Company's articles of
incorporation or by-laws, any material obligations, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness or in any material contract, indenture, mortgage, loan agreement,
lease, joint venture or other agreement or instrument to which the Company is a
party or by which it or any of its properties may be bound or any material
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality or court, domestic or foreign.
<PAGE>
Page 115 of 128 Pages
(h) The financial information contained in the Subscription
Agreement presents fairly the financial condition of the Company as of the dates
and for the periods indicated.
IV. REGISTRATION RIGHTS
4.1 The Company hereby agrees with the holders of the Shares, the
Underlying Shares or their transferees (collectively, the "Holders") that no
later than one month following the Closing, unless a private placement is still
taking place which must be concluded prior to filing a registration statement
with the SEC covering the resale of the Underlying Shares on Form S-1 or such
other form as the Company desires, pursuant to the Act, and the Company will use
its best efforts to cause such registration to become effective as promptly as
practicable thereafter.
The obligation of the Company under this Section 5.1 shall be limited to
one registration statement.
4.2 Registration Procedures. The Company will after the Closing Date:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective until the Underlying Shares are freely
saleable without the volume limitations of Rule 144;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective until the
Underlying Shares are freely salable without the volume limitation of Rule 144;
(c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as the Holders may reasonably request in writing
within 45 days following the original filing of such registration statement,
except that the Company shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the Holders, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Holders promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of any
Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of
<PAGE>
Page 116 of 128 Pages
counsel for such Holders (and concurred in by counsel for the Company), is
required under the Act or the rules and regulations thereunder in connection
with the distribution of Common Stock by such Holders;
(h) prepare and promptly file with the SEC and promptly notify such
Holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise the Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
4.3 Expenses.
(a) With respect to the registration required pursuant to Section
4.1 hereof, all fees, costs and expenses of and incidental to such registration,
inclusion and public offering (as specified in paragraph (b) below) in
connection therewith shall be borne by the Company, provided, however, that the
Holders shall bear their pro rata share of the underwriting discount and
commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 4.3(a) above). Fees and
disbursements of counsel and accountants for the Holders and any other expenses
incurred by the Holders not expressly included above shall be borne by the
Holders.
4.4 Indemnification.
(a) The Company will indemnify and hold harmless each Holder of
Securities which are included in a registration statement pursuant to the
provisions of Section 4.1 hereof, its directors and officers, and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or such underwriter within the meaning of the Act, from and
against, and will reimburse such Holder and each such underwriter and
controlling person with respect to, any and all loss, damage, liability, cost
and expense to which such Holder or any such underwriter or controlling person
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained
<PAGE>
Page 117 of 128 Pages
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(b) Each Holder of Securities included in a registration pursuant to
the provisions of Section 4.1 hereof will indemnify and hold harmless the
Company, its directors and officers, any controlling person and any underwriter
from and against, and will reimburse the Company, its directors and officers,
any controlling person and any underwriter with respect to, any and all loss,
damage, liability, cost or expense to which the Company or any controlling
person and/or any underwriter may become subject under the Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
Holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 4.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if counsel for the indemnifying party concludes that a single
counsel cannot under applicable legal and ethical considerations, represent both
the indemnifying party and the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
<PAGE>
Page 118 of 128 Pages
V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at its registered office, Wayne
Interchange Plaza II, Third Floor, Wayne, New Jersey 07470, Attention: Chief
Executive Officer and to the Subscriber at his address indicated on the last
page of this Subscription Agreement. Notices shall be deemed to have been given
on the date of mailing, except notices of change of address, which shall be
deemed to have been given when received.
5.2 This Subscription Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Subscription
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of New York. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Subscription Agreement shall be adjudicated before a court located in New York
City and they hereby submit to the exclusive jurisdiction of the courts of the
State of New York located in New York, New York and of the federal courts in the
Southern District of New York with respect to any action or legal proceeding
commenced by any party, and irrevocably waive any objection they now or
hereafter may have respecting the venue of any such action or proceeding brought
in such a court or respecting the fact that such court is an inconvenient forum,
relating to or arising out of this Subscription Agreement or any acts or
omissions relating to the sale of the securities hereunder, and consent to the
service of process in any such action or legal proceeding by means of registered
or certified mail, return receipt requested, in care of the address set forth
below or such other address as the undersigned shall furnish in writing to the
other.
5.5 This Subscription Agreement may be executed in counterparts.
5.6 The holding of any provision of this Subscription Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Subscription Agreement, which shall remain in full
force and effect.
5.7 It is agreed that a waiver by either party of a breach of any
provision of this Subscription Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
<PAGE>
Page 119 of 128 Pages
5.9 The Company agrees not to disclose the names, addresses or any other
information about the Subscribers, except as required by law, provided, that the
Company may use information relating to the Subscriber in any registration
statement under the Act with respect to the Securities.
IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.
- ------------------------------ ---------------------------------
Signature of Subscriber Signature of Co-Subscriber
- ------------------------------ ---------------------------------
Name of Subscriber Name of Co-Subscriber
[please print]
- ------------------------------ ---------------------------------
Address of Subscriber Address of Co-Subscriber
- ------------------------------ ---------------------------------
Social Security or Taxpayer Social Security or Taxpayer
Identification Number of Subscriber Identification Number of
Co-Subscriber
- ------------------------------
Number of Shares of Preferred Stock
Subscribed For
*If Subscriber is a Registered Representative
with an NASD member firm, have the following
acknowledgment signed by the appropriate party:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Rule 3050 of the NASD Subscription Accepted:
Conduct Rules.
PICK COMMUNICATIONS CORP.
- ------------------------------
Name of NASD Member Firm By:
-----------------------------
Name:
Title:
By
---------------------------
Authorized Officer
Page 120 of 128 Pages
Exhibit 8 April 21, 1999
PICK Communications Corp.
Wayne Interchange Plaza II
Wayne, New Jersey 07470
Attn.: Diego Leiva
Dear Mr. Leiva:
The purpose of this letter is to confirm the understanding of Commonwealth
Associates, L.P., ("Commonwealth"), as agent for and on behalf of the holders of
the Notes, and PICK Communications Corp. (the "Company") concerning the proposed
restructuring (the "Restructuring") of the 10% Senior Secured Notes in the
original aggregate principal amount of $9,900,000 (the "Notes") of the Company.
The current terms and conditions of such Restructuring are set forth in Schedule
I hereto.
Section 1. Services. Commonwealth will perform the following:
(a) Commonwealth has, and will continue to, negotiate on behalf of the
Noteholders in developing a general strategy for structuring and accomplishing
the Restructuring on terms beneficial to the Noteholders, and the Company
acknowledges that Commonwealth is acting solely on behalf of the Noteholders and
not as an agent, fiduciary or in any other capacity for the Company, its
shareholders or any other third party; and
(b) Provided it has concluded that the Restructuring is in the best
interests of the Noteholders, Commonwealth will assist in the solicitation of
consents from Noteholders to the Restructuring (the "Consents") with the goal of
obtaining Consents from the holders of not less than 80% of the principal amount
of the Notes.
Section 2. Consideration. Upon effectiveness of the Restructuring,
Noteholders from whom Consents have been obtained will receive the following:
(a) The right for a two-year period to exchange each existing warrant
previously issued to a Noteholder for one share of the Company's Common Stock.
The Company agrees to register the shares of Common Stock to be issued in
exchange for the warrants as set forth herein as promptly as practicable but in
no event later than June 30, 1999.
(b) The right to receive from the Company a number of shares of the
Company's Common Stock equal to 100% of the original principal amount of their
Note (or 9,900,000 shares if all Consents are obtained). In lieu of such share
of stock, a Noteholder can elect to have his Conversion Price, as set forth in
Paragraph 2 of Schedule I, reduced to $.50 per share. A Noteholder shall have
two years to elect whether to receive the shares of Common Stock or to reduce
the Conversion Price. The Company agrees to file a registration statement with
respect to the shares of Common Stock to be issued as set forth herein within
six months of the effective date of the Restructuring, and to use its best
efforts to cause such registration statement to become effective as soon as
possible thereafter.
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(c) Commonwealth shall be entitled to designate one nominee to the Board
of Directors for a three-year period.
Section 3. Fees. The Company shall pay to Commonwealth for its services on
behalf of the Noteholders and for the previous services rendered to the Company
including, without limitation, securing a new CEO for the Company, the following
consideration:
(a) The exercise price for the 1,394,367 warrants previously issued to
Commonwealth or its designees shall immediately and automatically be reduced to
$.10 per share of Common Stock; and
(b) The Company shall issue to Commonwealth shares of Common Stock equal
to 10% of the shares of Common Stock issued or to be issued to Noteholders who
consent to the Restructuring, including the shares to be issued in exchange for
the existing warrants as set forth in 2(a) above and the shares to be issued to
Noteholders pursuant to 2(b) above either directly or as a result of the
reduction in their Conversion Price, up to a maximum of 2,000,000 shares, plus
warrants to purchase 500,000 shares at an exercise price equal to $1.375 per
share. The Company agrees to file a registration statement with respect to the
shares underlying the warrants set forth in 3(a) above and the shares of Common
Stock to be issued as set forth herein within six months of the effective date
of the Restructuring, and to use its best efforts to cause such registration
statement to become effective as soon as possible thereafter.
Section 4. Expenses. In addition to the compensation described in Section
2 above, the Company agrees to promptly reimburse us, upon request from time to
time, not more than monthly, for all out-of-pocket expenses incurred or to be
incurred (including, without limitation, all travel and lodging expenses, and
reasonable fees and disbursements of any counsel, consultants and advisors
retained by us with the Company's consent) in connection with our services
pursuant to this agreement; provided however, that unless otherwise consented to
in writing by the Company in advance such expenses shall not exceed $10,000 in
the aggregate.
Section 5. Indemnity. The Company will indemnify us in the manner and to
the extent provided in the indemnification provisions (the "Indemnification
Provisions") attached to this agreement and incorporated herein and made a part
hereof.
Section 6. Repayment of Notes. Nothing herein shall be construed to
prevent the Company from raising any financing in order to repay the Notes in
lieu of the Restructuring on or before April 27, 1999.
Section 7. Successors and Assigns. The benefits of this agreement shall
inure to the respective successors and assigns of the parties hereto and of the
indemnified parties hereunder and their successors and assigns and
representatives, and the obligations and liabilities assumed in this agreement
by the parties hereto shall be binding upon their respective successors and
assigns; provided, that the rights and obligations of either party under this
agreement may not be assigned without the prior written consent of the other
party hereto and any other purported assignment shall be null and void.
Section 8. Governing Law/Resolution of Disputes. The validity and
interpretation of this Agreement shall be governed by the law of the State of
New York applicable to agreements made
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and to be fully performed therein. Commonwealth and the Company will attempt to
settle any claim or controversy arising out of this Agreement through
consultation and negotiation in good faith and a spirit of mutual cooperation.
If those attempts fail, then the dispute will be mediated by a mutually
acceptable mediator to be chosen by Commonwealth and the Company within 15 days
after written notice from either party demanding mediation. Neither party may
unreasonably withhold consent to the selection of a mediator, and the parties
will share the costs of the mediation equally. Any dispute which the parties
cannot resolve through negotiation or mediation within six months of the date of
the initial demand for it by one of the parties may then be submitted to binding
arbitration under the rules of the American Arbitration Organization of New York
for resolution. The use of mediation will not be construed under the doctrine of
latches, waiver or estoppel to affect adversely the rights of either party.
Nothing in this paragraph will prevent either party from resorting to judicial
proceedings if (a) good faith efforts to resolve the dispute under these
procedures have been unsuccessful or (b) interim relief from a court is
necessary to prevent serious and irreparable injury.
Section 9. Miscellaneous.
(a) The Company expressly acknowledges that all opinions and advice
(written or oral) given by Commonwealth to the Company in connection with
Commonwealth's engagement are intended solely for the benefit and use of the
Company.
(b) The Company is a sophisticated business enterprise that has retained
Commonwealth for the limited purposes set forth in this Agreement, and the
parties acknowledge and agree that their respective rights and obligations are
contractual in nature. Each party disclaims an intention to impose fiduciary
obligations on the other by virtue of the engagement contemplated by the
Agreement, and each party agrees that there is no fiduciary relationship between
them.
(c) This agreement shall supersede any and all previous agreements
relating to the matters set forth herein including the letter dated April 20,
1999.
Please confirm that the foregoing is in accordance with your understandings and
agreements with Commonwealth Associates, L.P. by signing and returning to
Commonwealth the two copies of this letter enclosed herewith.
Very truly yours,
COMMONWEALTH ASSOCIATES, L.P.
By:
--------------------------------
ACCEPTED AND AGREED AS OF
THE DATE FIRST ABOVE WRITTEN:
PICK COMMUNICATIONS CORP.
By:
-------------------------------
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SCHEDULE I
TERMS OF RESTRUCTURING:
Existing holders will be asked to consent to the following terms (the
"Restructuring").
Note Exchange. The Notes will be amended as set forth below and will be in a
principal amount equal to the principal amount plus accrued and unpaid interest
on the original Notes (the "Amended Notes"). The Amended Notes will contain
identical terms and conditions as the original Notes except as follows:
1. Maturity Date. The Maturity Date will be April 26, 2002. In
addition, the Company shall have the option to extend the maturity
date for one additional year, in which event the Conversion Price
referred to below shall be adjusted as described below.
2. Optional Conversion/Conversion Price. Each Amended Note shall be
convertible at any time at the option of the holder thereof into
shares of Common Stock at a per share conversion price equal to
$1.00 (the "Conversion Price"). In the event that: (i) within 12
months after the Restructuring the Company issues any shares,
options, warrants, or other convertible securities (other than
options issued pursuant to the Company's employee stock option plan)
for a purchase price, exercise price or conversion price, as the
case may be, less than the Conversion Price, other than any shares
issued pursuant to any authorized or outstanding options, warrants
or other convertible securities (including the Notes and the Series
B and Series D Preferred Stock) as of the date of the Restructuring,
or any shares, options, warrants, or other convertible securities
issued to Commonwealth, or (ii) the average closing bid price for
the Common Stock for the 15 trading days immediately preceding the
one year anniversary of the effective date of the Restructuring is
less than the Conversion Price, then the Conversion Price shall be
reset to such lower price but in no event less than $.50. In the
event that the Company elects to extend the maturity date for an
additional year, the Conversion Price shall be reduced to 50% of the
average closing bid price for the Common Stock for the 15 trading
days immediately preceding the date of extension.
3. Mandatory Conversion. The Notes shall be automatically converted
into shares of Common Stock in the event that the closing bid price
for the Common Stock has exceeded $1.50 per share for 20 consecutive
trading days. Such conversion shall be conditioned upon the shares
of Common Stock to be issued upon such conversion being fully
registered for resale.
4. Registration. The Company agrees to file a registration statement
with respect to the shares of Common Stock issuable upon conversion
of the Notes within six months from the date of issuance of the
Amended Notes, and shall use its best efforts to cause such
registration statement to become effective as soon as practical
thereafter, and to keep such registration effective thereafter.
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5. Director Nominee. Noteholders shall have the right to designate one
nominee to the Board of Directors, which nominee shall be identified
by Commonwealth or by holders owning 51% of the outstanding
principal of the New Notes.
Conditions to Restructuring: The Restructuring shall be conditioned upon the
following:
1. Board of Directors. The Board of Directors of the Company being
reconstituted to consist of Diego Leiva (Chairman), Tom Malone,
Robert Priddy (founder of Atlantic Southeast Airlines and ValueJet
Airlines, and founding investor of MGC Communications), Robert Sams
and John Tyderman (two of the existing directors), one designee of
Commonwealth, and one designee of the Noteholders.
2. D&O Insurance. The Company will maintain its existing D&O insurance
coverage.
3. Cooper Option Agreement. The Option Agreement entered into between
the Company and Ashley Cooper, Robert Becker and John Clarke shall
have been terminated without any ongoing liability or obligation on
the part of the Company.
4. JP Turner Agreement. The investment banking agreement with JP Turner
shall have been terminated without any ongoing liability or
obligation of the Company.
5. Stock Options. All stock options approved for issuance subsequent to
February 26, -------------- 1999, other than the 5,000,000 options
issued to Tom Malone, shall be subject to the review and approval of
Tom Malone and, if not so approved, shall be rescinded in full. The
shares issued to directors will be converted into stock options with
a one year vesting period, at an exercise price equal to the closing
price as of the date of grant of such options. In addition, Mr.
Delgado and Mr. Maronon may be engaged as advisors to the Company in
exchange for 500,000 options on the same terms as those issued to
directors as set forth above.
6. Diego Leiva Employment Agreement. Diego Leiva's employment agreement
shall be amended to change his title and duties to that of Chairman
of the Board. Mr. Leiva shall agree that during the term of such
employment contract he will vote for the slate of directors proposed
by management, including the nominee of Commonwealth and the nominee
of the Noteholders, provided Mr. Leiva is a nominee. Except as
provided above, such employment agreement shall not be amended.
7. Capitalization. There shall be no more than approximately 103
million shares outstanding on a fully-diluted basis after giving
effect to all options, warrants and other convertible securities.
8. Affiliated Transactions. During the term of the Notes, the Company
shall not enter into any transaction with any affiliated party
without the unanimous consent of the independent directors.
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9. Minimum Participation. Holders owning in excess of 80% of the
outstanding principal amount of the original Notes shall have
consented in writing to the Restructuring.
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INDEMNIFICATION PROVISIONS
PICK Communications Corp. (the "Company") agrees to indemnify and hold
harmless Commonwealth Associates, L.P. ("Commonwealth") against any and all
losses, claims, damages, obligations, penalties, judgments, awards, liabilities,
costs, expenses and disbursements (and any and all actions, suits, proceedings
and investigations in respect thereof and any and all reasonable legal and other
costs, expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including without limitation, the
reasonable costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which
Commonwealth is a party), directly or indirectly, caused by, relating to, based
upon, arising out of, or in connection with Commonwealth's performance of
professional services for the Company, including, without limitation, any act or
omission by Commonwealth in connection with its acceptance of or the performance
or non performance of its obligations under the agreement dated April 21, 1999
between the Company and Commonwealth to which these indemnification provisions
are attached and form a part (the "Agreement"); provided, however, that the
Company shall not be obligated to indemnify, defend or hold harmless
Commonwealth for losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements suffered by or paid by
Commonwealth as a result of acts or omissions of Commonwealth which have been
made or not made in bad faith or which constitute willful misconduct or gross
negligence. The Company also agrees that Commonwealth shall not have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement of Commonwealth, except to the
extent that any such liability has resulted primarily and directly from
Commonwealth's gross negligence or willful misconduct.
The indemnification provisions shall be in addition to any liability which
the Company may otherwise have to Commonwealth or the persons indemnified below
in this sentence and shall extend to the following: Commonwealth, its affiliated
entities, partners, employees, legal counsel, agents and controlling persons
(within the meaning of the federal securities laws), and the officers,
directors, employees, legal counsel, agents and controlling persons of any of
them. All references to Commonwealth in these indemnification provisions shall
be understood to include any and all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to which
Commonwealth proposes to demand indemnification, it shall notify the Company
within 30 days from the time Commonwealth has any knowledge of such action,
suit, proceeding or investigation. Commonwealth shall have the right to retain
counsel which will be reasonably acceptable to the Company to represent it
(provided, however, that Commonwealth shall hire only one law firm and to the
extent necessary, local counsel) and the Company shall pay the reasonable fees,
expenses and disbursements of such counsel; and such counsel shall, to the
extent consistent with its professional responsibilities, cooperate with the
Company and any counsel designated by the Company. The Company shall be liable
for any settlement of any claim against Commonwealth only if made with the
Company's written consent. The Company shall not, without the prior written
consent of Commonwealth, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to Commonwealth of an unconditional release from all liability in
respect of such claim. If the Company makes any indemnity payment hereunder this
Agreement and
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Page 127 of 128 Pages
thereafter a determination is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) that the Company did not owe
indemnity under this Agreement, Commonwealth shall immediately repay all amounts
paid pursuant to the indemnity provisions of this Agreement.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made but it is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Company, on the one hand, and Commonwealth, on the other hand, shall
contribute to the losses involved in such proportion as is appropriate to
reflect (i) the relative benefits received by the Company, on the one hand, and
Commonwealth, on the other hand, (ii) the relative fault of the Company, on the
one hand, and Commonwealth, on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, and (iii) the
relevant equitable considerations. No person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
also found liable for fraudulent misrepresentation. Notwithstanding the
foregoing, Commonwealth shall not be obligated to contribute any amount
hereunder that exceeds the amount of fees previously received by Commonwealth
pursuant to the Agreement.
Neither termination nor completion of the engagement of Commonwealth
referred to above shall affect these indemnification provisions which shall then
remain operative and in full force and effect.
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Page 128 of 128 Pages
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agree to jointly prepare and file with regulatory
authorities a Schedule 13D and any future amendments thereto reporting each of
the undersigned's ownership of securities of PICK Communications Corp. and
hereby affirm that such Schedule 13D is being filed on behalf of each of the
undersigned.
Dated: May 14, 1999 Commonwealth Associates L.P.
New York, New York
By: Commonwealth Associates Management Corp.,
its general partner
By: /s/ Joseph Wynne
-----------------------------------------
Joseph Wynne
Chief Financial
Dated: May 14, 1999 /s/ Michael S. Falk
New York, New York ---------------------------------------------
Michael S. Falk
Dated: May 14, 1999 /s/ Robert Priddy
Marietta, Georgia ---------------------------------------------
Robert Priddy
Dated: May 14, 1999 /s/ Keith Rosenbloom
New York, New York ---------------------------------------------
Keith Rosenbloom
Dated: May 14, 1999 /s/ Basil Ascuitto
New York, New York ---------------------------------------------
Basil Ascuitto
Dated: May 14, 1999 /s/ Robert Beuret
New York, New York ---------------------------------------------
Robert Beuret
