SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Commission File Number:
earliest event reported):
MARCH 17, 2000 1-10210
EGLOBE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486421
(State or other jurisdiction of (IRS Employer Identification
incorporation) Number)
1250 24TH STREET, NW, SUITE 725
WASHINGTON, D.C. 20037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(202) 822-8981
(Former name or former address, if changed since last report)
NA
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EGLOBE, INC.
ITEM 5 OTHER EVENTS
On March 17, 2000, we closed a $4 million equity private placement with
RGC International Investors, LDC ("RGC"), which made a $15 million investment in
us on January 26, 2000. Pursuant to the terms of a securities purchase
agreement, we issued RGC 4,000 shares of our Series Q convertible preferred
stock (the "Series Q Preferred Stock") and warrants (the "Series Q Warrants") to
purchase 100,000 shares of our common stock with a per share exercise price
equal to $12.04, subject to adjustment for issuances of shares of our common
stock below market price. We intend to use the proceeds of the private placement
for general working capital.
The Series Q securities purchase agreement also provides that we may
issue up to 6,000 additional shares of our Series Q Preferred Stock and warrants
to purchase an additional 150,000 shares of our common stock to RGC for an
additional $6,000,000 at a second closing to be completed no later than July 15,
2000. The primary condition to the second closing is the effectiveness of a
registration statement registering the resale of common stock underlying the
Series Q Preferred Stock and the Series Q Warrants and the preferred stock and
warrants issued in January (the "January Stock and Warrants").
The shares of Series Q Preferred Stock carry an effective annual yield
of 5% (payable in kind at the time of conversion) and are convertible, at the
holder's option, into shares of common stock. The shares of Series Q Preferred
Stock will automatically be converted into shares of common stock on March 15,
2003, subject to delay for specified events. The conversion price for the Series
Q Preferred Stock is $12.04 until April 26, 2000, and thereafter is equal to the
lesser of:
o the five day average closing price of our common stock on Nasdaq during
the 22-day period prior to conversion, and
o $12.04.
We can force a conversion of the Series Q Preferred Stock on any trading day
following a period in which the closing bid price of our common stock has been
greater than $24.08 for a period of at least 20 trading days after the earlier
of:
o the first anniversary of the date the common stock issuable upon
conversion of the Series Q Preferred Stock and Series Q Warrants is
registered for resale, and
o the completion of a firm commitment underwritten public offering with
gross proceeds to us of at least $45 million.
The Series Q Preferred Stock is convertible into a maximum of 3,434,581
shares of common stock. This maximum share amount is subject to increase if the
average closing bid prices of our common stock for the 20 trading days ending on
the later of June 30, 2000 and the 60th calendar day after the common stock
issuable upon conversion of the Series Q Preferred Stock and Series Q Warrants
is registered is less than $9.375, provided that under no circumstances will the
Series Q Preferred Stock be convertible into more than 7,157,063 shares of our
common stock (the maximum share amount will increase to 9,365,463 shares of our
common stock if we receive written guidance from Nasdaq that the issuance of the
Series Q Preferred Stock and the Series Q Warrants will not be integrated with
the issuances of the January Stock and Warrants). In addition, no holder may
convert the Series Q Preferred Stock or exercise the Series Q Warrants it owns
for any shares of common stock that would cause it to own following such
conversion or exercise in excess of 4.9% of the shares of our common stock then
outstanding.
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We may be required to redeem the Series Q Preferred Stock under certain
circumstances:
o if we fail to perform specified obligations under the securities purchase
agreement or related agreements;
o if we or any of our subsidiaries make an assignment for the benefit of
creditors or become involved in bankruptcy, insolvency, reorganization or
liquidation proceedings;
o if we merge out of existence without the surviving company assuming the
obligations relating to the Series Q Preferred Stock;
o if our common stock is no longer listed on the Nasdaq National Market, the
Nasdaq SmallCap Market, the NYSE or the AMEX;
o if the Series Q Preferred Stock is no longer convertible into common stock
because it would result in an aggregate issuance of more than 3,434,581
shares of common stock, as such number may be adjusted, and we have not
waived such limit or obtained stockholder approval of a higher limit; or
o if the Series Q Preferred Stock is no longer convertible into common stock
because it would result in an aggregate issuance of more than 7,157,063
shares of our common stock (the maximum share amount will increase to
9,365,463 shares of our common stock if we receive written guidance from
Nasdaq that the issuance of the Series Q Preferred Stock and the Series Q
Warrants will not be integrated with the issuances of the January Stock
and Warrants) and we have not obtained stockholder approval of a higher
limit.
The foregoing description of the Series Q Preferred Stock private
placement does not purport to be complete and is qualified in its entirety by
reference to (a) the Certificate of Designations, Rights and Preferences of
Series Q Convertible Preferred Stock, filed as Exhibit 4.1 hereto, (b) the form
of Warrant, filed as Exhibit 4.2 hereto, and (c) the Securities Purchase
Agreement, filed as Exhibit 10.1 hereto, each of which is incorporated herein by
reference.
(c) Exhibits.
4.1 Certificate of Designations, Preferences, and Rights of Series Q
Convertible Preferred Stock of eGlobe.
4.2 Form of Warrant to purchase 100,000 shares of eGlobe common stock,
dated March 15, 2000.
10.1 Securities Purchase Agreement, dated March 15, 2000, between eGlobe,
Inc. and RGC International Investors, LDC.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
eGLOBE, INC.
Date: March __, 2000 By: /s/
-----------------------
Graeme S.R. Brown
Deputy General Counsel
and Secretary
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EXHIBIT INDEX
Exhibit Description
4.1 Certificate of Designations, Preferences, and Rights of Series Q
Convertible Preferred Stock of eGlobe.
4.2 Form of Warrant to purchase 100,000 shares of eGlobe common stock,
dated March 15, 2000.
10.1 Securities Purchase Agreement, dated March 15, 2000, between eGlobe,
Inc. and RGC International Investors, LDC.
EXHIBIT 4.1
CERTIFICATE OF
DESIGNATIONS, PREFERENCES, AND RIGHTS
OF
SERIES Q CONVERTIBLE PREFERRED STOCK
OF
EGLOBE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
EGLOBE, INC., a corporation organized and existing under the
Delaware General Corporation Law (the "CORPORATION"), hereby certifies that the
following resolutions were adopted by the Executive Committee of the Board of
Directors of the Corporation on March 14, 2000 pursuant to authority granted by
the Board of Directors of the Corporation as required by Section 151(g) of the
Delaware General Corporation Law:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (the " BOARD OF DIRECTORS" or the
"BOARD") in accordance with the provisions of its Certificate of Incorporation,
the Board of Directors hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $.001 per share (the "PREFERRED
STOCK"), and hereby states the designation and number of shares, and fixes the
relative rights, preferences, privileges, powers and restrictions thereof as
follows:
Series Q Convertible Preferred Stock:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 10,000 shares of Preferred
Stock, is Series Q Convertible Preferred Stock (the "SERIES Q PREFERRED STOCK")
and the stated value shall be One Thousand Dollars ($1,000) per share (the
"STATED VALUE").
II. RANK
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The Series Q Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share (the "COMMON STOCK"); (ii)
prior to the Series F Convertible Preferred Stock, the Series I Convertible
Preferred Stock and the Series L Convertible Preferred Stock; (iii) prior to any
class or series of capital stock of the Corporation hereafter created (unless,
with the consent of the holders of Series Q Preferred Stock obtained in
accordance with Article X hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or pari passu with the Series Q
Preferred Stock) (collectively with the Common Stock, the Series F Convertible
Preferred Stock, the Series I Convertible Preferred Stock and the Series L
Convertible Preferred Stock, "JUNIOR SECURITIES"); (iv) pari passu with the
Series P Convertible Preferred Stock (the "SERIES P PREFERRED STOCK") and with
any class or series of capital stock of the Corporation hereafter created (with
the consent of the holders of Series Q Preferred Stock obtained in accordance
with Article X hereof) specifically ranking, by its terms, on parity with the
Series Q Preferred Stock ("PARI PASSU SECURITIES"); (v) junior to the 8% Series
E Cumulative Convertible Redeemable Preferred Stock, the 5% Series J Cumulative
Convertible Preferred Stock, the 20% Series M Cumulative Convertible Preferred
Stock and the 10% Series O Cumulative Convertible Preferred Stock; and (vi)
junior to any class or series of capital stock of the Corporation hereafter
created (with the consent of the holders of Series Q Preferred Stock obtained in
accordance with Article X hereof) specifically ranking, by its terms, senior to
the Series Q Preferred Stock (collectively with the 8% Series E Cumulative
Convertible Redeemable Preferred Stock, the 5% Series J Cumulative Convertible
Preferred Stock, the 20% Series M Cumulative Convertible Preferred Stock and the
10% Series O Cumulative Convertible Preferred Stock, "SENIOR SECURITIES"), in
each case as to distribution of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary.
III. DIVIDENDS
The Series Q Preferred Stock shall not bear any dividends. In
no event, so long as any Series Q Preferred Stock shall remain outstanding,
shall any dividend whatsoever be declared or paid upon, nor shall any
distribution be made upon, any Junior Securities, nor shall any shares of Junior
Securities be purchased or redeemed by the Corporation nor shall any moneys be
paid to or made available for a sinking fund for the purchase or redemption of
any Junior Securities (other than a distribution of Junior Securities), without,
in each such case, the written consent of the holders of a majority of the
outstanding shares of Series Q Preferred Stock, voting together as a class.
IV. LIQUIDATION PREFERENCE
A. LIQUIDATION EVENT. If the Corporation shall commence a
voluntary case under the Federal bankruptcy laws or any other applicable Federal
or State bankruptcy, insolvency or similar law, or consent to the entry of an
order for relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal bankruptcy
laws or any other applicable Federal or state bankruptcy, insolvency or similar
law resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree
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or order shall be unstayed and in effect for a period of thirty (30) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (each such event being considered a "LIQUIDATION EVENT"), no
distribution shall be made to the holders of any shares of capital stock of the
Corporation (other than Senior Securities) upon liquidation, dissolution or
winding up unless prior thereto, the holders of shares of Series Q Preferred
Stock, subject to Article VI, shall have received the Liquidation Preference (as
defined in Article IV.C) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series Q Preferred Stock and holders of Pari Passu Securities
(including any dividends or distribution paid on any Pari Passu Securities after
the date of filing of this Certificate of Designation) shall be insufficient to
permit the payment to such holders of the preferential amounts payable thereon,
then the entire assets and funds of the Corporation legally available for
distribution to the Series Q Preferred Stock and the Pari Passu Securities shall
be distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
liquidation preference payable on all such shares. Any prior dividends or
distribution made after the date of filing of this Certificate of Designation
shall offset, dollar for dollar, the amount payable to the class or series to
which such distribution was made.
B. CERTAIN ACTS DEEMED LIQUIDATION EVENT. At the option of any
holder of Series Q Preferred Stock, the sale, conveyance or disposition of all
or substantially all of the assets of the Corporation, the effectuation by the
Corporation of a transaction or series of related transactions in which more
than 50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the Corporation with or
into any other Person (as defined below) or Persons when the Corporation is not
the survivor (other than in connection with the Corporation's proposed
acquisition of Trans Global Communications, Inc. (the "TRANS GLOBAL
ACQUISITION")) shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute upon consummation of and as a condition to such
transaction an amount equal to 120% of the Liquidation Preference with respect
to each outstanding share of Series Q Preferred Stock or (ii) to the extent
applicable, be treated pursuant to Article VI.C(b) hereof. "PERSON" shall mean
any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
C. LIQUIDATION PREFERENCE. For purposes hereof, the
"LIQUIDATION PREFERENCE" with respect to a share of the Series Q Preferred Stock
shall mean an amount equal to the sum of (i) the Stated Value thereof plus (ii)
an amount equal to five percent (5%) per annum of such Stated Value for the
period beginning on the date of issuance of such share of Series Q Preferred
Stock pursuant to the Purchase Agreement (as defined in Article V.A(i) below)
(the "ISSUE DATE") and ending on the date of final distribution to the holder
thereof (prorated for any portion of such period) plus (iii) all Conversion
Default Payments (as defined in Article VI.E below), Delivery Default Payments
(as defined in Article VI.D(b) below) and any other amounts owed to such holder
pursuant to Section 2(c) of the Registration Rights Agreement. The liquidation
preference with respect to any Pari Passu Securities shall be as set forth in
the Certificate of Designation filed in respect thereof.
V. REDEMPTION
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A. MANDATORY REDEMPTION. If any of the following events (each,
a "MANDATORY REDEMPTION EVENT") shall occur:
(i) The Corporation (a) fails to issue shares of Common
Stock to the holders of Series Q Preferred Stock upon exercise by the holders of
their conversion rights in accordance with the terms of this Certificate of
Designation (for a period of at least sixty (60) days if such failure is solely
as a result of the circumstances governed by the second paragraph of Article
VI.E below and the Corporation is using its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable), (b) fails
to transfer or to cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
holders upon conversion of the Series Q Preferred Stock as and when required by
this Certificate of Designation or the Registration Rights Agreement, dated as
of March 15, 2000, by and among the Corporation and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), (c) fails to remove any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate or any shares of Common Stock issued to the holders
of Series Q Preferred Stock upon conversion of the Series Q Preferred Stock as
and when required by this Certificate of Designation, the Securities Purchase
Agreement dated as of March 15, 2000, by and between the Corporation and the
other signatories thereto (the "PURCHASE AGREEMENT") or the Registration Rights
Agreement, or (d) fails to fulfill its obligations pursuant to Sections 4(c),
4(e), 4(h), 4(j), 4(n) or 5 of the Purchase Agreement (or makes any
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for ten (10) business days after the
Corporation shall have been notified thereof in writing by any holder of Series
Q Preferred Stock;
(ii) The Corporation fails to obtain effectiveness with
the Securities and Exchange Commission (the "SEC"), prior to July 15, 2000 of
the Registration Statement (as defined in the Registration Rights Agreement, the
"REGISTRATION STATEMENT") required to be filed pursuant to Section 2(a) of the
Registration Rights Agreement, or fails to obtain the effectiveness of any
additional Registration Statement (required to be filed pursuant to Section 3(b)
of the Registration Rights Agreement) within sixty (60) days after the
Registration Trigger Date (as defined in the Registration Rights Agreement), or
any such Registration Statement, after its initial effectiveness and during the
Registration Period (as defined in the Registration Rights Agreement), lapses in
effect or sales of all of the Registrable Securities (as defined in the
Registration Rights Agreement, the "REGISTRABLE SECURITIES") otherwise cannot be
made thereunder (whether by reason of the Corporation's failure to amend or
supplement the prospectus included therein in accordance with the Registration
Rights Agreement, the Corporation's failure to file and obtain effectiveness
with the SEC of an additional Registration Statement required to be filed
pursuant to Section 3(b) of the Registration Rights Agreement or otherwise) for
more than forty-five (45) consecutive days or more than ninety (90) days in any
twelve (12) month period after such Registration Statement becomes effective;
(iii) The Corporation or any subsidiary of the
Corporation shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for all or
substantially all of its property or business; or such a receiver or trustee
shall otherwise be appointed;
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(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Corporation or any subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the listing of
the Common Stock on the Nasdaq National Market ("NASDAQ"), the Nasdaq SmallCap
Market ("NASDAQ SMALLCAP"), the New York Stock Exchange ("NYSE") or the American
Stock Exchange ("AMEX"); or
(vi) any Mandatory Redemption Event shall have occurred
and be continuing pursuant to the Certificate of Designations, Preferences and
Rights governing the Series P Preferred Stock (the "SERIES P CERTIFICATE OF
DESIGNATION");
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii), (v) or (vi), at the
option of the holders of at least 50% of the then outstanding shares of Series Q
Preferred Stock exercisable by delivery of written notice (the "MANDATORY
REDEMPTION NOTICE") to the Corporation of such Mandatory Redemption Event, or
upon the occurrence of any Mandatory Redemption Event specified in subparagraphs
(iii) or (iv), the then outstanding shares of Series Q Preferred Stock shall
become immediately redeemable and the Corporation shall purchase each holder's
outstanding shares of Series Q Preferred Stock for an amount per share equal to
the greater of (1) 120% multiplied by the sum of (a) the Stated Value of the
shares to be redeemed plus (b) an amount equal to five percent (5%) per annum of
such Stated Value for the period beginning on the applicable Issue Date and
ending on the date of payment of the Mandatory Redemption Amount (the "MANDATORY
REDEMPTION DATE ") plus (c) all Conversion Default Payments (as defined in
Article VI.E below), Delivery Default Payments (as defined in Article VI.D
below) and any other amounts owed to such holder pursuant to Section 2(c) of the
Registration Rights Agreement, and (2) the "PARITY VALUE" of the shares to be
redeemed, where parity value means the product of (a) the highest number of
shares of Common Stock issuable upon conversion of such shares of Series Q
Preferred Stock in accordance with Article VI below (without giving any effect
to any limitations on conversions of shares contained herein, and treating the
Trading Day (as defined in Article VI.B(a)) immediately preceding the Mandatory
Redemption Date as the "CONVERSION DATE" (as defined in Article VI.D(d)) for
purposes of determining the lowest applicable Conversion Price, unless the
Mandatory Redemption Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the highest Closing Price (as defined below)
for the Common Stock during the period beginning on the date of first occurrence
of the Mandatory Redemption Event and ending one day prior to the Mandatory
Redemption Date (the greater of such amounts being referred to as the "MANDATORY
REDEMPTION AMOUNT"). "CLOSING PRICE," as of any date, means the last sale price
of the Common Stock on Nasdaq as reported by Bloomberg Financial Markets or an
equivalent reliable reporting service mutually acceptable to and hereafter
designated by the holders of a majority in interest of the shares of Series Q
Preferred Stock and the Corporation ("BLOOMBERG") or, if Nasdaq is not the
principal trading market for such security, the last sale price of such security
on the principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg, or if the foregoing do not apply, the
last sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
last sale price of such security is available in the over-the-counter market on
the electronic bulletin board for such security or in any of the foregoing
manners, the average of the bid prices of any market makers for such security
that are
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listed in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Price cannot be calculated for such security on such date in the manner
provided above, the Closing Price shall be the fair market value as mutually
determined by the Corporation and the holders of a majority in interest of
shares of Series Q Preferred Stock for which the calculation of the Closing
Price is required.
B. TRADING MARKET REDEMPTION. If the Series Q Preferred Stock
ceases to be convertible by any holder as a result of the limitations described
in Article VI.A(d) below (a "TRADING MARKET REDEMPTION EVENT"), and the
Corporation has not, prior to, or within thirty (30) days of, the date that such
Trading Market Redemption Event arises, (i) delivered the Share Limit Waiver (as
defined in Article VI.A(c)) (to the extent not already given) and (ii)(A)
obtained the Stockholder Approval (as defined in Article VI.A(d)) or (B)
eliminated any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities on
the Corporation's ability to issue shares of Common Stock in excess of the
Maximum Share Amount (as defined in Article VI.A(d)), then the Corporation shall
be obligated to redeem immediately all of the then outstanding Series Q
Preferred Stock, in accordance with this Article V.B. In such event, an
irrevocable redemption notice (the "TRADING MARKET REDEMPTION NOTICE") shall be
delivered promptly to the holders of Series Q Preferred Stock at their
registered address appearing on the records of the Corporation and shall state
(i) that the Maximum Share Amount has been issued, (ii) that the Corporation is
obligated to redeem all of the outstanding Series Q Preferred Stock and (iii)
the Trading Market Redemption Date, which shall be a date (the "TRADING MARKET
REDEMPTION DATE") within five (5) business days of the earlier of (a) the date
of the Trading Market Redemption Notice and (b) the date on which the holders of
the Series Q Preferred Stock notify the Corporation of the occurrence of a
Trading Market Redemption Event. On the Trading Market Redemption Date, the
Corporation shall purchase each holder's outstanding shares of Series Q
Preferred Stock for an amount per share equal to the Liquidation Preference (the
"CAP REDEMPTION AMOUNT").
C. CAP AMOUNT REDEMPTION. If the Series Q Preferred Stock
ceases to be convertible by any holder as a result of the Cap Amount (as defined
in Article VI.A(c)) being reached (a "CAP AMOUNT REDEMPTION EVENT"), and the
Corporation has not, prior to, or within one hundred eighty (180) days of, the
date that such Cap Amount Redemption Event arises, (1) if the sum of (A) the
aggregate number of shares of Common Stock previously issued upon conversion of
the Series Q Preferred Stock and upon exercise of the Warrants (as defined in
the Purchase Agreement) (together with the aggregate number of shares of Common
Stock previously issued upon conversion of the Series P Preferred Stock, unless
the Corporation obtains the Non-Integration Letter (as defined in the Purchase
Agreement)) and (B) the number of shares of Common Stock that remain issuable
upon full conversion of the then outstanding Series Q Preferred Stock at the
Conversion Price then in effect (without giving effect to any limitations on
conversion contained in Article VI hereof) and upon full exercise of the
Warrants (without giving effect to any limitations on exercise contained
therein) (together with the number of shares of Common Stock that remain
issuable upon full conversion of the then outstanding Series P Preferred Stock
(without giving effect to any limitations on conversion contained in the Series
P Certificate of Designation), unless the Corporation obtains the
Non-Integration Letter), exceeds the Maximum Share Amount (as defined in Article
VI.A(d)) on any date prior to the delivery of the Share Limit Waiver (as defined
in Article VI.A(c)), either (i) obtained the Stockholder Approval (as defined in
Article VI.A(d)) or (ii) eliminated any prohibitions under applicable law or the
rules or regulations of any stock exchange, interdealer quotation system or
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other self-regulatory organization with jurisdiction over the Corporation or any
of its securities on the Corporation's ability to issue shares of Common Stock
in excess of the Maximum Share Amount (as defined in Article VI.A(d)), and (2)
delivered to the holders of the Series Q Preferred Stock a Share Limit Waiver
(as defined in Article VI.A (c)) (provided that the Share Limit Waiver may not,
without the written consent of the holders of at least 50% of the then
outstanding shares of Series Q Preferred Stock, be delivered by the Corporation
after the one hundred eightieth (180th) day immediately preceding the Automatic
Conversion Date (as described below) and, provided, further that in no event
shall the Corporation be entitled to deliver a Share Limit Waiver unless all of
the shares of Common Stock issuable in excess of the Cap Amount are (x)
authorized and reserved for issuance, (y) registered for re-sale under the
Securities Act of 1933, as amended (the "1933 ACT"), by the holders of the
Series Q Preferred Stock (or may otherwise be resold publicly without
restriction) and (z) eligible to be traded on Nasdaq, the NYSE, the AMEX or
Nasdaq SmallCap), then the Corporation shall be obligated to redeem immediately
all of the then outstanding Series Q Preferred Stock, in accordance with this
Article V.C. In such event, an irrevocable redemption notice (the "CAP AMOUNT
REDEMPTION NOTICE") shall be delivered promptly to the holders of Series Q
Preferred Stock at their registered address appearing on the records of the
Corporation and shall state (i) that the Cap Amount (as defined in Article
VI.A(c)) has been issued upon conversion of the Series Q Preferred Stock, (ii)
that the Corporation is obligated to redeem all of the outstanding Series Q
Preferred Stock and (iii) the Cap Amount Redemption Date, which shall be on the
earlier of (a) one hundred eighty (180) days from the date of the Cap Amount
Redemption Event and (b) the Automatic Conversion Date (the earlier of such
dates being hereafter referred to as the "CAP AMOUNT REDEMPTION DATE"). Solely
for purposes of this Article V.C., the Automatic Conversion Date shall be March
15, 2003 and shall not be subject to extension as provided in Article VII hereof
without the written consent of the holders of at least 50% of the then
outstanding shares of Series Q Preferred Stock delivered to the Corporation
prior to March 15, 2003. On the Cap Amount Redemption Date (or such earlier date
as the Corporation shall so elect), the Corporation shall make payment of the
Cap Redemption Amount (as defined in Article V.B above) in cash.
D. FAILURE TO PAY REDEMPTION AMOUNTS. Subject to Article
VI.A(d), in the case of a Mandatory Redemption Event or the delivery of a Cap
Amount Redemption Notice, if the Corporation fails to pay the Mandatory
Redemption Amount or the Cap Redemption Amount, as applicable, within five (5)
business days of written notice that such amount is due and payable, then
(assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series Q Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, or at any time
after the Cap Amount Redemption Date, to require the Corporation, upon written
notice, to immediately issue (without regard to the Cap Amount) at any time or
from time to time until payment of the Mandatory Redemption Amount or the Cap
Redemption Amount is received by such holder (in accordance with and subject to
the terms of Article VI below (but without regard to the Cap Amount)), in lieu
of the Mandatory Redemption Amount or the Cap Redemption Amount, as applicable,
the number of shares of Common Stock of the Corporation equal to such applicable
redemption amount divided by any Conversion Price (as defined below), as chosen
in the sole discretion of the holder of Series Q Preferred Stock, in effect from
the date of the Mandatory Redemption Event or the Cap Amount Redemption Event,
as the case may be, until the date such holder elects to exercise its rights
pursuant to this Article V.D.
VI. CONVERSION AT THE OPTION OF THE HOLDER
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A. OPTIONAL CONVERSION
(A) CONVERSION AMOUNT. Subject to the restriction set
forth in Article VI.A(b) below, each holder of shares of Series Q Preferred
Stock may, at its option at any time and from time to time, upon surrender of
the certificates therefor, convert any or all of its shares of Series Q
Preferred Stock into Common Stock as set forth below (an "OPTIONAL CONVERSION").
Each share of Series Q Preferred Stock shall be convertible into such number of
fully paid and nonassessable shares of Common Stock as such Common Stock exists
on the Issue Date, or any other shares of capital stock or other securities of
the Corporation into which such Common Stock is thereafter changed or
reclassified, as is determined by dividing (1) the sum of (a) the Stated Value
thereof plus (b) the Premium Amount (as defined below), by (2) the then
effective Conversion Price (as defined below); provided, however, that in no
event (other than pursuant to the Automatic Conversion (as defined in Article
VII)) shall a holder of shares of Series Q Preferred Stock be entitled to
convert any such shares in excess of that number of shares upon conversion of
which the sum of (x) the number of shares of Common Stock beneficially owned by
the holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unconverted portion of
the shares of Series Q Preferred Stock or the unexercised or unconverted portion
of any other securities of the Corporation (including, without limitation, the
Warrants, the Series P Preferred Stock and the Series P Warrants (as defined in
the Purchase Agreement)) subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (y) the number of shares of
Common Stock issuable upon the conversion of the shares of Series Q Preferred
Stock with respect to which the determination of this proviso is being made,
would result in beneficial ownership by a holder and such holder's affiliates of
more than 4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (x) of such proviso. The "PREMIUM AMOUNT" means the product of the
Stated Value, multiplied by .05, multiplied by (N/365), where "N" equals the
number of days elapsed from the Issue Date to and including the Conversion Date
(as defined in Article VI.B).
(b) CONVERSION RESTRICTIONS. No conversions shall be
permitted at a Conversion Price (as defined in Article VI.B(a)) that is less
than the Fixed Conversion Price (as defined in Article VI.B(a)) prior to April
26, 2000; provided, however, that such restriction shall not apply to
conversions taking place on any Conversion Date (i) on which the Trade Price (as
defined below) of the Common Stock is greater than or equal to the Fixed
Conversion Price or (ii) occurring on or after the date the Corporation makes a
public announcement that it intends to merge or consolidate with any other
corporation or sell or transfer substantially all of the assets of the
Corporation, (other than the Trans Global Acquisition), or (iii) occurring on or
after the date any person, group or entity (including the Corporation) publicly
announces a tender offer to purchase 50% or more of the Corporation's Common
Stock (or any other takeover scheme) or (iv) occurring on or after the date on
which there is a Material Adverse Change (as defined below), or (v) occurring on
or after the occurrence of any Mandatory Redemption Event. "TRADE PRICE" means,
for any security as of any date, the highest reported sale price of the Common
Stock on the Nasdaq as reported by Bloomberg or, if Nasdaq is not the principal
trading market for such security, the highest reported sale price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the highest reported sale price of such security in the
<PAGE>
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no sale price of such security is available in the
over-the-counter market on the electronic bulletin board for such security or in
any of the foregoing manners, the highest reported bid price of any market maker
for such security that is listed in the "pink sheet" by the National Quotation
Bureau, Inc. If the Trade Price cannot be calculated for such security on such
date in the manner provided above, the Trade Price shall be the fair market
value as mutually determined by the Corporation and the holders of a majority in
interest of shares of Series Q Preferred Stock. "MATERIAL ADVERSE CHANGE" means
(i) the bankruptcy of the Corporation; (ii) the insolvency of the Corporation;
(iii) the receipt by the Corporation of a "going concern" opinion from its
auditors; (iv) the resignation or dismissal by the Corporation of its auditors
(provided, however, that the replacement by the Corporation of any auditors who
are not a "Big Five" auditing firm with a "Big Five" auditing firm shall not be
deemed to constitute a "Material Adverse Change"); (v) the resignation or
dismissal of the Chairman, the Chief Executive Officer, the Chief Financial
Officer or the Chief Operating Officer of the Corporation; (vi) the receipt by
the Issuer of notice of failure to meet Nasdaq listing requirements; or (vii)
the abandonment or termination of the Trans Global Acquisition.
(c) LIMITATION ON NUMBER OF SHARES OF COMMON STOCK TO BE
ISSUED. Subject to written waiver by the Corporation, the maximum number of
shares of Common Stock to be issued upon conversion of the Series Q Preferred
Stock shall be 3,434,581 shares (subject to adjustment for stock splits, stock
dividends and similar events, the "CAP AMOUNT"); provided however, that if the
average of the Closing Bid Prices of the Common Stock during the twenty (20)
Trading Day period ending on the later of (x) June 30, 2000 and (y) the sixtieth
(60th) calendar day after the date on which the Registration Statement is first
declared effective is less than the Closing Bid Price of the Common Stock on
January 12, 2000, the Cap Amount shall thereafter equal 3,434,581 multiplied by
the Closing Bid Price on January 12, 2000 and divided by the average of the
Closing Bid Prices during such twenty (20) Trading Day period, but in no event
shall the Cap Amount exceed the Maximum Share Amount (unless the Maximum Share
Amount no longer applies pursuant to Article VI.A(d)). If the Corporation has
issued a number of shares of Common Stock upon conversion of the Series Q
Preferred Stock equal to the Cap Amount, unless the Corporation has provided
written notice to the holders of the Series Q Preferred Stock that it has waived
the restrictions contained in this Article VI.A(c) on issuing shares of Common
Stock upon conversion of the Series Q Preferred Stock in excess of the Cap
Amount (the "SHARE LIMIT WAIVER") (provided that such Share Limit Waiver may
not, without the written consent of the holders of at least 50% of the then
outstanding shares of Series Q Preferred Stock, be delivered by the Corporation
after the 180th day preceding the Automatic Conversion Date (as defined in
Article VII); provided, further, that in no event shall the Corporation be
entitled to deliver a Share Limit Waiver unless all of the shares of Common
Stock issuable in excess of the Cap Amount are (x) authorized and reserved for
issuance, (y) registered for re-sale under the 1933 Act by the holders of the
Series Q Preferred Stock (or may otherwise be resold publicly without
restriction) and (z) eligible to be traded on Nasdaq, the NYSE, the AMEX or
Nasdaq SmallCap and; provided, further, that if the sum of (A) the aggregate
number of shares of Common Stock previously issued upon conversion of the Series
Q Preferred Stock and upon exercise of the Warrants (together with the aggregate
number of shares of Common Stock previously issued upon conversion of the Series
P Preferred Stock, unless the Corporation obtains the Non-Integration Letter)
and (B) the number of shares of Common Stock that remain issuable upon full
conversion of the then outstanding Series Q Preferred Stock at the Conversion
Price then in effect (without giving effect to any limitations on conversion
contained
<PAGE>
in Article VI hereof) and upon full exercise of the Warrants (without giving
effect to any limitations on exercise contained therein) (together with the
number of shares of Common Stock that remain issuable upon full conversion of
the then outstanding Series P Preferred Stock (without giving effect to any
limitations on conversion contained in the Series P Certificate of Designation),
unless the Corporation obtains the Non-Integration Letter), exceeds the Maximum
Share Amount (as defined in Article VI.A(d)) on any date prior to the delivery
of the Share Limit Waiver, the Corporation has either (i) obtained the
Stockholder Approval (as defined in Article VI.A(d)) or (ii) eliminated any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Corporation or any of its securities on the
Corporation's ability to issue shares of Common Stock in excess of the Maximum
Share Amount (as defined in Article VI.A(d)), then the Corporation shall be
obligated to redeem the Series Q Preferred Stock in accordance with Article V.C.
(d) TRADING MARKET LIMITATION. Unless the Corporation
either (i) is permitted by the applicable rules and regulations of the principal
securities market on which the Common Stock is listed or traded or (ii) has
obtained approval of the issuance of the Common Stock upon conversion of or
otherwise pursuant to the Series Q Preferred Stock and upon exercise of the
Warrants (and of the issuance of the Common Stock upon conversion of or
otherwise pursuant to the Series P Preferred Stock and upon exercise the Series
P Warrants (unless the Corporation has obtained the Non-Integration Letter prior
thereto)) in accordance with applicable law and the rules and regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities
(the "STOCKHOLDER APPROVAL"), in no event shall the total number of shares of
Common Stock issued upon conversion of or otherwise pursuant to the Series Q
Preferred Stock and upon exercise of the Warrants (together with any shares of
Common Stock issued upon conversion of or otherwise pursuant to the Series P
Preferred Stock, unless the Corporation obtains the Non-Integration Letter) and
any other shares of capital stock or rights to acquire shares of capital stock
issued by the Corporation which are aggregated or integrated with the Common
Stock issued or issuable upon conversion of or otherwise pursuant to the Series
Q Preferred Stock for purposes of any such rule or regulation) exceed the
maximum number of shares of Common Stock that the Corporation can so issue
pursuant to any rule of the principal United States securities market on which
the Common Stock trades (including Rule 4460 of Nasdaq or any successor rule)
(the "MAXIMUM SHARE AMOUNT") which shall be 7,157,063 shares (19.99% of the
total shares of Common Stock outstanding on January 26, 2000) (provided,
however, that, if the Corporation obtains the Non-Integration Letter, the
Maximum Share Amount shall be 9,365,463 (19.99% of the total shares of Common
Stock outstanding on March 15, 2000)), subject to equitable adjustments from
time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
January 26, 2000 (or March 15, 2000, as applicable). With respect to each holder
of Series Q Preferred Stock, the Maximum Share Amount shall refer to such
holder's pro rata share thereof determined in accordance with Article XI below.
In the event that the sum of (x) the aggregate number of shares of Common Stock
actually issued upon conversion of or otherwise pursuant to the outstanding
Series Q Preferred Stock and upon exercise of the Warrants (together with the
aggregate number of shares of Common Stock previously issued upon conversion of
the Series P Preferred Stock, unless the Corporation obtains the Non-Integration
Letter), plus (y) the aggregate number of shares of Common Stock that remain
issuable upon conversion of or otherwise pursuant to the Series Q Preferred
Stock at the then effective Conversion Price (without giving effect to any
<PAGE>
limitations on conversion contained in Article VI hereof) and upon full exercise
of the Warrants (without giving effect to any limitations on exercise contained
therein) (together with the number of shares of Common Stock that remain
issuable upon full conversion of the then outstanding Series P Preferred Stock
(without giving effect to any limitations on conversion contained in the Series
P Certificate of Designation), unless the Corporation obtains the
Non-Integration Letter), represents at least one hundred percent (100%) of the
Maximum Share Amount (the "TRIGGERING EVENT"), the Corporation will use its best
efforts to seek and obtain Stockholder Approval (or obtain such other relief as
will allow conversions hereunder in excess of the Maximum Share Amount) as soon
as practicable following the Triggering Event.
B. CONVERSION PRICE.
(a) CALCULATION OF CONVERSION PRICE. Subject to
subparagraph (b) below, the "CONVERSION PRICE" shall be the lesser of the
Variable Conversion Price (as defined herein) and the Fixed Conversion Price (as
defined herein), subject to adjustments pursuant to the provisions of Article
VI.C below. The "VARIABLE CONVERSION PRICE" shall mean the Market Price (as
defined below). "MARKET PRICE" shall mean the average of the Closing Bid Prices
for any five (5) consecutive Trading Days (the "MARKET PRICE DAYS"), during the
twenty-two (22) Trading Day period ending one (1) Trading Day prior to the date
the Notice of Conversion (as defined in Article VI.D) is sent by a holder to the
Corporation via facsimile (the "PRICING PERIOD"). The Market Price Days shall be
designated by the converting holder (from among the days comprising the Pricing
Period) in the Notice of Conversion. "FIXED CONVERSION PRICE" shall mean $12.04.
"CLOSING BID PRICE" means, for any security as of any date, the closing bid
price on Nasdaq as reported by Bloomberg or, if Nasdaq is not the principal
trading market for such security, the closing bid price of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price of such security is available in the over-the-counter market on the
electronic bulletin board for such security or in any of the foregoing manners,
the average of the bid prices of any market makers for such security that are
listed in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Bid Price cannot be calculated for such security on such date in the
manner provided above, the Closing Bid Price shall be the fair market value as
mutually determined by the Corporation and the holders of a majority in interest
of shares of Series Q Preferred Stock being converted for which the calculation
of the Closing Bid Price is required in order to determine the Conversion Price
of such Series Q Preferred Stock. "TRADING DAY" shall mean any day on which the
Common Stock is traded for any period on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded.
(b) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in subparagraph (a) of this Article VI.B to
the contrary, except in connection with the Trans Global Acquisition, in the
event the Corporation (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Corporation is the surviving or continuing corporation and its capital stock
is unchanged) or sell or transfer all or substantially all of the assets of the
Corporation or (ii) any person, group or entity (including the Corporation)
publicly announces a tender offer to purchase 50% or more of the Corporation's
Common Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"ANNOUNCEMENT DATE"), then the Conversion Price shall, effective upon the
<PAGE>
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal, for each such date, to the lower
of (x) the Conversion Price which would have been applicable for an Optional
Conversion occurring on the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in
subparagraph (a) of this Article VI.B. For purposes hereof, "Adjusted Conversion
Price Termination Date" shall mean, with respect to any proposed transaction or
tender offer (or takeover scheme) for which a public announcement as
contemplated by this subparagraph (b) has been made, the date upon which the
Corporation (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) consummates or publicly announces the termination
or abandonment of the proposed transaction or tender offer (or takeover scheme)
which caused this subparagraph (b) to become operative.
C. ADJUSTMENTS TO CONVERSION PRICE. The Conversion Price shall
be subject to adjustment from time to time as follows:
(a) ADJUSTMENT TO CONVERSION PRICE DUE TO STOCK SPLIT,
STOCK DIVIDEND, ETC. If at any time when Series Q Preferred Stock is issued and
outstanding, the number of outstanding shares of Common Stock is increased or
decreased by a stock split, stock dividend, combination, reclassification,
rights offering below the Trading Price (as defined below) to all holders of
Common Stock or other similar event, which event shall have taken place during
the reference period for determination of the Conversion Price for any Optional
Conversion or Automatic Conversion of the Series Q Preferred Stock, then the
Conversion Price shall be calculated giving appropriate effect to the stock
split, stock dividend, combination, reclassification or other similar event. In
such event, the Corporation shall notify the Transfer Agent of such change on or
before the effective date thereof. "Trading Price," which shall be measured as
of the record date in respect of the rights offering, means (i) the average of
the last reported sale prices for the shares of Common Stock on Nasdaq as
reported by Bloomberg, as applicable, for the five (5) Trading Days immediately
preceding such date, or (ii) if Nasdaq is not the principal trading market for
the shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Trading Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, (b) at the option of a majority-in-interest of the holders of
the outstanding Series Q Preferred Stock by an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the Corporation.
(b) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at
any time when Series Q Preferred Stock is issued and outstanding and prior to
the conversion of all Series Q Preferred Stock, (i) there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or (ii)
in case of any sale or conveyance of all or substantially all of the assets of
the Corporation, in any such case, other than in connection with the Trans
Global Acquisition or a plan of complete liquidation of the Corporation (each
such event described in clause (i) and (ii) above, a "CHANGE OF CONTROL
TRANSACTION"), then the holders of Series Q Preferred Stock shall thereafter
have the right to receive upon conversion of the Series Q Preferred Stock, upon
<PAGE>
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
stock, securities or assets which the holders of Series Q Preferred Stock would
have been entitled to receive in such transaction had the Series Q Preferred
Stock been converted in full immediately prior to such transaction (without
regard to any limitations on conversion contained herein), and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders of Series Q Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares of Common Stock issuable upon conversion of
the Series Q Preferred Stock) shall thereafter be applicable, as nearly as may
be practicable in relation to any securities or assets thereafter deliverable
upon the conversion of Series P Preferred Stock. The Corporation shall not
effect any transaction described in this subsection (b) unless (a) it first
gives, to the extent practical, thirty (30) days' prior written notice (but in
any event at least fifteen (15) business days prior written notice) of the
record date of the special meeting of stockholders to approve, or if there is no
such record date, the consummation of, such Change of Control Transaction
(during which time the holders of Series Q Preferred Stock shall be entitled to
convert the Series Q Preferred Stock) and (b) the resulting successor or
acquiring entity (if not the Corporation) and, if an entity different from the
successor or acquiring entity, the entity whose capital stock or assets the
holders of the Common Stock are entitled to receive as a result of such Change
of Control Transaction, assumes by written instrument the obligations of this
Certificate of Designation (including this subsection (b); provided, however,
that in the case of a merger or consolidation in which the Corporation is not
the surviving entity and in which all of the outstanding shares of capital stock
of the Corporation are being acquired for or converted into the right to receive
consideration consisting entirely of cash, then the successor or surviving
entity (if not the Corporation) shall not be obligated to assume the obligations
under this Certificate of Designation, except for the obligations under Article
IV.B). The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.
(c) ADJUSTMENT DUE TO DISTRIBUTION. Subject to Article
III, if the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Corporation's shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a
"DISTRIBUTION"), then the holders of Series Q Preferred Stock shall be entitled,
upon any conversion of shares of Series Q Preferred Stock after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the holder with
respect to the shares of Common Stock issuable upon such conversion had such
holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.
(d) PURCHASE RIGHTS. Subject to Article III, if at any
time when any Series Q Preferred Stock is issued and outstanding, the
Corporation issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the holders of Series Q
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series Q Preferred Stock (without regard to any
limitations on conversion contained herein)
<PAGE>
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(e) ADJUSTMENT FOR RESTRICTED PERIODS. In the event that
(i) the Corporation fails to obtain effectiveness with the SEC of any
Registration Statement required to be filed pursuant to the Registration Rights
Agreement on or prior to the date on which such Registration Statement is
required to become effective pursuant to the terms of the Registration Rights
Agreement, (ii) any such Registration Statement after its initial effectiveness
and during the Registration Period (as defined in the Registration Rights
Agreement) lapses in effect, or sales of all the Registrable Securities
otherwise cannot be made thereunder, whether by reason of the Corporation's
failure or inability to amend or supplement the prospectus (the "PROSPECTUS")
included therein in accordance with the Registration Rights Agreement or
otherwise, after such Registration Statement becomes effective (including,
without limitation, during an Allowed Delay (as defined in Section 3(f) of the
Registration Rights Agreement)), or (iii) a Cap Amount Redemption Event or
Trading Market Redemption Event occurs (each of the events described in clauses
(i), (ii) and (iii) being referred to as an "EXTENDED LOOKBACK EVENT"), then, at
the election of each holder of Series Q Preferred Stock, the Pricing Period
shall be comprised of, (x) in the case of an event described in clause (i), the
twenty-two (22) Trading Days preceding the date on which such Registration
Statement is required to become effective pursuant to the terms of the
Registration Rights Agreement, plus all Trading Days through and including the
third (3rd) Trading Day following the date of actual effectiveness of such
Registration Statement, (y) in the case of an event described in clause (ii),
the twenty-two (22) Trading Days preceding the date on which the holder of the
Series Q Preferred Stock is first notified that sales may not be made under the
Prospectus, plus all Trading Days through and including the third (3rd) Trading
Day following the date on which the Holder is first notified that such sales may
again be made under the Prospectus, and (z) in the case of an event described in
clause (iii), the twenty-two (22) Trading Days preceding the occurrence of the
Cap Amount Redemption Event or Trading Market Redemption Event, as the case may
be, plus all Trading Days through and including the third (3rd) Trading Day
following the date on which the Share Limit Wavier has been properly delivered
in accordance with Article V.C above (in the case of a Cap Amount Redemption
Event) or on which the Stockholder Approval has been obtained (in the case of a
Trading Market Redemption Event) (each of such periods referred to in clauses
(x), (y) and (z) being defined as an "EXTENDED LOOKBACK PERIOD"). If a holder of
Series Q Preferred Stock determines that sales may not be made pursuant to the
Prospectus (whether by reason of the Corporation's failure or inability to amend
or supplement the Prospectus or otherwise) it shall so notify the Corporation in
writing and, unless the Corporation provides such holder with a written opinion
of the Corporation's counsel to the contrary, such determination shall be
binding for purposes of this paragraph. In the event that an Extended Lookback
Event occurs within the three (3) Trading Day-period following the cure of any
other Extended Lookback Event, the Extended Lookback Periods shall be
cumulative.
D. MECHANICS OF CONVERSION. In order to convert Series Q
Preferred Stock into full shares of Common Stock, a holder of Series Q Preferred
Stock shall: (i) submit a copy of the fully executed notice of conversion in the
form attached hereto as Exhibit A ("NOTICE OF CONVERSION") to the Corporation by
facsimile dispatched prior to Midnight, New York City time (the "CONVERSION
NOTICE DEADLINE") on the date specified therein as the Conversion Date (as
defined in Article VI.D(d)) (or by other means resulting in, or reasonably
expected to result in,
<PAGE>
notice to the Corporation on the Conversion Date) to the office of the
Corporation, which notice shall specify the number of shares of Series Q
Preferred Stock to be converted, the applicable Conversion Price and a
calculation of the number of shares of Common Stock issuable upon such
conversion (together with a copy of the first page of each certificate to be
converted); and (ii) surrender the original certificates representing the Series
Q Preferred Stock being converted (the "PREFERRED STOCK CERTIFICATES"), duly
endorsed, along with a copy of the Notice of Conversion to the office of the
Corporation or the Transfer Agent for the Series Q Preferred Stock as soon as
practicable thereafter. The Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion, unless either the Preferred Stock Certificates are delivered to the
Corporation or its Transfer Agent as provided above, or the holder notifies the
Corporation or its Transfer Agent that such certificates have been lost, stolen
or destroyed (subject to the requirements of subparagraph (a) below). In the
case of a dispute as to the calculation of the Conversion Price, the Corporation
shall promptly issue such number of shares of Common Stock that are not disputed
in accordance with subparagraph (b) below. The Corporation shall submit the
disputed calculations to its outside accountant via facsimile within two (2)
business days of receipt of the Notice of Conversion. The accountant shall audit
the calculations and notify the Corporation and the holder of the results no
later than two (2) business days following the date it receives the disputed
calculations. The accountant's calculation shall be deemed conclusive absent
manifest error.
(a) LOST OR STOLEN CERTIFICATES. Upon receipt by the
Corporation of evidence of the loss, theft, destruction or mutilation of any
Preferred Stock Certificates representing shares of Series Q Preferred Stock,
and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
(b) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the
surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within three (3) business days
after such surrender (or, in the case of lost, stolen or destroyed certificates,
after provision of agreement and indemnification pursuant to subparagraph (a)
above) (the "DELIVERY PERIOD"), deliver (or cause its Transfer Agent to so issue
and deliver) in accordance with the terms hereof and the Purchase Agreement
(including, without limitation, in accordance with the requirements of Section
2(g) of the Purchase Agreement) to or upon the order of the holder (i) that
number of shares of Common Stock for the portion of the shares of Series Q
Preferred Stock converted as shall be determined in accordance herewith and (ii)
a certificate representing the balance of the shares of Series Q Preferred Stock
not converted, if any. In addition to any other remedies available to the
holder, including actual damages and/or equitable relief, the Corporation shall
pay to a holder $2,000 per day in cash for each day beyond a two (2) business
day grace period following the Delivery Period that the Corporation fails to
deliver Common Stock (a "DELIVERY DEFAULT") issuable upon surrender of shares of
Series Q Preferred Stock with a Notice of Conversion until such time as the
Corporation has delivered all such Common Stock (the " DELIVERY DEFAULT
PAYMENTS"). Such Delivery Default Payments shall be paid to such holder by the
fifth day of the month following the month in which it has accrued or, at the
option of the holder (by written notice to the Corporation by the first day of
the month following the month in which it has accrued), shall be convertible
into Common Stock in accordance with the terms of this Article VI.
<PAGE>
In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer Agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder and its
compliance with the provisions contained in Article VI.A and in this Article
VI.D, the Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) NO FRACTIONAL SHARES. If any conversion of Series Q
Preferred Stock would result in a fractional share of Common Stock or the right
to acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares of Common Stock issuable upon Conversion of
the Series Q Preferred Stock shall be the next higher number of shares.
(d) CONVERSION DATE. The "CONVERSION DATE" shall be the
date specified in the Notice of Conversion, provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting in, or
reasonably expected to result in, notice) to the Corporation before Midnight,
New York City time, on the date so specified, otherwise the Conversion Date
shall be the first business day after the date so specified on which the Notice
of Conversion is actually received by the Corporation. The person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such securities as
of the Conversion Date and all rights with respect to the shares of Series Q
Preferred Stock surrendered shall forthwith terminate except the right to
receive the shares of Common Stock or other securities or property issuable on
such conversion and except that the holders preferential rights as a holder of
Series Q Preferred Stock shall survive to the extent the Corporation fails to
deliver such securities.
E. RESERVATION OF SHARES. A number of shares of the authorized
but unissued Common Stock sufficient to provide for the conversion of the Series
Q Preferred Stock outstanding (based on the lesser of the then current Variable
Conversion Price and the Fixed Conversion Price in effect from time to
time)shall at all times be reserved by the Corporation, free from preemptive
rights, for such conversion or exercise. As of the date of issuance of the
Series Q Preferred Stock, 4,000,000 authorized and unissued shares of Common
Stock have been duly reserved for issuance upon conversion of the Series Q
Preferred Stock (the "RESERVED AMOUNT"). The Reserved Amount shall be increased
from time to time in accordance with the Corporation's obligations pursuant to
Section 4(h) of the Purchase Agreement. In addition, if the Corporation shall
issue any securities or make any change in its capital structure which would
change the number of shares of Common Stock into which each share of the Series
Q Preferred Stock shall be convertible, the Corporation shall at the same time
also make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Series Q Preferred Stock.
If at any time a holder of shares of Series Q Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "CONVERSION
DEFAULT"), subject to Article XI, the Corporation shall issue to
<PAGE>
the holder all of the shares of Common Stock which are available to effect such
conversion. The number of shares of Series Q Preferred Stock included in the
Notice of Conversion which exceeds the amount which is then convertible into
available shares of Common Stock (the "EXCESS AMOUNT") shall, notwithstanding
anything to the contrary contained herein, not be convertible into Common Stock
in accordance with the terms hereof until (and at the holder's option at any
time after) the date additional shares of Common Stock are authorized by the
Corporation to permit such conversion, at which time the Conversion Price in
respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the Conversion Price on the
Conversion Date elected by the holder in respect thereof. The Corporation shall
use its best efforts to effect an increase in the authorized number of shares of
Common Stock as soon as possible following the earlier of (i) such time that a
holder of Series Q Preferred Stock notifies the Corporation or that the
Corporation otherwise becomes aware that there are or likely will be
insufficient authorized and unissued shares to allow full conversion thereof and
(ii) a Conversion Default. In addition, the Corporation shall pay to the holder
payments ("CONVERSION DEFAULT PAYMENTS ") for a Conversion Default in the amount
of (a) .24, multiplied by (b) the sum of the Stated Value plus the Premium
Amount per share of Series Q Preferred Stock held by such holder through the
Authorization Date (as defined below), multiplied by (c) (N/365), where N = the
number of days from the day the holder submits a Notice of Conversion giving
rise to a Conversion Default (the "CONVERSION DEFAULT DATE") to the date (the
"AUTHORIZATION DATE") that the Corporation authorizes a sufficient number of
shares of Common Stock to effect conversion of the full number of shares of
Series Q Preferred Stock. The Corporation shall send notice to the holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of holder's accrued Conversion Default Payments. The accrued
Conversion Default Payment for each calendar month shall be paid in cash or
shall be convertible into Common Stock at the applicable Conversion Price, at
the holder's option, as follows:
(a) In the event the holder elects to take such payment
in cash, cash payment shall be made to holder by the fifth day of the month
following the month in which it has accrued; and
(b) In the event the holder elects to take such payment
in Common Stock, the holder may convert such payment amount into Common Stock at
the Conversion Price (as in effect at the time of conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article VI (so long as there is then a
sufficient number of authorized shares of Common Stock).
The holder's election shall be made in writing to the
Corporation at any time prior to 9:00 p.m, New York City Time, on or prior to
the third (3rd) day of the month following the month in which Conversion Default
payments have accrued. If no election is made, the holder shall be deemed to
have elected to receive cash. Nothing herein shall limit the holder's right to
pursue actual damages (to the extent in excess of the Conversion Default
Payments) for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
F. NOTICE OF CONVERSION PRICE ADJUSTMENTS. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Article VI, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the
<PAGE>
terms hereof and prepare and furnish to each holder of Series Q Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
Q Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series Q Preferred Stock.
G. STATUS AS STOCKHOLDERS. Upon submission of a Notice of
Conversion by a holder of Series Q Preferred Stock, (i) the shares covered
thereby (other than the shares, if any, which cannot be issued because their
issuance would exceed such holder's allocated portion of the Reserved Amount or
Maximum Share Amount) shall be deemed converted into shares of Common Stock and
(ii) the holder's rights as a holder of such converted shares of Series Q
Preferred Stock shall cease and terminate, excepting only the right to receive
certificates for such shares of Common Stock and to any remedies provided herein
or otherwise available at law or in equity to such holder because of a failure
by the Corporation to comply with the terms of this Certificate of Designation.
Notwithstanding the foregoing, if a holder has not received certificates for all
shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Delivery Period with respect to a conversion of shares of
Series Q Preferred Stock for any reason, then (unless the holder otherwise
elects to retain its status as a holder of Common Stock by so notifying the
Corporation) the holder shall regain the rights of a holder of such shares of
Series Q Preferred Stock with respect to such unconverted shares of Series Q
Preferred Stock and the Corporation shall, as soon as practicable, return such
unconverted shares of Series Q Preferred Stock to the holder or, if such shares
of Series Q Preferred Stock have not been surrendered, adjust its records to
reflect that such shares of Series Q Preferred Stock have not been converted. In
all cases, the holder shall retain all of its rights and remedies (including,
without limitation, (i) the right to receive Delivery Default Payments pursuant
to Article VI.E to the extent required thereby for such Delivery Default and any
subsequent Delivery Default and (ii) the right to have the Conversion Price with
respect to subsequent conversions determined in accordance with Article VI.E.)
for the Corporation's failure to convert the Series Q Preferred Stock.
VII. AUTOMATIC CONVERSION
Subject to the limitations on conversion set forth in Article
VI.A(d) and subject to the provisions of Article VI.A(c) and so long as (i) all
of the shares of Common Stock issuable upon conversion of all outstanding shares
of Series Q Preferred Stock are then (x) authorized and reserved for issuance,
(y) registered for re-sale under the 1933 Act by the holders of the Series Q
Preferred Stock (or may otherwise be resold publicly without restriction) and
(z) eligible to be traded on Nasdaq, the NYSE, the AMEX or Nasdaq SmallCap and
(ii) there is not then a continuing Mandatory Redemption Event, Cap Amount
Redemption Event or Trading Market Redemption Event, each share of Series Q
Preferred Stock issued and outstanding on March 15, 2003 (the "AUTOMATIC
CONVERSION DATE"), automatically shall be converted into shares of Common Stock
on such date at the then effective Conversion Price in accordance with, and
subject to, the provisions of Article VI hereof (the "AUTOMATIC CONVERSION").
The Automatic Conversion Date shall be delayed by one (1) Trading Day for each
Trading Day occurring prior thereto and prior to the full conversion of the
Series Q Preferred Stock that (i) any Registration Statement required to be
filed and to be effective pursuant to the Registration Rights Agreement
<PAGE>
is not effective or sales of all of the Registrable Securities otherwise cannot
be made thereunder during the Registration Period (as defined in the
Registration Rights Agreement) (whether by reason of the Corporation's failure
to properly supplement or amend the prospectus included therein in accordance
with the terms of the Registration Rights Agreement or otherwise, including
during any Allowed Delays (as defined in Section 3(f) of the Registration Rights
Agreement)), (ii) any Mandatory Redemption Event, Cap Amount Redemption Event or
Trading Market Redemption Event exists, without regard to whether any cure
periods shall have run or (iii) that the Corporation is in breach of any of its
obligations pursuant to Section 4(h) of the Purchase Agreement. The Automatic
Conversion Date shall be the Conversion Date for purposes of determining the
Conversion Price and the time within which certificates representing the Common
Stock must be delivered to the holder.
VIII. CONVERSION BY THE CORPORATION
Subject to the limitations on conversion set forth in Article
VI.A(d) and so long as for at all times during the period beginning thirty (30)
Trading Days prior to the Forced Conversion Trigger Date (as defined below) and
ending on the Corporation Conversion Date (as defined below) (i) all of the
shares of Common Stock issuable upon conversion of all outstanding shares of
Series Q Preferred Stock are then (x) authorized and reserved for issuance, (y)
registered for re-sale under the 1933 Act by the holders of the Series Q
Preferred Stock (or may otherwise be resold publicly without restriction) and
(z) eligible to be traded on Nasdaq, the NYSE, the AMEX or Nasdaq SmallCap and
(ii) there is not then a continuing Mandatory Redemption Event, Cap Amount
Redemption Event or Trading Market Redemption Event, then, at any time after the
earlier of (A) the twelve (12) month anniversary of the date the Registration
Statement required to be filed pursuant to Section 2(a) of the Registration
Rights Agreement is declared effective by the SEC (subject to extension for each
Trading Day following effectiveness that sales of all of the Registrable
Securities (as defined in the Registration Rights Agreement) cannot be made
pursuant to the Registration Statement (whether by reason of the Company's
failure to properly supplement or amend the prospectus included therein in
accordance with the terms of the Registration Rights Agreement, during an
Allowed Delay or otherwise)), and (B) provided that the Registration Statement
has been effective and sales of all of the Registrable Securities can be made
thereunder for at least forty-five (45) days, the consummation of a Qualified
Public Offering (as defined below), the Corporation shall have the right on any
Trading Day (a "FORCED CONVERSION TRIGGER DATE") on which, and for a period of
twenty (20) consecutive Trading Days prior thereto, the Closing Bid Price of the
Common Stock is greater than 200% of the Fixed Conversion Price (subject to
adjustment for stock splits, stock dividends and similar transactions), to
deliver written notice (the "CORPORATION CONVERSION NOTICE") to the holders of
the Series Q Preferred Stock (which notice may not be sent to the holders of the
Series Q Preferred Stock (a) until the Corporation is permitted to convert the
Series Q Preferred Stock pursuant to this Article VIII and (b) during any period
of time in which the Corporation is in possession of any information, the
disclosure of which would reasonably be expected to cause a material increase in
the Trade Price of the Corporation's Common Stock, unless such information is
publicly disclosed at least five (5) Trading Days prior to the Corporation
Conversion Date (as defined below)) of its intention to convert all of the
outstanding shares of Series Q Preferred Stock into shares of Common Stock in
accordance with Article VI and this Article VIII; provided, however, that a
Corporation Conversion (as defined below) shall not be permitted if during the
period beginning on the date the Corporation Conversion Notice is delivered to
the holders of the Series Q Preferred Stock and ending on the Trading Day prior
to the Corporation Conversion Date the average Closing Bid Price of the Common
Stock during
<PAGE>
such period is not greater than 200% of the Fixed Conversion Price (subject to
adjustment for stock splits, stock dividends and similar transactions). Any
conversion hereunder (a "CORPORATION CONVERSION") shall be as of the date (the
"CORPORATION CONVERSION DATE") specified in the Corporation Conversion Notice
(but in no event prior to the fifteenth (15) Trading Day following the date of
such notice), which notice must be given within five (5) Trading Days of the
Forced Conversion Trigger Date. The Corporation Conversion Notice shall be
delivered to the holders of Series Q Preferred Stock at their registered
addresses appearing on the books and records of the Corporation. The Corporation
Conversion Date shall be the "Conversion Date" for purposes of determining the
Conversion Price and the time within which certificates representing the Common
Stock must be delivered to the holder upon a Corporation Conversion.
Notwithstanding notice of a Corporation conversion, the holders shall at all
times prior to the Corporation Conversion Date maintain the right to convert all
or any shares of Series Q Preferred Stock in accordance with Article VI.
"QUALIFIED PUBLIC OFFERING" means a firm commitment underwritten public
offering, managed by an underwriter of nationally recognized standing, resulting
in gross proceeds to the Corporation of at least $45,000,000.
IX. VOTING RIGHTS
The holders of the Series Q Preferred Stock have no voting
power whatsoever, except as otherwise provided by the Delaware General
Corporation Law ("DGCL"), in this Article IX, and in Article X below.
Notwithstanding the above, the Corporation shall provide each
holder of Series Q Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the holders of
the Series Q Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series Q Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series Q
Preferred Stock (except as otherwise may be required under the DGCL) shall
constitute the approval of such action by the class. To the extent that under
the DGCL holders of the Series Q Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series Q Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated.
<PAGE>
Holders of the Series Q Preferred Stock shall be entitled to notice of all
shareholder meetings or written consents (and copies of proxy materials and
other information sent to shareholders) with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Corporation's
bylaws and the DGCL.
X. PROTECTIVE PROVISIONS
So long as shares of Series Q Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the DGCL) of the holders of at least a majority
of the then outstanding shares of Series Q Preferred Stock:
(a) alter, amend or repeal (whether by merger,
consolidation or otherwise) the rights, preferences or privileges of the Series
Q Preferred Stock or any capital stock of the Corporation so as to affect
adversely the Series Q Preferred Stock;
(b) create any new class or series of capital stock
having a preference over the Series Q Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "SENIOR SECURITIES");
(c) create any new class or series of capital stock
ranking pari ---- passu with the Series Q Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "PARI PASSU SECURITIES");
(d) increase the authorized number of shares of Series Q
Preferred Stock;
(e) issue any shares of Series Q Preferred Stock other
than pursuant to the Purchase Agreement;
(f) issue any Senior Securities or Pari Passu Securities,
except pursuant to the terms of any Senior Securities or Pari Passu Securities
outstanding on the Issue Date;
(g) increase the par value of the Common Stock, or
(h) do any act or thing not authorized or contemplated by
this Certificate of Designation which would result in taxation of the holders of
shares of the Series Q Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event holders of at least a majority of the then
outstanding shares of Series Q Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series Q
Preferred Stock, pursuant to subsection (a) above, so as to affect the Series Q
Preferred Stock, then the Corporation will deliver notice of such approved
change to the holders of the Series Q Preferred Stock that did not agree to such
alteration or change (the "DISSENTING HOLDERS") and Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to the terms
of this Certificate of Designation as they exist prior to such alteration or
change or continue to hold their shares of Series Q Preferred Stock.
<PAGE>
XI. PRO RATA ALLOCATIONS
The Maximum Share Amount (including any increases thereto)
shall be allocated by the Corporation pro rata among the holders of Series P
Preferred Stock, Series Q Preferred Stock and Warrants based on the number of
shares of Series P Preferred Stock and Series Q Preferred Stock and the number
of Warrants issued to each holder. Each increase to the Maximum Share Amount
shall be allocated pro rata among the holders of Series P Preferred Stock,
Series Q Preferred Stock and Warrants based on the number of shares of Series P
Preferred Stock and Series Q Preferred Stock and the number of Warrants held by
each holder at the time of the increase in the Maximum Share Amount. In the
event a holder shall sell or otherwise transfer any of such holder's shares of
Series P Preferred Stock, Series Q Preferred Stock or Warrants, each transferee
shall be allocated a pro rata portion of such transferor's Maximum Share Amount.
Any portion of the Maximum Share Amount which remains allocated to any person or
entity which does not hold any Series P Preferred Stock, Series Q Preferred
Stock or Warrants shall be allocated to the remaining holders of shares of
Series P Preferred Stock and Series Q Preferred Stock and of Warrants, pro rata
based on the number of shares of Series P Preferred Stock and Series Q Preferred
Stock and the number of Warrants then held by such holders. In the event that
the Corporation has obtained the Non-Integration Letter, the holders of Series P
Preferred Stock shall be excluded from the allocations pursuant hereto.
The Reserved Amount (including any increases thereto) shall be
allocated by the Corporation pro rata among the holders of Series Q Preferred
Stock based on the number of shares of Series Q Preferred Stock issued to each
holder. Each increase to the Reserved Amount shall be allocated pro rata among
the holders of Series Q Preferred Stock based on the number of shares of Series
Q Preferred Stock held by each holder at the time of the increase in the
Reserved Amount. In the event a holder shall sell or otherwise transfer any of
such holder's shares of Series Q Preferred Stock, each transferee shall be
allocated a pro rata portion of such transferor's Reserved Amount. Any portion
of the Reserved Amount which remains allocated to any person or entity which
does not hold any Series Q Preferred Stock shall be allocated to the remaining
holders of shares of Series Q Preferred Stock, pro rata based on the number of
shares of Series Q Preferred Stock then held by such holders.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation this 15th day of March, 2000.
EGLOBE, INC.
By:____________________________________
Christopher J. Vizas
Chairman of the Board and
Chief Executive Officer
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series Q Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series Q Preferred Stock, represented by stock certificate No(s).
__________ (the "PREFERRED STOCK CERTIFICATES") into shares of common stock
("COMMON STOCK") of eGlobe, Inc., a Delaware corporation (the "CORPORATION")
according to the conditions of the Certificate of Designation of Series Q
Preferred Stock, as of the date written below. If securities are permitted to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the undersigned for any conversion,
except for transfer taxes, if any. A copy of each Preferred Stock Certificate
(or evidence of loss, theft or destruction thereof) is attached hereto.
The undersigned hereby irrevocably elects to convert
$___________ in Conversion Default Payments, $__________ in Delivery Default
Payments and/or $___________ in payments pursuant to Section 2(c) of the
Registration Rights Agreement at the Applicable Conversion Price set forth
below.
The Corporation shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system
("DWAC TRANSFER").
Name of DTC Prime Broker:
Account
Number:
In lieu of receiving shares of Common Stock issuable pursuant
to this Notice of Conversion by way of a DWAC Transfer, the
undersigned hereby requests, if permitted, that the
Corporation issue a certificate or certificates for the number
of shares of Common Stock set forth above (which numbers are
based on the calculation of the undersigned attached hereto)
in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:
Name: ___________________________
Address: ___________________________
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series Q Preferred Stock shall be made pursuant to
registration of the securities under the Securities Act of 1933, as amended (the
"ACT"), or pursuant to an exemption from registration under the Act.
Date of Conversion:
Market Price Days:
<PAGE>
Applicable Conversion Price:
Number of Shares of
Common Stock to be Issued pursuant to:
(i) Conversion of Series Q Preferred Stock:
(ii) Conversion of Conversion Default
Payments, Delivery Default Payments and/or
payments pursuant to Section 2(c) of the
Registration Rights Agreement:
Signature:
Name:
Address:
*The Corporation is not required to issue shares of Common Stock until the
original Series Q Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to the converting holder not later than three (3) business days (subject to a
two (2) business day grace period) following receipt of the original Preferred
Stock Certificate(s) to be converted, and shall make payments pursuant to the
Certificate of Designation for the number of business days such issuance and
delivery is late.
EXHIBIT 4.2
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
AGREEMENT DATED AS OF MARCH 15, 2000, NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR,
AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SUCH ACT.
Right to Purchase
100,000 Shares of Common Stock,
par value $.001 per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC INTERNATIONAL INVESTORS,
LDC or its registered assigns, is entitled to purchase from EGLOBE, INC., a
Delaware corporation (the "Company"), at any time or from time to time during
the period specified in Paragraph 2 hereof, One Hundred Thousand (100,000) fully
paid and nonassessable shares of the Company's Common Stock, par value $.001 per
share (the "Common Stock"), at an exercise price of $12.04 per share (the
"Exercise Price"). The term "Warrant Shares," as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term Warrants means this Warrant and the other warrants issued pursuant to that
certain Securities Purchase Agreement, dated March 15, 2000, by and among the
Company and the Buyers listed on the execution page thereof (the "Securities
Purchase Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached
<PAGE>
hereto (the "Exercise Agreement"), to the Company during normal business hours
on any business day at the Company's principal executive offices (or such other
office or agency of the Company as it may designate by notice to the holder
hereof), and upon (i) payment to the Company in cash, by certified or official
bank check or by wire transfer for the account of the Company of the Exercise
Price for the Warrant Shares specified in the Exercise Agreement or (ii) if the
resale of the Warrant Shares by the holder is not then registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), delivery to the Company of a written notice of an
election to effect a "Cashless Exercise" (as defined in Section 11(c) below) for
the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so
purchased shall be deemed to be issued to the holder hereof or such holder's
permitted designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares (or an election to effect a Cashless Exercise has been
made) as set forth above. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Exercise Agreement,
shall be delivered to the holder hereof within a reasonable time, not exceeding
three (3) business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the holder hereof and shall be registered in the name of such holder or such
other name permitted as shall be designated by such holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.
Notwithstanding anything in this Warrant to the contrary, in
no event shall the holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, shares of Series Q
Preferred Stock, shares of Series P Preferred Stock and the Series P Warrants
(each as defined in the Securities Purchase Agreement)) subject to a limitation
on conversion or exercise analogous to the limitation contained herein) and (ii)
the number of shares of Common Stock issuable upon exercise of the Warrants (or
portions thereof) with respect to which the determination described herein is
being made, would result in beneficial ownership by the holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (i) hereof.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement (the "Issue Date")
and before 5:00 p.m., New York City time on the fifth (5th) anniversary of the
Issue Date (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
<PAGE>
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a suf-ficient number of shares of Common
Stock to provide for the exercise of this Warrant in accordance with the terms
of Section 4(b) of the Securities Purchase Agreement.
(c) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise Price shall be
rounded up to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(b)(vi),
4(c) and 4(e) hereof, if and whenever on or after the Issue Date of this
Warrant, the Company issues or sells, or in accordance with Paragraph 4(b)
hereof is deemed to have issued or sold, any shares of Common
<PAGE>
Stock for no consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances in
connection therewith) less than Market Price (as hereinafter defined) on the
date of issuance (or deemed issuance) of such Common Stock (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by multiplying the Exercise Price in effect
immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of
which is an amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance, plus (y) the
quotient of the aggregate consideration, calculated as set forth in Paragraph
4(b) hereof, received by the Company upon such Dilutive Issuance divided by the
Market Price in effect immediately prior to the Dilutive Issuance and (ii) the
denominator of which is the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date of
issuance of such Convertible Securities then the maximum total number of shares
of Common Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible Securities,
be deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon such
<PAGE>
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect will be readjusted to the
Exercise Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
market price thereof (calculated in the manner provided for calculating the
Market Price of the Common Stock) as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
acquisition, merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than
cash or securities will be determined in good faith by the Board of Directors of
the Company.
<PAGE>
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, so
long as the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose; or (iii) upon the exercise of the Warrants.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor or acquiring entity (if other than the Company) and, if
an entity different from the successor or acquiring entity, the entity whose
capital stock or assets the holders of the Common Stock of the Company are
entitled to receive as a result of such consolidation, merger or sale or
conveyance assumes by written instrument the obligations under this Paragraph 4
and the obligations to deliver to the holder of this Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.
<PAGE>
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the holder of this
Warrant shall be entitled upon exercise of this Warrant for the purchase of any
or all of the shares of Common Stock subject hereto, to receive the amount of
such assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such
<PAGE>
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
holder shall be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the
number of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) pursuant to
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant
of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the
maximum total number of shares of Common Stock issuable upon conversion or
exchange of Convertible Securities, as of the date of issuance of such
Convertible Securities, if any.
(ii) "MARKET PRICE," as of any date, (i) means the
average of the last reported sale prices for the shares of Common Stock on the
Nasdaq National Market ("Nasdaq") for the five (5) trading days immediately
preceding such date as reported by Bloomberg Financial Markets or an equivalent
reliable reporting service mutually acceptable to and hereafter designated by
the holder of this Warrant and the Company ("Bloomberg"), or (ii) if Nasdaq is
not the principal trading market for the shares of Common Stock, the average of
the last reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good faith by
(a) the Board of Directors of the Company or, at the option of a
majority-in-interest of the holders of the outstanding Warrants, by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the Company. The manner of determining
the Market Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.
(iii) "COMMON STOCK," for purposes of this Paragraph
4, includes the Common Stock, par value $.001 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant to
this Warrant shall include only shares of Common Stock, par value
<PAGE>
$.001 per share, in respect of which this Warrant is exercisable, or shares
resulting from any subdivision or combination of such Common Stock, or in the
case of any reorganization, reclassification, consolidation, merger, or sale of
the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment shall
be subject to the conditions set forth in Paragraph 7(f) hereof and to the
applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
March 15, 2000, by and among the Company and the other signatories thereto (the
"Registration Rights Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this
<PAGE>
Warrant shall be promptly canceled by the Company. The Company shall pay all
taxes (other than securities transfer taxes) and all other expenses (other than
legal expenses, if any, incurred by the holder or transferees) and charges
payable in connection with the preparation, execution, and delivery of Warrants
pursuant to this Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which opinion and counsel are
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under applicable
state securities or blue sky laws, (ii) that the holder or transferee execute
and deliver to the Company an investment letter in form and substance acceptable
to the Company and (iii) that the transferee be an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act; provided that no
such opinion, letter or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act. The
first holder of this Warrant, by taking and holding the same, represents to the
Company that such holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 1250 24th Street, NW,
Suite 725, Washington, DC 20037, Attention: Chief Executive Officer, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail
<PAGE>
courier, if postage is prepaid and the mailing is properly addressed, as the
case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF DELAWARE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY CONSENT TO THE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS AND THE STATE COURTS LOCATED IN DELAWARE WITH
RESPECT TO ANY SUIT OR PROCEEDING BASED ON OR ARISING UNDER THIS AGREEMENT, THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY AND IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH SUIT
OR PROCEEDING MAY BE DETERMINED IN SUCH COURTS. BOTH PARTIES IRREVOCABLY WAIVE
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY
MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF
PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL
AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
<PAGE>
EGLOBE, INC.
By:
-----------------------------
Christopher J. Vizas
Chairman of the Board and
Chief Executive Officer
Dated as of March 15, 2000
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ___________, 2000
To: EGLOBE, INC.
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name: ___________________________________
Signature: _______________________________
Address: _______________________________
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: ________ __, 2000
In the presence of:
- -------------------------
Name:____________________________________
Signature:_________________________________
Title of Signing Officer or
Agent (if any):
Address:__________________________________
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 15,
2000, by and among eGlobe, Inc., a Delaware corporation, with headquarters
located at 1250 24th Street, NW, Suite 725, Washington, DC 20037 ("COMPANY") and
each of the purchasers set forth on the signature pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock,
designated as Series Q Convertible Preferred Stock (the "SERIES Q PREFERRED
STOCK"), having the rights, preferences and privileges set forth in the
Certificate of Designations, Rights and Preferences attached hereto as EXHIBIT
"A" (the "CERTIFICATE OF DESIGNATION") and has authorized the issuance to the
Buyers of an aggregate of Ten Thousand (10,000) shares of Series Q Preferred
Stock (together with any shares of Series Q Preferred Stock issued in
replacement thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, the "PREFERRED SHARES");
C. The Series Q Preferred Stock is convertible into shares of common
stock, $.001 par value per share, of the Company (the "COMMON STOCK"), upon the
terms and subject to the limitations and conditions set forth in the Certificate
of Designation;
D. The Company has authorized the issuance to the Buyers of warrants,
in the form attached hereto as EXHIBIT "B-1", to purchase an aggregate of One
Hundred Thousand (100,000) shares of Common Stock (the "FIRST CLOSING WARRANTS")
and warrants, in the form attached hereto as EXHIBIT "B-2", to purchase an
aggregate of One Hundred Fifty Thousand (150,000) shares of Common Stock (the
"SECOND CLOSING WARRANTS" and, together with the First Closing Warrants, the
"WARRANTS"). The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants are referred to herein collectively as the "WARRANT
SHARES."
E. The Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement, (i) an
aggregate of Ten Thousand (10,000) Preferred Shares and (ii) the Warrants, for
an aggregate purchase price of Ten Million Dollars ($10,000,000);
F. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, the number of Preferred Shares and Warrants as is set forth
immediately below its name on the signature pages hereto; and
<PAGE>
G. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. PURCHASE OF PREFERRED SHARES AND WARRANTS. On each Closing
Date (as defined below), the Company shall issue and sell to each Buyer and each
Buyer severally agrees to purchase from the Company such number of Preferred
Shares and Warrants for the aggregate purchase price with respect to such
applicable Closing (as defined below) as is set forth immediately below such
Buyer's name on the signature pages hereto. The issuance, sale and purchase of
the Preferred Shares and Warrants shall take place at two (2) closings (each, a
"CLOSING"), the first of which is hereinafter referred to as the "FIRST CLOSING"
and the second of which is referred to as the "SECOND CLOSING." The aggregate
number of Preferred Shares to be issued at the First Closing is Four Thousand
(4,000) for an aggregate purchase price of Four Million Dollars ($4,000,000)
(the "FIRST CLOSING PURCHASE PRICE") and the aggregate number of Preferred
Shares to be issued at the Second Closing is Six Thousand (6,000) for an
aggregate purchase price of Six Million Dollars ($6,000,000) (the "SECOND
CLOSING PURCHASE PRICE" and, collectively with the First Closing Purchase Price,
the "PURCHASE PRICE "). The aggregate number of First Closing Warrants to be
issued at the First Closing is 100,000 and the aggregate number of Second
Closing Warrants to be issued at the Second Closing is 150,000. Subject to the
satisfaction (or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, (i) at the First Closing, the Company shall issue and sell to
each Buyer and each Buyer shall purchase from the Company the number of
Preferred Shares and First Closing Warrants which such Buyer is purchasing
hereunder and as set forth below such Buyer's name on the signature pages hereto
and (ii) at the Second Closing, the Company shall issue and sell to each Buyer
and each Buyer shall purchase from the Company the number of Preferred Shares
and Second Closing Warrants as is set forth below such Buyer's name on the
signature pages hereto.
b. FORM OF PAYMENT. On each Closing Date (as defined below),
(i) each Buyer shall pay the applicable Purchase Price for the Preferred Shares
and Warrants to be issued and sold to it at the applicable Closing by wire
transfer of immediately available funds to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing such number of Preferred Shares and Warrants which
such Buyer is purchasing and (ii) the Company shall deliver such certificates
duly executed on behalf of the Company, to such Buyer, against delivery of such
applicable Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Preferred Shares pursuant to this Agreement
(each, a "CLOSING DATE") shall be (i) in the case of the First Closing, 12:00
noon Eastern Standard Time on March 15, 2000 and (ii) in
<PAGE>
the case of Second Closing, as soon as practicable (but no later than 12:00 noon
Eastern Standard Time on the fifth (5th) business day) following the
satisfaction (or waiver) of the conditions to the Second Closing set forth in
Sections 6 and 7 below, but in no event shall the Second Closing take place if
the conditions set forth in Sections 6 and 7 are not satisfied or waived prior
to July 15, 2000 or, in each case, such other mutually agreed upon time. Each
closing shall occur on the applicable Closing Date at the offices of Ballard
Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania
19103, or at such other location as may be agreed to by the parties. The parties
may close the transactions contemplated by this Agreement by transmitting
signature pages and copies of other documents via facsimile followed by
overnight delivery and exchange of the originally executed documents.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and
not jointly) represents and warrants to the Company solely as to such Buyer
that:
a. INVESTMENT PURPOSE. As of the date hereof, the Buyer is
purchasing the Preferred Shares, the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Preferred Shares (including, without
limitation, such additional shares of Common Stock as are issuable as a result
of the events described in Articles V, VI.D(b) or VI.E of the Certificate of
Designation and Section 2(c) of the Registration Rights Agreement (such shares
of Common Stock being collectively referred to herein as the "CONVERSION
SHARES")), the Warrants and the shares of Common Stock issuable upon exercise of
or otherwise pursuant to the Warrants (the "WARRANT SHARES" and, collectively
with the Preferred Shares, the Conversion Shares and the Warrants, the
"SECURITIES") for its own account and not with a present view towards the public
sale or distribution thereof within the meaning of the 1933 Act, except pursuant
to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a effective registration statement or an applicable exemption under
the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D promulgated
under the 1933 Act (an "ACCREDITED INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer's right to rely on the Company's representations and warranties
contained in Section 3
<PAGE>
below. The Buyer understands that its investment in the Securities involves a
significant degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. TRANSFER OR RE-SALE. The Buyer understands that (i) except
as provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from such registration, (c) the Securities are sold or transferred
to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("Rule 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor or (d) the Securities are sold pursuant to Rule 144; (ii)
any sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. LEGENDS. The Buyer understands that the Preferred Shares
and Warrants and, until such time as the Conversion Shares and Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately sold, the Conversion Shares and Warrant Shares, may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed with the Company's transfer agent against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities may not be sold, transferred or assigned in the
absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form,
substance and scope customary for opinions of counsel in
comparable transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said
Act."
The legend set forth above shall be removed and the Company shall issue
or caused to be issued a certificate without such legend to the holder of any
Security upon which it
<PAGE>
is stamped, if, unless otherwise required by applicable state securities laws,
(a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the 1933 Act and such
sale or transfer is effected, or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144. The
Buyer agrees to sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in compliance with
applicable securities laws and prospectus delivery requirements, if any.
h. AUTHORIZATION; ENFORCEMENT. (i) The Buyer has all requisite
power, capacity and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby, (ii) the execution and delivery of this Agreement and the
Registration Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Buyer, and (iii) this Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes, and upon execution and delivery by
the Buyer of the Registration Rights Agreement, such agreement will constitute,
valid and binding agreements of the Buyer enforceable in accordance with their
terms.
i. RESIDENCY. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
j. NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Buyer and the
consummation by the Buyer of the transactions contemplated hereby and thereby
will not (i) if the Buyer is an entity, conflict with or result in a violation
of any provision of the certificate of incorporation, bylaws or other
organizational documents of the Buyer, (ii) violate or conflict with, or result
in a breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under any agreement to
which the Buyer is a party, or (iii) result in the violation of any law, rule,
regulation, order, judgment or decree applicable to the Buyer. There are no
agreements, laws or other restrictions of any kind to which the Buyer is a party
or is subject that would prevent or restrict the execution, delivery or
performance of this Agreement by the Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. SCHEDULE 3(a) sets forth
a list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary
<PAGE>
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the Securities, (ii) the business, operations, assets, financial
condition or prospects of the Company and its Subsidiaries, if any, taken as a
whole, or (iii) on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith. "SUBSIDIARIES" means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Preferred Shares and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise of or
otherwise pursuant to the Preferred Shares and the Warrants) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its stockholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company, and (iv) this Agreement constitutes and, upon execution and delivery by
the Company of the Registration Rights Agreement and the Warrants and upon
execution and filing of the Certificate of Designation, each of such agreements
and instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. CAPITALIZATION. The authorized capital stock of the Company
consists of: (a) one hundred million (100,000,000) shares of Common Stock of
which forty-six million, eight hundred fifty thousand, seven hundred forty
(46,850,740) shares were issued and outstanding as of March 15, 2000; and (b)
ten million (10,000,000) shares of preferred stock, par value $.001 per share,
of which, as of March 15, 2000: (i) one hundred twenty-five (125) shares of 8%
Series E Cumulative Convertible Redeemable Preferred Stock are authorized, none
of which are outstanding; (ii) two million twenty thousand (2,020,000) shares of
Series F Convertible Preferred Stock are authorized, none of which are
outstanding; (iii) four hundred thousand (400,000) shares of Series I
Convertible Preferred Stock are authorized, of which two hundred fifty thousand
(250,000) shares are issued and outstanding; (iv) forty (40) shares of 5% Series
J Cumulative Convertible Preferred Stock are authorized, none of which are
outstanding; (v) one (1) share of 20% Series M Cumulative Convertible Preferred
Stock is authorized, issued and outstanding; (vi) sixteen thousand one hundred
(16,100) shares of 10% Series O Cumulative Convertible Preferred Stock are
authorized, issued and outstanding; and (vii) fifteen thousand (15,000) shares
of Series P Convertible Preferred Stock ("SERIES P PREFERRED STOCK") are
authorized, issued and outstanding. In addition, (i) 3,250,000 shares are
reserved for issuance pursuant to Company stock options, (ii) 21,497,988 shares
are reserved for issuance pursuant to securities (other than the Preferred
Shares and the Warrants) exercisable for, or convertible into or exchangeable
for shares of Common Stock (which amount includes 10,921,464 shares issuable
upon conversion of shares of preferred stock (excluding the Preferred Shares),
7,322,357 shares issuable upon exercise of non-contingent warrants and 3,254,167
shares issuable upon exercise of contingent warrants), (iii) 6,000,000 shares
are reserved for issuance upon conversion of the shares of Series P Preferred
Stock and exercise of the warrants issued
<PAGE>
pursuant to that certain Securities Purchase Agreement dated as of January 26,
2000 by and between the Company and the Buyers named therein (the "SERIES P
AGREEMENT") and (iv) 4,000,000 shares are reserved for issuance upon conversion
of the Preferred Shares and exercise of the Warrants (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(h) below). All of such
outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
SCHEDULE 3(c), as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, (ii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) that will be triggered by the
issuance of the Preferred Shares, the Conversion Shares, the Warrants or the
Warrant Shares. The Company has furnished to the Buyer true and correct copies
of the Company's Certificate of Incorporation (including all certificates of
designation of the rights, preferences, privileges and restrictions of the
various existing series of preferred stock of the Company) as in effect on the
date hereof (the "CERTIFICATE OF INCORPORATION"), the Company's By-laws, as in
effect on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock of the Company and the material
rights of the holders thereof in respect thereto. The Company shall provide the
Buyer with a written update of this representation signed by the Company's Chief
Executive or Chief Financial Officer on behalf of the Company as of the
applicable Closing Date.
d. ISSUANCE OF SHARES. The Preferred Shares and the Warrants
are duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof. The Conversion Shares and the Warrant Shares are duly authorized
and reserved for issuance and, upon conversion of the Preferred Shares and
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances with respect to the issuance thereof and will not be subject to
preemptive rights or other similar rights of stockholders of the Company and
will not impose personal liability upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of or otherwise pursuant to
the Preferred Shares and upon issuance of the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. The Company's directors and executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of or otherwise pursuant to the Preferred
Shares and
<PAGE>
Warrant Shares upon exercise of or otherwise pursuant to the Warrants in
accordance with this Agreement, the Certificate of Designation and the Warrants
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company. Taking the foregoing into account, the Company's Board of Directors has
determined, in its good faith business judgment, that the issuance of the
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
hereunder and under the Certificate of Designation and the consummation of the
transactions contemplated hereby and thereby are in the best interest of the
Company and its stockholders.
f. SERIES OF PREFERRED STOCK. The terms, designations, powers,
preferences and relative, participating and optional or special rights, and the
qualifications, limitations and restrictions of each series of preferred stock
of the Company (other than the Preferred Shares) are as stated in the
Certificate of Incorporation, filed on or prior to the date hereof, and the
Bylaws. The terms, designations, powers, preferences and relative, participating
and optional or special rights, and the qualifications, limitations and
restrictions of the Preferred Shares are as stated in the Certificate of
Designation.
g. NO CONFLICTS. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation and the issuance and reservation for issuance, as applicable, of
the Preferred Shares, Conversion Shares, Warrants and Warrant Shares) will not
(i) conflict with or result in a violation of any provision of the Certificate
of Incorporation or By-laws or (ii) violate or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation
of its Certificate of Incorporation, By-laws or other organizational documents
and neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company or
any of its Subsidiaries in default) under, and neither the Company nor any of
its Subsidiaries has taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party or by which any property or assets of the
Company or any of its Subsidiaries is bound or affected, except for possible
defaults as would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as a Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, except where such conduct would not, individually or in the aggregate,
have a Material Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with,
<PAGE>
any court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants in accordance with the terms hereof or thereof or to
issue and sell the Preferred Shares and the Warrants in accordance with the
terms hereof and to issue the Conversion Shares upon conversion of or otherwise
pursuant to the Preferred Shares and the Warrant Shares upon exercise of or
otherwise pursuant to the Warrants. Except as disclosed in SCHEDULE 3(g), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of the
listing requirements of the Nasdaq National Market ("NASDAQ") and does not
reasonably anticipate that the Common Stock will be delisted by the Nasdaq in
the foreseeable future. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth on
SCHEDULE 3(h), since December 31, 1997, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has made available to each Buyer
true and complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates, the SEC Documents complied
as to form in all material respects with the applicable requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior to
the date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly present
in all material respects the consolidated financial position of the Company and
its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in SCHEDULE 3(h) or in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not material
to the financial condition or operating results of the Company.
<PAGE>
i. Absence of Certain Changes. Since December 31, 1998 and
except as set forth in the SEC Documents filed after such date, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, prospects, financial condition or
results of operations of the Company or any of its Subsidiaries.
j. ABSENCE OF LITIGATION. Except as disclosed in the SEC
documents or set forth on SCHEDULE 3(j), there is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse Effect. SCHEDULE
3(j) contains a complete list and summary description of any pending or
threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.
k. PATENTS, COPYRIGHTS, ETC.; YEAR 2000 COMPLIANCE.
(i) The Company and each of its Subsidiaries owns or
possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
("INTELLECTUAL PROPERTY") necessary to enable it to conduct its business as now
operated (and, except as set forth in SCHEDULE 3(k) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in SCHEDULE 3(k) hereof, to the best of the Company's knowledge, as presently
contemplated to be operated in the future); to the best of the Company's
knowledge, the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.
(ii) All of the Company's computer software and computer
hardware, and other similar or related items of automated, computerized or
software systems that are used or relied on by the Company in the conduct of its
business or that were, or currently are being, sold or licensed by the Company
to customers (collectively, "INFORMATION TECHNOLOGY"), are Year 2000 Compliant,
except for any such failure to be Year 2000 Compliant that would not have a
Material Adverse Effect. For purposes of this Agreement, the term "YEAR 2000
COMPLIANT" means, with respect to the Company's Information Technology, that the
Information Technology is designed to be used prior to, during and after the
calendar Year 2000 A.D., and the Information Technology used during each such
time period will accurately receive, provide and process date and time data
(including, but not limited to, calculating, comparing and sequencing) from,
into and between the 20th and 21st centuries, including the years 1999 and 2000,
and leap-year calculations, and will not malfunction, cease to function, or
provide invalid
<PAGE>
or incorrect results as a result of the date or time data, to the extent that
other information technology, used in combination with the Information
Technology, properly exchanges date and time data with it. The Company has
delivered to the Buyer true and correct copies of all analyses, reports, studies
and similar written information, whether prepared by the Company or another
party, relating to whether the Information Technology is Year 2000 Compliant.
l. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
m. TAX STATUS. Except as set forth on SCHEDULE 3(m), the
Company and each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. Except as set forth on SCHEDULE 3(m), there are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim. The Company
has not executed a waiver with respect to the statute of limitations relating to
the assessment or collection of any foreign, federal, state or local tax. Except
as set forth on SCHEDULE 3(m), none of the Company's tax returns is presently
being audited by any taxing authority.
n. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(n)
and except for arm's length transactions pursuant to which the Company or any of
its Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors, or employees of the Company is presently
a party to any transaction with the Company or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
o. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business,
<PAGE>
properties, prospects, operations or financial conditions, which has not been
publicly announced or disclosed but, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act).
p. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and that any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers' purchase of the Securities and, except for any such statement
included in this Agreement or the Registration Rights Agreement, has not been
relied upon by the Company, its officers or its directors in any way. The
Company further represents to each Buyer that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation of the
Company and its representatives.
q. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any stockholder
approval provisions applicable to the Company or its securities, except for the
issuance of the Series P Preferred Stock and warrants (the "SERIES P WARRANTS")
issued pursuant to the Series P Agreement and the issuance of Common Stock upon
conversion of the Series P Preferred Stock and upon exercise of the Series P
Warrants.
r. NO BROKERS. The Company has taken no action which would
give rise to any claim by any person (except for Gerard Klauer Mattison & Co.,
Inc.) for brokerage commissions, finder's fees or similar payments relating to
this Agreement or the transactions contemplated hereby. Prior to the date of
this Agreement, the Company has furnished to the Buyers a complete and correct
copy of the agreement dated December 1, 1999 between the Company and Gerard
Klauer Mattison & Co., Inc. pursuant to which such firm will be entitled to
payment relating to the transactions contemplated by this Agreement.
s. PERMITS; COMPLIANCE. The Company and each of its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), except where the failure to possess any such Company Permit would not
have a Material Adverse Effect, and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits, except for any such action that would not have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not
<PAGE>
reasonably be expected to have a Material Adverse Effect. Since December 31,
1998, neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.
t. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE 3(t), there are, to
the Company's knowledge, with respect to the Company or any of its Subsidiaries
or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local or
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"HAZARDOUS MATERIALS") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, or to the best of the
Company's knowledge leased or used, by the Company or any of its Subsidiaries,
and no Hazardous Materials were released on or about any real property
previously owned, or to the Company's knowledge leased or used, by the Company
or any of its Subsidiaries during the period the property was owned, leased or
used by the Company or any of its Subsidiaries, except in the normal course of
the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in Schedule 3(t), there are no
underground storage tanks on or under any real property owned, or to the
Company's knowledge leased or used, by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
u. TITLE TO PROPERTY. The Company and its Subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in SCHEDULE 3(u) or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
<PAGE>
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
v. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.
w. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
x. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977 as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
y. SOLVENCY. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
z. NO INVESTMENT COMPANY. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this Agreement and the
Certificate of Designation will not be an "investment company" required to be
registered under the Investment Company Act of 1940 (an "INVESTMENT COMPANY").
The Company is not controlled by an Investment Company.
<PAGE>
aa. FORM S-1 ELIGIBILITY. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-1
under the 1933 Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-1 with
respect to the Registrable Securities (as defined in the Registration Right
Agreement) within the time periods referred to therein.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. FORM D; BLUE SKY LAWS. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date in respect of the First Closing, take such action as the
Company shall reasonably determine is necessary to qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to each Buyer on or prior to the Closing Date in respect of the
First Closing.
c. ELIGIBILITY TO USE FORM S-1; Reporting Status. The Company
represents and warrants that it meets the requirements for the use of Form S-1
for registration of the sale by the Buyer of the Registrable Securities (as
defined in the Registration Rights Agreement). So long as the Buyer beneficially
owns any of the Securities, the Company shall timely file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company further agrees to file all reports required to be filed
by the Company with the SEC in a timely manner so as to become eligible, and
thereafter to maintain its eligibility, for the use of Form S-3. The Company
agrees that it will file with the SEC a Current Report on Form 8-K, or an
amendment to the Current Report on Form 8-K filed by the Company on February 15,
2000, within three (3) business days of the Closing Date in respect of the First
Closing, which filing will include as exhibits all of the material agreements
and instruments relating to the transactions contemplated hereby to which the
Company is a party.
d. USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Preferred Shares in the manner set forth in SCHEDULE 4(d)
attached hereto and made a part hereof and, except as set forth in SCHEDULE
4(d), shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or other person
(except in connection with its currently existing direct or indirect
Subsidiaries).
e. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. Subject to
the exceptions described below, the Company will not, without the prior written
consent of a majority-in-interest of the Buyers, negotiate or contract with any
party to obtain additional equity or equity-equivalent financing (including debt
financing with an equity component) during the period (the "LOCK-UP PERIOD")
beginning on the Closing Date in respect of the First Closing and ending on the
date which is one hundred twenty (120) days from the date the Registration
Statement (as defined in the Registration Rights Agreement) is declared
effective (plus any days in which sales cannot be made thereunder). In addition,
subject to the exceptions described
<PAGE>
below, if the Company wishes to obtain equity or equity-equivalent financing
(including debt financing with an equity component) ("FUTURE FINANCINGS") during
the period beginning on the Closing Date in respect of the First Closing and
ending twelve (12) months following the date the Registration Statement is
declared effective (plus any days in which sales cannot be made thereunder), it
shall first deliver to each Buyer, at least fifteen (15) business days prior to
offering such Future Financing to any other Person (as defined in Article IV.B
of the Certificate of Designation), written notice describing the proposed
Future Financing, including the terms and conditions thereof, and the Buyers
shall have the exclusive right to negotiate, and the Company shall negotiate in
good faith with the Buyers, during the ten (10) day period following delivery of
such notice, to provide such Future Financing on terms acceptable to the
Company; provided, however, that if the Company and the Buyers are unable to
agree on such terms during such period, the Company shall have the right to
negotiate and contract with any other Person to obtain such Future Financing,
provided that the terms of such Future Financing are no less favorable to the
Company than those terms proposed in such written notice (the limitations
referred to in this sentence and the preceding sentence are collectively
referred to as the "CAPITAL RAISING LIMITATIONS "). In the event the terms and
conditions of a proposed Future Financing are amended in any material respect on
terms which are less favorable to the Company after delivery of the notice to
the Buyers concerning the proposed Future Financing, the Company shall deliver a
new notice to each Buyer describing the amended terms and conditions of the
proposed Future Financing and each Buyer thereafter shall have the exclusive
right during the ten (10) day period following delivery of such new notice to
provide such Future Financing on the same terms as contemplated by such proposed
Future Financing, as amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future Financing. The
Capital Raising Limitations shall not apply to any transaction involving: (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 1933 Act); or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product, asset or
license by the Company. The Capital Raising Limitations also shall not apply to
the issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option, restricted stock or other employee
benefit plan approved by the stockholders of the Company.
f. EXPENSES. The Company shall reimburse Rose Glen Capital
Management, L.P. ("ROSE GLEN") for all reasonable expenses incurred by it in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith, including, without limitation, attorneys' and consultants'
fees and expenses and travel expenses. The Company's obligation to reimburse
Rose Glen's expenses under this Section 4(f) shall be limited to Fifteen
Thousand Dollars ($15,000).
g. FINANCIAL INFORMATION. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) business days after the filing with
the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K; (ii) within one (1) business day after
release, copies of all press releases issued by the Company or any of its
Subsidiaries; and (iii) contemporaneously with the making available or giving to
the
<PAGE>
stockholders of the Company, copies of any notices or other information the
Company makes available or gives to such stockholders.
h. RESERVATION OF SHARES. The Company shall use its best
efforts at all times to maintain the number of shares of Common Stock reserved
for issuance upon conversion of the Preferred Shares and upon exercise of the
Warrants at no less than 4,000,000 shares; provided that, in the event that the
Company delivers the Share Limit Waiver (as defined in the Certificate of
Designation), the Company will promptly take all action necessary to reserve
additional shares of Common Stock in accordance with its obligations hereunder,
and the Company shall at all times thereafter have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion of the outstanding Preferred Shares and the
issuance of the Conversion Shares in connection therewith (based on the lesser
of the Variable Conversion Price (as defined in the Certificate of Designation)
in effect from time to time and the Fixed Conversion Price (as defined in the
Certificate of Designation) in effect from time to time) and as otherwise
required by the Certificate of Designation and the full exercise of the Warrants
and the issuance of the Warrant Shares in connection therewith (based on the
exercise price of the Warrants in effect from time to time). The Company shall
not reduce the number of shares of Common Stock reserved for issuance upon
conversion of or otherwise pursuant to the Preferred Shares and upon exercise of
or otherwise pursuant to the Warrants without the consent of each Buyer. Subject
to the first sentence of this Section 4(h), if at any time the number of shares
of Common Stock authorized and reserved for issuance is below the number of
Conversion Shares issued and issuable upon conversion of or otherwise pursuant
to the Preferred Shares (based on the lesser of the Variable Conversion Price in
effect from time to time and the Fixed Conversion Price in effect from time to
time (each as defined in the Certificate of Designation)) and the number of
Warrant Shares issued and issuable upon exercise of or otherwise pursuant to
Warrants (based on the exercise price of the Warrants in effect from time to
time), the Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case of
an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of shares.
i. LISTING. The Company shall promptly secure the listing of
the Conversion Shares and the Warrant Shares upon each national securities
exchange or automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and, so long as
any Buyer owns any of the Securities shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Conversion Shares from
time to time issuable upon conversion of or otherwise pursuant to the Preferred
Shares and Warrant Shares from time to time issuable upon exercise of or
otherwise pursuant to the Warrants. The Company will obtain and, so long as any
Buyer owns any of the Securities, maintain the listing and trading of its Common
Stock on Nasdaq, the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York
Stock Exchange ("NYSE"), or the American Stock Exchange (" AMEX") and will
comply in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall promptly
provide to each Buyer copies of any notices it receives from Nasdaq and any
other exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.
<PAGE>
j. CORPORATE EXISTENCE. So long as a Buyer beneficially owns
any Preferred Shares, the Company shall maintain its corporate existence and
shall not merge, consolidate or sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where (i) the surviving or successor
entity (and, if an entity different from the surviving or successor entity, the
entity whose securities into which the Preferred Shares shall become convertible
pursuant to Article VI.C(b) of the Certificate of Designation) in such
transaction assumes the Company's obligations hereunder and under the agreements
and instruments entered into in connection herewith (provided, however, that in
the case of a merger or consolidation in which the Company is not the surviving
entity and in which all of the outstanding shares of capital stock of the
Company are being acquired for or converted into the right to receive
consideration consisting entirely of cash, then the successor or surviving
entity (if not the Company) shall not be obligated to assume the obligations of
the Company under the Certificate of Designation, except for the obligations
under Article IV.B thereof), and (ii) any entity whose securities into which the
Preferred Shares shall become convertible pursuant to Article VI.C(b) of the
Certificate of Designation is a publicly traded corporation whose Common Stock
is listed for trading on Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
k. NO INTEGRATION. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
1933 Act or cause the offering of Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
l. TRADING GUIDELINES. So long as a Buyer holds Preferred
Shares, such Buyer covenants and agrees that it will conduct its sales of Common
Stock in compliance with applicable securities laws and will not create any
daily low trading price in the Common Stock.
m. CERTIFICATES OF ELIMINATION. The Company shall promptly
file Certificates of Elimination with the Secretary of State of the State of
Delaware with respect to each series of its outstanding preferred stock which is
fully converted by the holders thereof or redeemed by the Company upon such
conversion or redemption.
n. STOCKHOLDER APPROVAL. Unless the Company otherwise receives
written guidance from Nasdaq in substance and scope satisfactory to the Buyers
(the "NON-INTEGRATION LETTER") that the issuance of Securities pursuant hereto
and pursuant to the terms of the Certificate of Designation and the Warrants
will not be integrated with the issuance of the Series P Preferred Stock, the
Series P Warrants and the shares of Common Stock issuable upon conversion and
exercise of, or otherwise with respect to, the Series P Preferred Stock and the
Series P Warrants for purposes of Nasdaq rules (including Rule 4460), the
Company shall, at its next annual meeting of stockholders which will be held on
or prior to July 31, 2000, obtain such approvals of the Company's stockholders
as may be required to issue all of the shares of Common Stock issuable upon
conversion and exercise of, or otherwise with respect to, the Preferred Shares,
the Warrants and the shares of Series P Preferred Stock and the Series P
Warrants in accordance with applicable law and the rules and regulations of
Nasdaq (including Rule 4460) (the "20% RULE APPROVAL"). The Company shall comply
with the filing and disclosure requirements of Section 14 under the Exchange
Act, and the rules and regulations
<PAGE>
thereunder, in connection with the solicitation, acquisition and the disclosure
of the 20% Rule Approval. The Company represents and warrants that its Board of
Directors has approved, and will recommend that the Company's stockholders
approve, the proposal contemplated by this Section 4(n) and shall so indicate
such recommendation in the proxy statement used to solicit the 20% Rule
Approval. The Company shall use its best efforts to cause its officers and
directors to vote in favor of the proposal contemplated by this Section 4(n).
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and the Warrant Shares
in such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Preferred Shares or exercise of the Warrants in accordance
with the terms thereof (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to
registration of the Conversion Shares and the Warrant Shares under the 1933 Act
or the date on which the Conversion Shares and the Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares and
the Warrant Shares, prior to registration of the Conversion Shares and the
Warrant Shares under the 1933 Act or the date on which the Conversion Shares and
the Warrant Shares may be sold pursuant to Rule 144 without any restriction as
to the number of securities as of a particular date that can then be immediately
sold), will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement set forth in Section 2(g) hereof to comply with all
applicable securities laws and prospectus delivery requirements, if any, upon
re-sale of the Securities. If a Buyer provides the Company with (i) an opinion
of counsel, in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities
may be made without registration under the 1933 Act and such sale or transfer is
effected or (ii) the Buyer provides reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates, free from any restrictive
legend, in such name and in such denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to issue and sell the Preferred Shares and Warrants to a
Buyer at each of the First Closing and the Second Closing is subject to the
satisfaction, at or before the Closing Date in respect of such applicable
Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion:
a. With respect to the First Closing and the Second Closing:
(i) The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement and delivered the same to the
Company.
(ii) The applicable Buyer shall have delivered the
applicable Purchase Price in accordance with Section 1(b) above.
<PAGE>
(iii) The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware.
(iv) The representations and warranties of the applicable
Buyer shall be true and correct in all material respects as of the date when
made and as of the applicable Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date), and
the applicable Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the applicable Closing Date.
(v) No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of
each Buyer hereunder to purchase the Preferred Shares and the Warrants at each
of the First Closing and the Second Closing is subject to the satisfaction, at
or before the Closing Date in respect of such applicable Closing, of each of the
following conditions, provided that these conditions are for such Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. With respect to the First Closing and the Second Closing:
(i) The Company shall have executed this Agreement and
the Registration Rights Agreement and delivered the same to the Buyer.
(ii) The Company shall have delivered to such Buyer duly
executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares and duly executed Warrants purchased at such
applicable Closing in accordance with Section 1(b) above.
(iii) The Certificate of Designation shall have been
accepted for filing with the Secretary of State of the State of Delaware, and a
copy thereof certified by such Secretary of State shall have been delivered to
such Buyer.
(iv) The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to a majority-in-interest of the Buyers, shall have
been delivered to and acknowledged in writing by the Company's Transfer Agent.
(v) The representations and warranties of the Company
shall be true and correct in all material respects as of the date when made and
as of the applicable Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or
<PAGE>
complied with by the Company at or prior to the applicable Closing Date. The
Buyer shall have received a certificate or certificates, executed by the chief
executive officer or chief financial officer of the Company, dated as of the
applicable Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer including, but not limited to
certificates with respect to the Company's Certificate of Incorporation, By-laws
and Board of Directors' resolutions relating to the transactions contemplated
hereby.
(vi) No litigation, statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(vii) The Conversion Shares and the Warrant Shares shall
have been authorized for listing on Nasdaq (subject to official notice of
issuance) and trading in the Common Stock on Nasdaq shall not have been
suspended by the SEC or Nasdaq.
(viii) The Buyer shall have received an opinion of the
Company's counsel, dated as of the applicable Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially the same
form as Exhibit "D" attached hereto.
(ix) The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the applicable Closing
Date.
(x) No material adverse change or development in the
business, operations, properties, prospects, financial condition or operations
of the Company shall have occurred since the date hereof; provided that no
decrease in the trading price of the Common Stock on Nasdaq shall in and to
itself be considered to be such a material adverse change or development.
(xi) The Company 's Series A, B, C, D, G, H, K and N
preferred stock shall have been converted or eliminated and the] only remaining
series of preferred stock authorized and/or outstanding shall be Series E, F, I,
J, L, M, O and P preferred stock.
(xii) The proposed merger between the Company and Trans
Global Communications, Inc. shall not have been abandoned, canceled, terminated,
or the terms thereof materially altered (in a manner materially adverse to the
Company) from those previously publicly announced, nor shall there have been any
public announcement that such merger may not be consummated.
b. With respect to the Second Closing:
(i) The Registration Statement (as defined in the
Registration Rights Agreement) registering the resale by the Buyers of the
shares of Common Stock issuable upon conversion and exercise of, or otherwise
with respect to, the Preferred Shares, the Warrants, the Series P Preferred
Stock and the Series P Warrants in accordance with the terms of the Registration
Rights Agreement and that certain Registration Rights Agreement, dated as of
<PAGE>
January 26, 2000, by and among the Company and the other signatories thereto,
shall have been declared effective and no stop order shall have issued in
respect thereof.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). The parties irrevocably consent to the
jurisdiction of the United States federal courts and the state courts located in
Delaware with respect to any suit or proceeding based on or arising under this
Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
The parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. The parties agree that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may
be executed in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other parties hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
<PAGE>
If to the Company:
eGlobe, Inc.
1250 24th Street, NW
Suite 725
Washington, DC 20037
Attention: Chairman of the Board and Chief Executive Officer
Facsimile: (202) 822-8984
With copy to:
Hogan & Hartson L.L.P
Columbia Square
555 13th Street, NW
Washington, DC 20004-1109
Attention: Steven M. Kaufman, Esq.
Facsimile: (202) 637-5910
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
With copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Attention: Gerald J. Guarcini, Esq.
Facsimile: (215) 864-8999
Each party shall provide notice to the other party of any
change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to (i) any of its "affiliates," as that term is defined under
the 1934 Act and (ii) any person that purchases Securities in a private
transaction from a Buyer, without the consent of the Company.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company
and the Buyers and the agreements and covenants set forth in Sections 2, 3, 4, 5
and 8 shall survive the closings hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Company or the Buyers. The
Company agrees to indemnify and hold harmless
<PAGE>
each of the Buyers and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
expenses as they are incurred. Each Buyer agrees, severally and not jointly, to
indemnify and hold harmless the Company and its officers, directors, employees
and agents for loss or damage arising as a result of or related to any breach or
alleged breach by such Buyer of any of its representations, warranties and
covenants set forth in Sections 2 and 4 hereof or any of its covenants and
obligations under this Agreement, including advancement of expenses as they are
incurred.
j. PUBLICITY. The Company and each of the Buyers shall have
the right to review a reasonable period of time before issuance of any press
releases, filings with the SEC, the NASD or any stock exchange or interdealer
quotation system, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of each of the Buyers, to make any press
release or public filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be consulted
by the Company in connection with any such press release prior to its release
and shall be provided with a copy thereof and be given an opportunity to comment
thereon).
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
m. REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to each Buyer by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that each
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
EGLOBE, INC.
<PAGE>
By:
Christopher J. Vizas
Chairman of the Board and Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
as General Partner
By:
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
First Closing
Number of Preferred Shares: 4,000
Number of First Closing Warrants: 100,000
Aggregate Purchase Price: $4,000,000
Second Closing
Number of Preferred Shares: 6,000
Number of Second Closing Warrants: 150,000
Aggregate Purchase Price: $6,000,000
