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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (date of earliest event reported): September 30, 1997
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Medcross, Inc.
(Exact name of registrant as specified in its charter)
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Florida 0-17973 59-2291344
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
13751 South Wadsworth Park Drive, Suite 200, Draper, UT 84020
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 576-5000
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Item 5. Other Events
Medcross, Inc. (the "Company") and Winter Harbor, L.L.C. ("Winter Harbor")
entered into a Securities Purchase Agreement ("Purchase Agreement"), dated as of
September 30, 1997 and contemplating a closing on October 10 1997, pursuant to
which Winter Harbor will make an investment for equity of the Company (the
"Investment"). The prospective Investment was disclosed in the Company's
previous public filings.
Pursuant to the Purchase Agreement, Winter Harbor will invest an aggregate
of $12,100,000 in a new series of the Company's convertible preferred stock (the
"Series M Preferred Stock"). Winter Harbor will purchase approximately 2,545
shares of Series M Preferred Stock (convertible into 2,545,000 shares of Common
Stock) for an aggregate cash consideration of approximately $7,000,000
(equivalent to $2.75 per share of Common Stock). The Purchase Agreement also
provides for the purchase of approximately 1,855 additional shares of Series M
Preferred Stock (convertible into 1,855,000 shares of Common Stock); such
additional shares of Series M Preferred Stock will be paid for by Winter Harbor
exchanging $5,000,000 of outstanding principal balance under loans to the
Company plus approximately $100,000 accrued interest. After closing on the
Investment and exchanging principal and interest due, Winter Harbor's total
equity investment in the Company will equal $12,100,000. As additional
consideration for its equity financing commitments, Winter Harbor will be issued
warrants by the Company to acquire (a) 2,500,000 shares of Common Stock at an
exercise price of $2.75 per share (the "Series A Warrants"), (b) 2,500,000
shares of Common Stock at an exercise price of $4.00 per share (the "Series B
Warrants") and (c) 5,000,000 shares of Common Stock at an exercise price of
$4.69 (the "Series C Warrants"). The respective exercise prices for the Series A
Warrants, the Series B Warrants and the Series C Warrants (collectively, the
"Investment Warrants"), shall be subject to adjustment. The Series A Warrants
will be exercisable at any time for thirty months from the date of issuance, and
the Series B Warrants and Series C Warrants will be exercisable at any time for
sixty months from the date of issuance. All of the Investment Warrants (i) will
have demand registration rights and anti-dilution rights and (ii) will contain
cashless exercise provisions.
Item 7. Financial Statements and Exhibits
(c) Exhibits
4(u) Securities Purchase Agreement by and between the Company and Winter Harbor,
L.L.C., dated as of September 30, 1997 ("Purchase Agreement").
4(v) Form of Registration Rights Agreement by and between the Company and Winter
Harbor, L.L.C., which constitutes Exhibit C to the Purchase Agreement.
4(w) Form of Shareholders Agreement by and among the Company, Winter Harbor,
L.L.C. and certain holders of the Company's securities, which constitutes
Exhibit D to the Purchase Agreement.
4(x) Form of Warrant Agreement by and between Medcross, Inc. and Winter Harbor,
L.L.C., which constitutes Exhibit F to the Purchase Agreement.
4(y) Form of Articles of Amendment to the Amended and Restated Articles of
Incorporation of the Company, relating to Series M Preferred Stock, which
constitutes Exhibit A to the Purchase Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDCROSS, INC.
(Registrant)
Dated: October 6, 1997 By: /s/ John W. Edwards
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John W. Edwards, President,
Chief Executive Officer
Dated: October 6, 1997 By: /s/ Karl S. Ryser, Jr.
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Karl S. Ryser, Jr.,
Chief Financial Officer
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Exhibit 4(u)
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
September 30, 1997, by and between MEDCROSS, INC., a Florida corporation (the
"Company"), and WINTER HARBOR, L.L.C., a Delaware limited liability company (the
"Investor").
WITNESSETH:
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Investor, and the Investor desires to
purchase from the Company, 4,400 shares (as such number may be adjusted as
provided herein) of the Company's Series M Participating Convertible Preferred
Stock (the "Series M Preferred"), par value $10.00 per share, and warrants to
purchase up to 10,000,000 shares (as such number may be adjusted as provided
herein) of the Company's common stock, par value $.007 per share (the "Common
Stock"), for an aggregate purchase price of $12,100,000;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
Section 1.1 Conversion of Notes; Purchase and Sale of Shares of Series
M Preferred Stock and Warrants.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date (as that term is defined in Section 1.2), the Company shall
issue and sell to the Investor, and the Investor shall purchase from the
Company, (i) that number of shares of Series M Preferred (the "Acquired Shares")
equal to the excess of 4,400 over the number of Converted Shares issued pursuant
to Section 1.1(b), having the rights, privileges and preferences set forth in
the Articles of Amendment attached hereto as Exhibit A (the "Series M
Amendment"), and (ii) warrants to purchase (A) 2,500,000 shares (as such number
may be adjusted as provided herein) of Common Stock at an exercise price of
$2.75 per share (as such price per share may be adjusted as provided herein)
(the "Series A Warrants"), (B) 2,500,000 shares (as such number may be adjusted
as provided herein) of Common Stock at an exercise price
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of $4.00 per share (as such price per share may be adjusted as provided herein)
(the "Series B Warrants"), and (C) 5,000,000 shares (as such number may be
adjusted as provided herein) of the Common Stock at an exercise price of $4.69
per share (as such price per share may be adjusted as provided herein) (the
"Series C Warrants" and together with the Series A Warrants and the Series B
Warrants, collectively, the "Warrants"), which Warrants shall be subject to the
terms and conditions set forth in a Warrant Agreement in substantially the form
attached hereto as Exhibit F (the "Warrant Agreement"). The purchase price to be
paid by Investor for the Acquired Shares and the Warrants shall equal the excess
of (i) $12,100,000 over (ii) the outstanding principal balance and all unpaid
interest accrued thereon as of the Closing Date under those certain promissory
notes executed by the Company in favor of the Investor and dated June 6, 1997,
and August 18, 1997 (the "Notes"). The aggregate purchase price for the Acquired
Shares and the Warrants shall be allocated (i) 80% to the Purchased Shares, (ii)
7% to the Series A Warrants, (iii) 5% to the Series B Warrants, and (iv) 8% to
the Series C Warrants.
(b) Subject to the terms and conditions set forth herein, on
the Closing Date, the outstanding principal balance and all unpaid interest
accrued as of the Closing Date under the Notes (together, the "Note Amount")
shall be converted into shares (the "Converted Shares", and together with the
Acquired Shares, the "Purchased Shares") of Series M Preferred. The number of
Converted Shares shall equal (i) the product of (A) 12,100,000, and (B) a
fraction, the numerator of which is the Note Amount, and the denominator of
which is the sum of the Note Amount and the purchase price allocable to the
Acquired Shares, divided by (ii) 2,750. Upon issuance of the Converted Shares,
the Notes shall be surrendered by the Investor and cancelled by the Company.
(c) The parties agree that the number of Purchased Shares and
Warrants (together, the "Securities") to be issued by the Company to the
Investor on the Closing Date, and the exercise price of the Warrants, shall be
equitably adjusted, subject to the agreement of each party, to reflect any
spin-off, split-up, reclassification, combination of shares, recapitalization or
similar corporate reorganization, or any consolidation or merger under which the
surviving entity is or becomes the "Company" as defined in this Agreement, in
any such case which occurs between the effective date of this Agreement and the
Closing Date.
Section 1.2 Closing.
(a) Subject to the satisfaction or, to the extent permissible
by law, waiver by the parties hereto on the Closing Date of the conditions
described in Article 4 of this Agreement, and to the provisions of Article 5
hereof, the closing of the
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issuance and sale of the Securities (the "Closing") shall occur on such date as
the Company and the Investor may mutually agree in writing, or on a date
selected by the Company, by written notice to the Investor, on which the Company
has determined that the condition precedent to the obligations of the Investor
to consummate the Closing set forth in Section 4.1(j) is reasonably likely to be
satisfied, which date so selected shall not, in any event, be earlier than three
business days after the date of such notice; provided, however, that, if such
condition precedent is not actually satisfied or waived in writing by such date,
then either the Company or the Investor may elect, by written notice to the
other party, to postpone the date of the Closing, in which event the date of the
Closing shall be a subsequent date, as shall be designated by the Company by
written notice to the Investor, which is at least five business days after the
date on which the Company gives the Investor written notice of the actual
satisfaction (or, if applicable, the prior waiver in writing by the Investor) of
the condition precedent set forth in said Section 4.1(j) (such date on which the
Closing takes place being the "Closing Date"). The Closing shall take place at
the offices of Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue, N.W.,
Suite 800, Washington, D.C., or at such other place as the Company and the
Investor may mutually agree upon in writing.
(b) At the Closing, the Company shall deliver to the Investor
certificates representing the Purchased Shares and the Warrants and the Warrant
Agreement against payment of the Purchase Price by certified check payable to
the Company or by wire transfer of immediately available federal funds to such
account as the Company may designate in writing to the Investor and by
cancellation of the Notes, as provided in Section 1.1(c).
Section 1.3 Proxy Statement; Special Shareholders Meeting to
Approve Amendment to Articles of Incorporation. The Company has prepared and
filed with the Securities and Exchange Commission (the "SEC") proxy statement
materials for the purpose of soliciting proxies from the holders of the
Company's Common Stock in order to approve, at a meeting of the Company's
shareholders (which meeting, in any event shall be scheduled to occur not later
than thirty days after the date hereof), (i) the adoption of an amendment to the
Company's Articles of Incorporation in the form attached hereto as Exhibit B
(the "Authorized Shares Amendment" and, together with the Series M Amendment,
collectively the "Amendments"), which is necessary in order, among other things,
to permit the issuance of shares of Common Stock upon conversion of shares of
Series M Preferred, and (ii) to approve all actions or agreements to consummate
the transactions contemplated herein. The Company shall use its commercially
reasonable efforts to obtain the approval of its shareholders to the adoption of
the Authorized Shares Amendment and the approval of the other matters described
in this Section
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1.3. The Company shall promptly file with the Secretary of State of the State of
Florida the Amendments in the forms attached hereto as Exhibits A and B.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents and warrants to, and covenants with, the
Investor as follows:
Section 2.1 Organization, Qualifications and Corporate Power.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Florida, and it has
the requisite corporate power and authority to own and hold its properties and
to carry on its business as conducted or presently proposed to be conducted. The
Company has requisite corporate power and authority to execute, deliver and
perform this Agreement and to sell, issue and deliver to the Investor the
Securities, and the Company has, or will have within thirty days of the date
hereof, requisite corporate power and authority to issue and deliver to the
Investor the shares of Common Stock issuable upon conversion of the Series M
Preferred or exercise of the Warrants (collectively, the "Underlying Shares").
The Company is duly qualified to conduct business as a foreign corporation in
good standing under the laws of the State of Utah and each other jurisdiction
where the failure to so qualify could have a material adverse effect on the
financial condition, results of operations, properties, assets, prospects or
business of the Company or any of its subsidiaries (a "Material Adverse
Effect"). The Company has delivered to the Investor complete and correct copies
of the Company's Articles of Incorporation (including all amendments thereto)
and Bylaws, in each case in effect as of the date hereof (the "Company Existing
Articles" and "Company Existing Bylaws," respectively).
(b) The Company does not own, directly or indirectly, any
shares of capital stock, partnership interests or other participation rights or
other interests in the nature of an equity interest in any corporation,
partnership, company, trust or other entity, or any option, warrant or other
security convertible into or exchangeable for any of the foregoing, other than
(a) the shares of capital stock of I-Link Systems, Inc., a Utah corporation
("I-Link Systems"), (b) the shares of capital stock of I-Link Communications,
Inc. (formerly known as "Family Telecommunications, Inc."), a Utah corporation
("I-Link Communications"), (c) the shares of capital stock of MiBridge, Inc., a
Utah corporation ("MiBridge"), and (d) the membership interests of I-Link
Worldwide,
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L.L.C., a Delaware limited liability company ("Worldwide"). Each of I-Link
Systems, I-Link Communications and MiBridge is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Utah, and
Worldwide is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of I-Link Systems,
I-Link Communications, MiBridge and Worldwide has the requisite corporate or
limited liability company (as appropriate) power and authority to own and hold
its properties and to carry on its business as conducted or presently proposed
to be conducted. Each of I-Link Systems, I-Link Communications, MiBridge and
Worldwide is duly qualified to conduct business as a foreign corporation or
limited liability company (as appropriate) in good standing under the laws of
each jurisdiction where the failure to so qualify could have a Material Adverse
Effect. The Company has delivered to the Investor complete and correct copies of
the Articles of Incorporation (including all amendments thereto), Bylaws and
operating agreement (as appropriate) of each of I-Link Systems, I-Link
Communications, MiBridge and Worldwide, in each case in effect as of the date
hereof (the "Subsidiary Existing Articles", "Subsidiary Existing Bylaws" and
"Subsidiary Operating Agreement", respectively; the Existing Articles and
Existing Bylaws are sometimes referred to herein, together with the Company
Existing Articles and the Company Existing Bylaws, as the "Existing Articles"
and the "Existing Bylaws", respectively).
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Section 2.2 Authorization of Agreements.
(a) (i) Except as set forth in Schedule 2.2, each of the
execution, delivery and performance by the Company of this Agreement, the
Warrant Agreement, the Shareholders Agreement (as that term is defined in
Section 4.1(f)) and the Registration Rights Agreement (as that term is defined
in Section 4.1(e)) and the other agreements, documents and instruments to be
entered into pursuant hereto (collectively, the "Transaction Documents") and the
issuance, sale and delivery of the Securities and the Underlying Shares to the
Investor have been, or, prior to the Closing Date, will have been (in the case
only of approval or consent of the Company's shareholders), duly authorized by
all requisite corporate action of the Company, including, but not limited to,
the requisite action by the Board of Directors of the Company and the requisite
approval or consent of the Company's shareholders, and (ii) will not (with due
notice or lapse of time or both) violate, be in conflict with or constitute a
default under any provision of law, rule or regulation, any order of any court
or other governmental agency, the Articles of Incorporation or Bylaws of the
Company, or any provision of any indenture, mortgage, note, deed of trust,
agreement or other instrument to which the Company, any of its subsidiaries or
any of their respective properties or assets is bound, or conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, mortgage, note, deed of trust, agreement or
other instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company or any of its subsidiaries.
(b) The Securities have been duly authorized and, when issued
in accordance with this Agreement, shall be validly issued, fully paid and
non-assessable, with the rights, powers and privileges as set forth herein, in
the Articles of Incorporation, as amended, and in the Warrant Agreement, and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances other than restrictions on transfer under applicable state and
federal securities laws. The Underlying Shares issuable upon conversion of the
Purchased Shares and upon exercise of the Warrants have been, or, within thirty
days of the date hereof, will have been, duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Company's Articles of
Incorporation, as amended, and the Warrant Agreement, will be duly and validly
issued, fully paid and non-assessable, and will be free of restrictions on
transfer other than restrictions on transfer under applicable state and federal
securities laws. The issuance, sale and delivery of the Securities and the
Underlying Shares are not subject to any preemptive right of any shareholder of
the Company or to any right of first refusal or other right in favor of any
person.
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Section 2.3 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity. The other
Transaction Documents, when executed in accordance with the terms of this
Agreement, will be duly executed and delivered by the Company and will
constitute the legal, valid and binding obligation of the Company, enforceable
in accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable remedies
may be limited by general principles of equity.
Section 2.4 Capital Stock.
(a) The authorized capital stock of the Company consists of
(i) 20,000,000 shares of Common Stock, of which 11,627,597 shares were issued
and outstanding as of August 8, 1997, and (ii) 500,000 shares of Preferred
Stock, of which (A) 7,500 shares are designated as 12% Cumulative Convertible
Preferred Stock (of which no shares are outstanding), (B) 200,000 shares are
designated Class A Variable Rate Cumulative Convertible Preferred Stock (of
which no shares are outstanding), (C) 22,500 shares are designated Class B
Variable Rate Cumulative Convertible Preferred Stock (of which 7,500 shares are
outstanding), (D) 240,000 shares are designated as Class C Convertible
Cumulative Redeemable Preferred Stock (of which all 240,000 shares were
outstanding as of September 6, 1997), (E) 1,000 shares are designated as Series
D Convertible Preferred Stock (of which all 1,000 shares are outstanding) and
(F) 29,000 shares are designated as Series M Participating Convertible Preferred
Stock. All of the issued and outstanding shares of capital stock of the Company
have been validly issued, are fully paid and non-assessable and have been issued
pursuant to applicable exemptions from registration or qualification under
applicable federal and state securities laws and regulations.
(b) All of the issued and outstanding capital stock of each of
I-Link Systems, I-Link Communications and MiBridge is owned beneficially and of
record by the Company. All of the issued and outstanding membership interests of
Worldwide are owned beneficially and of record by the Company. All of the issued
and outstanding shares of capital stock of each of I-Link Systems, I-Link
Communications and MiBridge and all of the issued and outstanding membership
interests of Worldwide have been validly issued, are fully paid and
non-assessable and have been issued pursuant to applicable exemptions from
registration or
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qualification under applicable federal and state securities laws and
regulations.
(c) Except for the warrants and options listed on Schedule 2.4
attached hereto, no subscriptions, warrants, options, convertible debt,
participation rights or securities, or any commitments, agreements or rights of
any kind with respect to securities of the Company are outstanding as of the
date hereof or shall be outstanding as of the Closing Date. There are no
subscriptions, warrants, options, convertible debt, participation rights or
securities, or any commitments, agreements or rights of any kind with respect to
securities of any of I-Link Systems, I-Link Communications, MiBridge or
Worldwide outstanding.
Section 2.5 Litigation; Claims; Investigations. There is no action,
suit, proceeding or investigation pending or threatened against the Company or
any of its subsidiaries and there are no suits, actions or claims, or any
investigations or inquiries by any administrative agency or governmental body,
or legal, administrative or arbitration proceedings pending against or
threatened against the Company or any of its subsidiaries or affecting any of
the Company's or any of its subsidiaries' properties, rights, assets or
business, or to which the Company or any of its subsidiaries is a party or, in
the case of threatened proceedings, is reasonably likely to become a party. The
foregoing includes, without limitation, any action, suit, proceeding or
investigation pending or currently threatened involving the prior employment of
any of the Company's or any of its subsidiaries' employees, their use in
connection with the Company's or such subsidiary's business of any information
or techniques allegedly proprietary to any of their former employers, their
obligations under any agreements with prior employers, or negotiations by the
Company or any of its subsidiaries with potential backers of, or investors in,
the Company or its proposed business. There is no outstanding order, writ,
judgment, injunction or decree of any court, administrative agency, governmental
body or arbitration tribunal against or affecting the Company, any of its
subsidiaries or any of the properties, rights, assets or business of the Company
or any of its subsidiaries.
Section 2.6 Compliance. Neither the Company nor any of I-Link Systems,
I-Link Communications, MiBridge or Worldwide is in violation of or default under
any provision of its Articles of Incorporation or Bylaws or Subsidiary Operating
Agreement. Except as set forth on Schedule 2.6 attached hereto, neither the
Company nor any of its subsidiaries is in material violation of or default under
(i) any provision of any instrument, mortgage, deed of trust, loan, contract,
commitment, judgment, decree, order or obligation to which it is a party or by
which it or any of its properties or
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assets are bound or (ii) any provision of any federal, state or local law,
statute, rule, order or governmental regulation.
Section 2.7 Brokers. The Company does not have any contract,
arrangement or understanding with any broker, finder, investment or commercial
banker or similar agent with respect to the transactions contemplated by this
Agreement.
Section 2.8 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal or state governmental authority on the part of the
Company or any of its subsidiaries is required in connection with the offer,
sale or issuance of the Securities and the Underlying Shares, except for the
filing of the Amendments in the office of the Secretary of State of the State of
Florida, which shall be filed by the Company on or prior to the Closing.
Section 2.9 Employee Matters. Except as described on Schedule 2.9
attached hereto, neither the Company nor any of its subsidiaries is a party to
or bound by any employment contract, deferred compensation agreement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation or benefit agreement or arrangement, including without
limitation any multiemployer plan, and neither the Company nor any of its
subsidiaries is a party to any collective bargaining agreement or any
arrangement with any collective bargaining agent. No employees of the Company or
any of its subsidiaries are represented by any labor union or covered by any
collective bargaining agreement. There is no pending or, to the Company's
knowledge, threatened labor disagreement involving the Company or any of its
subsidiaries and any group of their employees.
Section 2.10 Offerees; Regulation D. Neither the Company, nor any of
its subsidiaries nor any of their respective directors, officers, affiliates or
any person or entity acting as agent for or on behalf of any of the foregoing,
directly or indirectly, has sold, offered for sale, or solicited offers to
purchase any of the Securities or other securities of the Company by means of
any general advertising or general solicitation so as to bring the offer,
issuance or sale of the Securities or the Underlying Shares contemplated by this
Agreement within the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or within the registration or qualification
requirements of any "blue sky" or securities laws of any state or other
jurisdiction. Assuming the accuracy of the representations and warranties of the
Investor set forth in Article 3 of this Agreement, the offer, sale and issuance
of the Securities and the Underlying Shares to the Investor in conformity with
the terms of this Agreement are exempt
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from the registration requirements of Section 5 of the Securities Act.
Section 2.11 Registration Rights. Except as provided in the
Registration Rights Agreement in the form attached hereto as Exhibit C (the
"Registration Rights Agreement"), which is to be executed and delivered by the
parties at the Closing, and except as set forth on Schedule 2.11 attached
hereto, the Company has not granted or agreed to grant any registration rights,
including piggyback rights, to any person or entity.
Section 2.12 Financial Statements. Attached hereto as Schedule 2.12 are
complete and correct copies of (i) audited consolidated financial statements of
the Company containing a balance sheet and a statement of income as at and for
the Company's fiscal year ending December 31, 1996 and (ii) an unaudited balance
sheet and statement of income of the Company as at and for the six-month period
ended June 30, 1997 (the items referred to in clauses (i) and (ii),
collectively, the "Financial Statements"). The Financial Statements have been
prepared from the books and records of the Company, have been prepared in
accordance with generally accepted accounting principles consistently applied
and maintained throughout the periods indicated, accurately reflect the books,
records and accounts of the Company, are complete and correct in all material
respects, and present fairly the financial condition of the Company and its
subsidiaries on a consolidated basis as at the respective dates and the results
of their operations for the periods then ended. None of the Financial Statements
understates the true costs and expenses of conducting the business or operations
of the Company and its subsidiaries, fails to disclose any material contingent
liabilities or inflates the revenues of the Company and its subsidiaries.
Section 2.13 Events Subsequent to the Date of the Financial Statements.
Except as set forth on Schedule 2.13 attached hereto, since the latest date of
the Financial Statements, neither the Company nor any of its subsidiaries has
(i) issued any stock, bond or other corporate security, (ii) borrowed any amount
or incurred or become subject to any liability (absolute, accrued or
contingent), except current liabilities incurred in the ordinary course of
business and liabilities under contracts entered into in the ordinary course of
business, (iii) discharged or satisfied any lien or encumbrances or incurred or
paid any obligation or liability (absolute, accrued or contingent) other than
current liabilities shown in the latest Financial Statements and current
liabilities incurred since the date of such Financial Statements in the ordinary
course of business, (iv) declared or made any payment or distribution to
shareholders or purchased or redeemed any share of its capital stock or other
security, (v) mortgaged, pledged or subjected to lien any of its assets,
tangible or intangible, (vi)
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sold, assigned or transferred any of its assets except in the ordinary course of
business, or cancelled any debt or claim, (vii) sold, assigned, transferred or
granted any license with respect to any patent, trademark, trade name, service
mark, copyright, trade secret or other intangible asset, (viii) suffered any
material loss of property or waived any right of substantial value whether or
not in the ordinary course of business, (ix) made any change in officer
compensation except in the ordinary course of business and consistent with past
practice, (x) made any material change in the manner of business or operations,
(xi) accelerated the payment terms of any note or account receivable or delayed
payment of any account payable or other liability beyond its due date, (xii)
instituted, amended or terminated any employee benefit plan, contract or written
agreement, (xiii) made any material change in the accounting policies applied in
the preparation of the Financial Statements, (xiv) entered into any material
transaction except in the ordinary course of business or as otherwise
contemplated hereby or (xv) entered into any commitment (contingent or
otherwise) to do any of the foregoing.
Section 2.14 Intellectual Property. Set forth on Schedule 2.14 attached
hereto is a list of all patents, pending patent applications, trademarks,
service marks, trade names, copyrights, licenses, computer codes or computer
software, proprietary rights, proprietary processes and other intellectual
property rights (collectively "Intellectual Property") owned by, or licensed to,
the Company or any of its subsidiaries, with an indication as to which of such
items are owned by the Company or any of its subsidiaries and which are licensed
to the Company or its subsidiaries. The Company's and its subsidiaries' legal
rights to such Intellectual Property is sufficient for their respective
businesses as now conducted and as presently proposed to be conducted. Except as
set forth on Schedule 2.14 attached hereto, neither the Company nor any of its
subsidiaries is infringing upon, or in conflict with, the right or claimed right
of any third party with respect to any of the Intellectual Property. Except for
the license agreements set forth in Schedule 2.14, neither the Company nor any
of its subsidiaries has licensed any of the listed Intellectual Property to any
other person or entity, nor does any other person or entity have any option or
other right to acquire any of the Intellectual Property which is owned by the
Company or any of its subsidiaries. Except as set forth on Schedule 2.14,
neither the Company nor any of its subsidiaries has received any communications
alleging that the Company or such subsidiary has violated or, by conducting its
business as proposed, would violate any patent, trademark, service mark, trade
name, copyright or trade secret or other proprietary right of any other person
or entity. The Company is not aware that any of its or its subsidiaries'
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or
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subject to any judgment, decree or order of any court or administrative agency,
that would interfere with the use of such employee's best efforts to promote the
interests of the Company or such subsidiary or that would conflict with the
Company's or such subsidiary's business as proposed to be conducted. Neither the
execution and delivery of this Agreement, nor the carrying on of the Company's
or any of its subsidiary's business by their respective employees, nor the
conduct of such business as presently proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. Except as set
forth on Schedule 2.14, the Company does not believe it is or will be necessary
to utilize any inventions of any of its or its subsidiaries' employees (or
people it currently intends to hire) made prior to their employment by the
Company or any subsidiary.
Section 2.15 Material Contracts. Schedule 2.15 lists each contract
relating to the Company or any of its subsidiaries that (a) represents a
contract upon which the Company or such subsidiary is substantially dependent or
which is otherwise material to the Company or such subsidiary, (b) provides for
borrowings or similar extensions of credit, (c) limits or restricts the ability
of the Company or such subsidiary to compete or otherwise to operate in any
manner or place, (d) provides for a guaranty or indemnity (other than customary
indemnities for infringement of Intellectual Property rights), (e) grants a
power of attorney, agency or similar authority to another person or entity, (f)
contains a right of first refusal with respect to the sale or acquisition of the
capital stock or assets of the Company or any of its subsidiaries, (g) contains
a right or obligation (other than in the ordinary course of business) of any
officer or director of the Company or any of its subsidiaries, or any of their
respective affiliates or associates, (h) is an employment or consulting
agreement to which the Company or any of its subsidiaries is a party, or (i) was
not made in the ordinary course of business (collectively, "Material
Contracts"). True copies of each Material Contract, including all amendments and
supplements thereto, have been made available to the Investor. Except as set
forth on Schedule 2.15, each Material Contract is valid and subsisting and no
breach or default, alleged breach or default, or event which would (with the
passage of time, notice or both) constitute a breach or default thereunder on
the part of the Company or any of its subsidiaries, or, to the knowledge of the
Company, on the part of any other party thereto, has occurred.
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Section 2.16 Title to and Sufficiency of Assets.
(a) Subject only to the encumbrances set forth in Schedule
2.16, the Company and each of its subsidiaries have good and marketable title
to, or ownership of, all of their respective assets. Such title or ownership is
sufficient for the Company and its subsidiaries to conduct their respective
businesses as currently conducted.
(b) The assets of the Company and its subsidiaries include all
properties (whether real or personal, tangible or intangible), Material
Contracts, licenses, permits, franchises and authorizations necessary for the
Company and its subsidiaries to continue to conduct their respective businesses
as currently conducted. All material tangible assets are in a reasonable state
of maintenance and repair (except for ordinary wear and tear) and are adequate
for the uses to which they are put. All assets constituting leasehold interests
are held under valid, binding and enforceable leases, subject only to the effect
of bankruptcy, insolvency or other similar laws affecting the enforcement rights
of creditors generally and such exceptions as are not, individually or in the
aggregate, material to the Company or any of its subsidiaries. There is no
pending or, to the knowledge of the Company, threatened action that would
materially interfere with the quiet enjoyment of any such leasehold by the
Company or any of its subsidiaries.
Section 2.17 Minute Books. Except as provided in Schedule 2.17 attached
hereto, the minute books of the Company and its subsidiaries (complete and
correct copies of which have been made available to the Investor) accurately
reflect all actions and proceedings taken to date by the shareholders, boards of
directors and committees of the Company and its subsidiaries, and such minute
books contain correct and complete copies of the charter documents of the
Company, its subsidiaries and all related amendments. The stock record books of
the Company and its subsidiaries (complete and correct copies of which have been
made available to the Investor) reflect accurately all transactions in their
respective capital stock of all classes.
Section 2.18 Insurance. Schedule 2.18 lists all insurance policies and
bonds that are material to the Company and its subsidiaries. All such insurance
policies and bonds are in full force and effect and, to the knowledge of the
Company, no defaults exist under any of them. In the past three years neither
the Company nor any of its subsidiaries has been refused insurance for which it
applied or had any policy of insurance terminated (except at its request).
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Schedule 2.19 Licenses, Permits and Authorizations. Schedule 2.19 attached
hereto is a list of all licenses, permits, franchises and authorizations issued
by a governmental entity to the Company or any of its subsidiaries and which are
required or necessary in connection with the operation of the Company's or such
subsidiary's business (the "Licenses"). All such Licenses are valid and are in
full force and effect, and no suspension, cancellation or termination of any of
the Licenses is pending or, to the knowledge of the Company, threatened.
Section 2.20 Environmental Laws. The Company, its subsidiaries, the
operation of their respective businesses and any real property that they own,
lease or otherwise occupy or use are in compliance in all material respects with
all applicable Environmental Laws and orders or directives of any governmental
authorities having jurisdiction under such Environmental Laws. Neither the
Company nor any of its subsidiaries has received any citation, directive or
notice of any proceedings, claims or other actions from any governmental
authority arising out of the ownership or occupation of its properties or
premises or the conduct of its respective operations, nor is it aware of any
basis therefor. No material expenditure on behalf of the Company or any of its
subsidiaries will be required in order to comply with any Environmental Law. As
used herein, "Environmental Laws" means any federal, state, municipal, local or
foreign law, statute, ordinance, code, rule or regulation pertaining to land
use, air, soil, surface water, groundwater (including protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, including, without limitation, the following
laws as the same may be amended from time to time: (i) Clean Air Act (42 U.S.C.
(S) 7401, et seq.), (ii) Clean Water Act (33 U.S.C. (S) 1251, et seq.), (iii)
Resource Conservation and Recovery Act (42 U.S.C. (S) 6901, et seq.), (iv)
Comprehensive Environmental Response Compensation Liability Act, as amended (42
U.S.C. (S) 9601, et seq.) ("CERCLA"), (v) Safe Drinking Water Act (42 U.S.C. (S)
300f, et seq.), (vi) Toxic Substance Control Act (15 U.S.C. (S) 2601, et seq.),
(vii) Rivers and Harbors Act (33 U.S.C. (S) 401, et seq.), (viii) Endangered
Species Act (16 U.S.C. (S) 1531, et seq.), and (ix) Occupational Safety and
Health Act (29 U.S.C. (S) 651, et seq.), together with any other applicable
federal, state or local laws relating to emissions, discharges, releases or
threatened releases of any Hazardous Substance (as defined herein) into ambient
air, land, surface water, ground water, personal property or structures, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, discharge or handling of any Hazardous Substance.
As used herein, "Hazardous Substances" means any pollutant, contaminant,
hazardous or toxic substance, material, constituent or waste or any pollutant
that is labeled or regulated
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as such terms are defined in any Environmental Law or that is labeled or
regulated as such by (i) The United States of America, (ii) any state,
commonwealth, territory or possession of the United States of America and (iii)
any political subdivision thereof (including counties, municipalities and the
like) or any agency, authority or instrumentality of any of the foregoing,
including any court, tribunal, department, bureau, commission or board,
including, without limitation, asbestos and asbestos-containing materials and
any material or substance that is: (i) designated as a "hazardous substance"
pursuant to Section 307 of the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, et seq. (33 U.S.C. (S) 1317), (ii) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Solid Waste Disposal Act, 42 U.S.C.
Section 6901, et seq. (42 U.S.C. (S) 6903), (iii) defined as a "hazardous
substance" pursuant to Section 101 of CERCLA or (iv) is so designated or defined
under any other applicable Environmental Law.
Section 2.21 Taxes. The Company and its subsidiaries have accurately
prepared and filed all federal, state, local and foreign tax returns required to
be filed by them. All taxes shown to be due and payable on such returns, any
assessment received, and all other taxes due and payable by the Company or any
of its subsidiaries have been paid or will be paid prior to the time they become
delinquent. The federal income tax returns of the Company and its subsidiaries
have never been audited by the Internal Revenue Service. Except as specified in
Schedule 2.21, no deficiency assessment or proposed adjustment of the Company's
or any of its subsidiaries' income taxes is pending by any federal, state, local
or foreign taxation authority, and the Company has no knowledge of any proposed
liability for any tax to be imposed upon its or any of its subsidiaries'
properties for which the Company has not established adequate reserves which are
reflected on the Financial Statements.
Section 2.22 Conflicts of Interest. Except as specified in Schedule 2.22,
no director, officer or any affiliate thereof (as such term is defined in Rule
405 under the Securities Act) of any such person or, to the best of the
Company's knowledge, any shareholder of the Company or its affiliates has any
direct or indirect interest (i) in any entity which does business with the
Company or any of its subsidiaries, or (ii) in any property, asset or right
which is used by the Company or any of its subsidiaries in the conduct of their
respective businesses, or (iii) in any contractual relationship with the Company
or any of its subsidiaries other than as an employee. For the purpose of this
Section 2.22, there shall be disregarded any interest which arises solely from
the ownership of less than a 1% equity interest in a corporation whose stock is
regularly traded on any national securities exchange or in the over-the-counter
market.
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Section 2.23 Retirement Plans. Except as set forth on Schedule 2.23
attached hereto, neither the Company nor any of its subsidiaries has any
retirement plans in which any of their employees participate that are subject to
any provisions of the Employee Retirement Income Security Act of 1974 and of the
regulations adopted pursuant thereto ("ERISA").
Section 2.24 Disclosure. No representation or warranty made by the Company
contained in this Agreement or in any other Transaction Document or in any
certificate or instrument furnished or to be furnished pursuant hereto contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact known to the Company required to make the statements
herein or therein contained not misleading. The Company is not aware of any
impending or contemplated event or occurrence that would cause any of the
foregoing representations not to be true and complete on the date of such event
or occurrence as if made on that date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company as follows:
Section 3.1 Unregistered Securities. The Investor understands that the
Securities are not, and the Underlying Shares may not be, registered under the
Securities Act or under the Florida Securities and Investor Protection Act (the
"Florida Securities Laws") on the ground that the offer and sale of securities
provided for in this Agreement are exempt from (i) the registration requirements
of the Securities Act pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder, and (ii) the registration requirements of
the Florida Securities Law pursuant to Section 517.061 thereunder. The Investor
hereby acknowledges that the Company's reliance on such exemptions is based, in
part, on the Investor's representations set forth herein.
Section 3.2 Authorization. The Investor has the limited liability company
power and authority to enter into and perform this Agreement and to purchase the
Securities; and this Agreement has been duly authorized, executed and delivered
by the Investor and constitutes the legal, valid and binding obligation of the
Investor, enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except
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as the availability of equitable remedies may be limited by general principles
of equity.
Section 3.3 No Conflict With Other Agreements. The execution, delivery and
performance by the Investor of this Agreement will not (with due notice or lapse
of time or both) violate any provision of law, rule or regulation, any order of
any court or other agency of government, its operating agreement or any
provision of any indenture, mortgage, note, deed of trust, agreement or other
instrument to which it is bound, or conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any such
indenture, mortgage, note, deed of trust, agreement or other instrument, if such
violation could have a material adverse effect upon its ability to perform its
obligations hereunder.
Section 3.4 Investment Knowledge. The Investor has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the risks and merits of its investment in the Company; and it is capable of
bearing the economic risks of such investment, including a complete loss of its
investment.
Section 3.5 Distribution. The Securities are being acquired for the
Investor's own account for the purpose of investment and not with a view to or
for resale in connection with any distribution or public offering thereof or
interest therein.
ARTICLE 4
CONDITIONS PRECEDENT TO CLOSING
Section 4.1 Conditions Precedent to the Closing. The obligation of the
Investor to purchase the Securities is subject to the satisfaction of, or the
waiver by, the Investor of the following conditions prior to or
contemporaneously with the Closing, unless otherwise indicated:
(a) The representations and warranties of the Company
contained in this Agreement and in each other Transaction Document shall be true
and correct at and as of the Closing Date with the same force and effect as if
given as of such date, and the Company shall have complied with the covenants,
agreements and obligations set forth in this Agreement and each other
Transaction Document required to be performed by it at or prior to the Closing;
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(b) The President of the Company shall have delivered to the
Investor at the Closing a certificate stating that the conditions specified in
paragraph (a) above been fulfilled;
(c) There shall not be any order, decree, injunction or
judgment enjoining the consummation of this Agreement;
(d) The Company shall have delivered to the Investor the
certificates described in Section 1.2(b) hereof;
(e) The Company shall have entered into the Registration
Rights Agreement in the form attached hereto as Exhibit C (the "Registration
Rights Agreement");
(f) The Company and each of the other parties identified
therein as signatories shall have entered into the Shareholders Agreement in the
form attached hereto as Exhibit D (the Shareholders Agreement");
(g) The Company shall have entered into the Warrant Agreement
in the form attached hereto as Exhibit F;
(h) The Company shall have delivered to the Investor the
opinions of Hardy and Allen, counsel for the Company, and of Rutledge, Ecenia,
Underwood, Purnell & Hoffman, Florida counsel for the Company, in each case
dated as of the Closing Date, in the forms attached hereto as Exhibits E-1 and
E-2;
(i) The Company shall have delivered to the Investor a copy of
the Series M Amendment, certified by the Secretary of State of the State of
Florida;
(j) The Company shall have received, and shall have delivered
copies thereof to the Investor, all shareholder, regulatory, governmental, third
party and other consents, permits and waivers necessary to consummate the
transactions contemplated by this Agreement, and the Company shall have
received, and shall have delivered copies thereof to the Investor, agreements
from shareholders holding at least 51% of the outstanding shares of Common Stock
to vote all of their shares of Common Stock in favor of the Authorized Shares
Amendment;
(k) All corporate and other proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions shall have been approved by the Investor, and the Investor
shall have received a certificate of the Secretary of the Company as to the
resolutions authorizing the transactions contemplated by this Agreement and such
other documents as are specified by the Investor;
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(l) Complete and correct copies of each written employment
agreement which the Company or any of its subsidiaries has entered into with any
of their respective employees shall have been provided to the Investor and each
such agreement shall be acceptable to the Investor in form and substance;
(m) Between the date of this Agreement and the Closing Date,
there shall have been no Material Adverse Effect; and
(n) The Company shall have delivered or caused to be delivered
to the Investor such additional instruments, documents, opinions, consents and
certificates as the Investor may reasonably request.
Section 4.2 Conditions Precedent to Obligations of the Company. The
obligation of the Company to issue and sell the Securities to the Investor
pursuant to this Agreement is subject to the satisfaction of or the waiver by
the Company of the condition that contemporaneously with the Closing the
representations and warranties made by the Investor in this Agreement shall be
true and correct as of the Closing as if made at and as of the Closing Date, and
the Investor shall have complied in all respects with all agreements hereunder
required to be performed by it at or prior to such Closing. If requested by the
Company, the Investor shall have delivered to the Company at the Closing a
certificate to the effect that the foregoing conditions have been satisfied in
all respects.
ARTICLE 5
ADDITIONAL COVENANTS
Section 5.1 Conduct of Business Prior to Closing. During the period from
the date of this Agreement to the Closing, except as expressly permitted by this
Agreement or as otherwise approved in writing by the Investor, the Company will
not enter into any agreement or take any action that is in conflict with the
terms of this Agreement. During the period from the date of this Agreement to
the Closing, the Company shall notify the Investor of any action it desires to
take or any transaction it desires to enter into which, pursuant to the terms of
the Shareholders Agreement, would require the consent of the Investor, if the
Shareholders Agreement were then in effect, and during such period, the Company
will not take such action or enter into such transaction without the prior
written consent of the Investor.
Section 5.2 Access to Information. From the date hereof until the Closing,
upon reasonable notice, the Company shall, and shall cause each of its officers,
directors, employees, auditors and agents to, (i) afford the officers, employees
and authorized
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agents and representatives of the Investor reasonable access, during normal
business hours, to the offices, properties, books and records of the Company and
(ii) furnish to the officers, employees and authorized agents and
representatives of the Investor such additional financial and operating data and
other information regarding the assets, properties, goodwill and business of the
Company and its subsidiaries as the Investor may from time to time reasonably
request, including, without limitation, monthly financial statements and
operating reports for the Company and its subsidiaries prepared in a manner
consistent with such financial statements and operating reports as have been
previously furnished to the Investor, copies of which financial statements and
operating reports shall be delivered by the Company to the Investor each month
as soon as they become available.
Section 5.3 Further Action. Each of the parties hereto shall cooperate
fully with each other and their respective counsel and other representatives in
connection with any action required to be taken as part of their respective
obligations under this Agreement or as may otherwise be required to consummate
the transactions contemplated hereby. Each of the parties shall use reasonable
efforts to consummate the transactions contemplated hereby, and shall execute
and deliver such documents and other papers and take such further actions as may
be reasonably required, or as may be reasonably requested by the other party, in
any case whether before or after the Closing, to carry out the provisions hereof
and give effect to the transactions contemplated hereby. Neither of the parties
shall take any action that is inconsistent with its obligations under the
Agreement.
Section 5.4 Key Man Life Insurance. By no later than December 1, 1997, the
Company shall acquire key man life insurance policies on the lives of John
Edwards, Steve Campbell and Dror Nahumi in such amounts as the Investor may deem
reasonable.
ARTICLE 6
CONVERSION OF PREFERRED SHARES AND EXERCISE OF WARRANTS
Section 6.1 Conversion of Preferred Shares. The Investor may, at its
option, at any time and from time to time, convert all or any portion of the
Purchased Shares into Common Stock at the rate and upon the terms and conditions
and subject to the adjustments set forth in the Series M Amendment.
Section 6.2 Exercise of Warrants. The Investor may, at its option, exercise
any Warrant, or any portion thereof, in exchange for Common Stock at the rate
and upon the terms and conditions set forth in the Warrant Agreement.
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Section 6.3 Underlying Shares Fully Paid; Reservation of Common Stock.
The Company covenants and agrees that all Underlying Shares shall be issued upon
the exercise of the conversion privilege referred to in Section 6.1 and the
right of exercise referred to in Section 6.2 and shall, upon issuance in
accordance with the terms of the Company's Articles of Incorporation, as
amended, and the Warrant Agreement, respectively, be fully paid and non-
assessable, and that the issuance thereof shall not give rise to any preemptive
rights on the part of any person. The Company further covenants and agrees that
the Company will at all times from and after a date no later than thirty days
after the Closing have authorized and reserved a sufficient number of shares of
its Common Stock for the purpose of issuing the Underlying Shares.
Section 6.4 Adjustment of Number of Shares. The number of shares of
Common Stock issuable upon conversion of Series M Preferred as well as the
number of shares of Common Stock issuable upon exercise of any Warrant (and the
exercise price payable in connection with such exercise) shall be subject to
adjustment from time to time as set forth in the Series M Amendment and in the
Warrant Agreement.
ARTICLE 7
TERMINATION
Section 7.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing:
(i) by the mutual written consent of the Company and the
Investor;
(ii) by either party hereto, if the Closing has not occurred
prior to December 31, 1997; provided, however, that the right to terminate this
Agreement under this Section 7.1(a)(ii) shall not be available to a party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
has resulted in, the failure of the Closing to occur prior to such date;
(iii) by the Investor, by notice given to the Company if the
Company shall breach or fail to comply with any of its representations,
warranties, covenants or agreements contained in this Agreement, or any such
representation or warranty shall have become untrue, in any such case such that
the conditions precedent to the Investor's obligation to close specified in
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Section 4.2 will not be satisfied, and such breach has not been promptly cured
within ten days following receipt by the Company of notice of such breach;
provided, however, the Investor's right to terminate under this provision shall
not be available if the Investor shall then be in material breach or material
noncompliance with any of its representations, warranties, covenants or
agreements contained in this Agreement; and
(iv) by the Company, by notice given to the Investor if the
Investor shall breach or fail to comply with any of its representations,
warranties, covenants or agreements contained in this Agreement, or any such
representation or warranty shall have become untrue, in any such case such that
the conditions precedent to the Company's obligation to close specified in
Section 4.1 will not be satisfied, and such breach has not been promptly cured
within ten days following receipt by the Investor of notice of such breach;
provided, however, the Company's right to terminate under this provision shall
not be available if the Company shall then be in material breach or material
noncompliance with any of its representations, warranties, covenants or
agreements contained in this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Section 7, in the event this Agreement is terminated pursuant to
Section 7.1(a)(iii) or 7.1(a)(iv), then the Company or the Investor, as
appropriate, shall have the right to seek all appropriate legal and equitable
remedies available to it.
Section 7.2 Procedure and Effect of Termination or Failure to Close.
(a) In the event of termination of this Agreement and abandonment of
the transactions contemplated hereby by either party pursuant to Section 7.1,
prompt written notice thereof shall be given to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by either party hereto. If this Agreement is
terminated as permitted herein:
(i) neither of the parties hereto or their affiliates, nor
any of such parties' or their affiliates' directors, officers, shareholders,
employees or agents, shall have any liability or further obligation to the other
party or its affiliates, or to any of such party's or its affiliates' directors,
officers, shareholders, employees or agents, pursuant to this Agreement, except
as stated in Sections 7.1(b) and 8.2 hereof; and
(ii) all filings, applications and other submissions relating
to the transactions contemplated hereby shall,
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to the extent practicable, be withdrawn from the agency or other person to which
made.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to this Agreement,
including the determination of the scope or applicability of this Agreement to
arbitrate, shall be settled by final and binding arbitration in accordance with
the rules then in effect of the American Arbitration Association ("AAA"), as
modified or supplemented under this section, and subject to the Federal
Arbitration Act, 9 U.S.C. (S)1-16. The decision of the arbitrators shall be
final and binding; provided, however, that where a remedy for breach is
prescribed hereunder or limitations on remedies are prescribed, the arbitrators
shall be bound by such restrictions, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
If any series of claims arising out of the same or related transactions
shall involve claims which are arbitrable under the preceding paragraph and
claims which are not, the arbitrable claims shall first be finally determined
before suit may be instituted upon the others and the parties will take such
action as may be necessary to toll any statutes of limitations, or defenses
based upon the passage of time, that are applicable to such non-arbitrable
claims during the period in which the arbitrable claims are being determined.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section 8.1, any party thereto may commence arbitration
hereunder by delivering notice to the other party or parties thereto. Within
five business days of delivery of a list of qualified potential arbitrators from
AAA, such parties shall attempt to agree on one arbitrator; provided that if
such parties cannot agree on one arbitrator within such time period, each party
to the controversy, claim or dispute shall within five business days thereafter
appoint one arbitrator, and the two arbitrators so appointed shall within five
business days of their appointment mutually agree upon and appoint one
additional arbitrator (or, if such arbitrators cannot agree on an additional
arbitrator, the additional arbitrator shall be appointed by the AAA as provided
under its rules); provided that persons eligible to be selected as arbitrators
shall be limited to attorneys at law who (i) are on the AAA's Large, Complex
Case Panel, (ii) have practiced law for at least fifteen years as an attorney
specializing in
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either general commercial litigation or general corporate and commercial matters
and (iii) are experienced in matters involving the telecommunications industry.
The arbitration hearing shall commence no later than thirty business days
after the completion of the selection of the arbitrators or at such other time
as the parties shall reasonably agree. Consistent with the intent of the parties
hereto that the arbitration be conducted as expeditiously as possible, the
parties agree that (i) discovery shall be limited to the production of such
documents and the taking of such depositions as the arbitrator(s) determine are
reasonably necessary to the resolution of the controversy, claim or dispute and
(ii) the arbitrator(s) shall limit the presentation of evidence by each side in
such arbitration to not more than ten full days (or the equivalent thereof) or
such shorter period as the arbitrator(s) shall determine to be necessary in
order to resolve the controversy, claim or dispute. The arbitrator(s) shall be
instructed to render a decision within thirty calendar days of the close of the
arbitration hearing. If arbitration has not been completed within one hundred
and twenty days of the commencement of such arbitration hearing, any party to
the arbitration may initiate litigation upon ten days written notice to the
other party(ies); provided, however, that if one party has requested the other
to participate in an arbitration and the other has failed to participate, the
requesting party may initiate litigation before the expiration of such one
hundred twenty-day period; and provided, further, that if any party to the
arbitration fails to meet any of the time limits set forth in this Section 8.1
or set by the arbitrators in the arbitration, any other party may provide ten
days written notice of its intent to institute litigation with respect to the
controversy, claim or dispute without the need to continue or complete the
arbitration and without awaiting the expiration of such one hundred twenty-day
period. The parties hereto further agree that if any of the rules of the AAA are
contrary to or conflict with any of the time periods provided for hereunder, or
with any other aspect of the matters set forth in this Section 8.1, that such
rules shall be modified in all respects necessary to accord with the provisions
of this Section 8.1 (and the arbitrators shall be so instructed by the parties).
The arbitrators shall base their decision on the terms of this Agreement
and the law of the State of Delaware, regardless of the law that might be
applicable under conflicts of law principles, and shall render their decision in
writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrator(s) shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Washington, D.C.
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Section 8.2 Expenses. The Company shall pay all expenses of the Investor,
including but not limited to travel, legal and accounting fees and expenses,
incurred in connection with the transactions contemplated under this Agreement.
Section 8.3 Survival of Agreements. All covenants, agreements,
representations, and warranties made herein shall survive the execution and
delivery hereof and remain in full force and effect, notwithstanding any
investigation made at any time by or on behalf of any party hereto.
Section 8.4 Parties in Interest. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
permitted assigns of the parties hereto, whether so expressed or not.
Section 8.5 Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed effectively
given and received upon delivery in person, or one business day after delivery
by national overnight courier service, or by telecopier transmission with
acknowledgment of transmission receipt, or three business days after deposit via
certified or registered mail, return receipt requested, in each case addressed
as follows:
(a) if to the Company, at
Medcross, Inc.
13751 South Wadsworth Park Drive
Suite 200
Draper, Utah 84020
Attention: John W. Edwards, President
Telecopier: 801-576-5075
with copy to:
David E. Hardy, Esq.
60 E. South Temple
Suite 2200
Salt Lake City, Utah 84111
Telecopier: (801) 364-6664
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(b) if to the Investor, at
Winter Harbor, L.L.C.
c/o First Media, L.P.
11400 Skipwith Lane
Potomac, Maryland 20854
Attention: Ralph W. Hardy, Jr.
Telecopier: (301) 983-2425
with copy to:
Ralph W. Hardy, Jr., Esq.
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Telecopier: (202) 776-2222
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Section 8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF DELAWARE WITHOUT
REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.
Section 8.7 Entire Agreement. This Agreement, including the Schedules
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
Section 8.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.9 No Waivers; Amendments.
(a) No failure or delay on the part of any party in exercising any
right, power or remedy hereunder shall operate as a waiver of thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to any party at law or in equity or
otherwise.
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(b) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Company and
the Investor.
Section 8.10 Severability. If any provision of this Agreement shall be
declared void or unenforceable by a judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 8.11 Gender. All pronouns and all variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the identity of the person or persons, thing or entity may require.
Section 8.12 Headings. The Section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the day and year first above written.
MEDCROSS, INC.
By: /s/ John W. Edwards
John W. Edwards, President
WINTER HARBOR, L.L.C.
By: First Media, L.P., its General Manager/Member
By: First Media Corporation, its sole General
Partner
By: /s/ Ralph W. Hardy, Jr.
Name: Ralph W. Hardy, Jr.
Title: Secretary
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A - Series M Amendment
Exhibit B - Authorized Shares Amendment
Exhibit C - Registration Rights Agreement
Exhibit D - Shareholders Agreement
Exhibit E-1 - Form of Opinion of Counsel to the Company
Exhibit E-2 - Form of Opinion of Florida Counsel to the Company
Exhibit F - Warrant Agreement
SCHEDULES
Schedule 2.2 - Authorization of Agreements
Schedule 2.4 - Outstanding Options and Warrants
Schedule 2.6 - Default Under Other Instruments
Schedule 2.9 - Employee Matters
Schedule 2.11 - Existing Registration Rights
Schedule 2.12 - Financial Statements
Schedule 2.13 - Subsequent Events
Schedule 2.14 - Intellectual Property
Schedule 2.15 - Material Contracts
Schedule 2.16 - Title to and Sufficiency of Assets
Schedule 2.17 - Minute Books
Schedule 2.18 - Insurance
Schedule 2.19 - License, Permits and Authorizations
Schedule 2.21 - Tax Matters
Schedule 2.22 - Conflicts of Interest
Schedule 2.23 - Retirement Plans
<PAGE>
Exhibit 4(v)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
October __, 1997, by and between I-LINK INCORPORATED (formerly known as
Medcross, Inc.), a Florida corporation (the "Company"), and WINTER HARBOR,
L.L.C., a Delaware limited liability company (the "Investor").
WHEREAS, the Company has entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement"), dated as of September 30, 1997, together with
the Investor, pursuant to which the Company is issuing and selling to the
Investor shares of the Company's Series M Participating Convertible Preferred
Stock (the "Series M Preferred") and warrants to acquire shares of the Company's
Common Stock; and
WHEREAS, the Company has agreed to grant certain rights with respect to shares
of the Series M Preferred (and the Common Stock issuable upon conversion
thereof) and shares of Common Stock issuable upon exercise of the warrants
issued to the Investor pursuant to the Securities Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.2 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the Commission's declaration or ordering
of the effectiveness of such registration statement.
1.3 "Registrable Securities" means any and all shares of (i) the Company's
Series M Preferred issued to the Investor under the Securities Purchase
Agreement, (ii) Common Stock of the Company, issued or issuable upon conversion
of the Series M Preferred, (iii)
<PAGE>
Common Stock of the Company issued or issuable upon exercise of Warrants issued
to the Investor under the Securities Purchase Agreement, and (iv) any securities
of the Company issued or issuable with respect to any securities referred to in
clauses (i), (ii) and (iii) above, upon any stock split, stock dividend,
reclassification, recapitalization or similar event, but excluding from the
foregoing clauses (i), (ii) and (iii) shares that (A) have been sold to or
through a broker, dealer or underwriter in a public distribution or a public
securities transaction, or (B) are then eligible to be sold without limitation,
pursuant to Rule 144(k) promulgated under the Securities Act (or any similar
successor provision thereto), and the holder of such shares is not then an
"affiliate" of the Company within the meaning of such Rule 144(k) (and has not
been such an affiliate for the preceding three months); to the extent that such
holder is an "affiliate" of the Company within the meaning of Rule 144, such
that such holder's shares of underlying Common Stock are not eligible to be sold
pursuant to Rule 144(k) without limitation, such shares of underlying Common
Stock shall remain Registrable Securities.
1.4 "Registration Expenses" shall mean all expenses, except Selling
Expenses, incurred by the Company in complying with Articles 2, 3 and 4 hereof
and in effecting any registration described therein, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of legal counsel and accountants for the
Company, fees and disbursements of one legal counsel for the selling
shareholders, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
1.5 "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1.6 "Selling Expenses" shall mean all underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to the Registrable
Securities registered by the Investor.
ARTICLE 2
REQUESTED REGISTRATION
2.1 Request for Registration. The Investor may request, in writing, that
the Company effect a registration or qualification with respect to all or part
of the Registrable Securities. In the event the Company shall receive from the
Investor such a written request, the Company will:
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(a) use its best efforts to effect such registration or qualification
as soon as practicable (including, without limitation, undertaking to file post-
effective amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and undertaking to effect appropriate compliance
with applicable regulations issued under the Securities Act, and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request; provided, however, that
the Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Article 2:
(i) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(ii) After the Company has effected three such requested
registrations pursuant to this Article 2 (not including registrations on Form
S-3), each such registration has been declared or ordered effective, and the
securities offered pursuant to each such registration have been sold; or
(iii) If the Company then meets the eligibility requirements
applicable to the use of Form S-3 in connection with such registration and is
able to effect such requested registration pursuant to Article 4 hereof.
(b) Subject to the foregoing clauses (i) through (iii), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
of the Investor; provided, however, that if the Company shall furnish to the
Investor a certificate signed by the chief executive officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed as a result of a pending corporate
transaction, the Company shall have the right to defer such filing for a period
of not more than 90 days after receipt of the request of the Investor, provided,
however, that the Company shall not be permitted to exercise such deferral right
under this Section 2.1(b) or Section 4.1(c) hereof more than once in any 365-day
period.
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<PAGE>
2.2 Underwriting.
(a) The distribution of the Registrable Securities covered by the
request of the Investor may, at the option of the Investor, be effected by means
of an underwritten offering.
(b) If the Investor elects to sell Registrable Securities pursuant to
an underwritten offering, the Company and the Investor shall enter into an
underwriting agreement in customary form with a managing underwriter of
nationally recognized standing selected for such underwriting by the Investor,
subject to the approval of the Company, which will not be unreasonably withheld
or delayed. Notwithstanding any other provision of this Article 2, if the
managing underwriter advises the Investor in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
underwriters may exclude shares requested to be included in such registration;
provided, however, that the Investor shall have first claim on the number of
shares of Registrable Securities that may be included in the registration. No
Registrable Securities excluded from the underwriting by reason of the managing
underwriter's marketing limitation shall be included in such registration.
(c) If the Investor disapproves of the terms of the underwriting, the
Investor may elect to withdraw therefrom by written notice to the Company and
the managing underwriter. The Registrable Securities so withdrawn shall also be
withdrawn from registration.
2.3 Inclusion of Shares by Company. If the managing underwriter for an
underwritten offering has not limited the number of Registrable Securities to be
underwritten, the Company may include securities for its own account or for the
account of others in such registration if the managing underwriter so agrees and
if the number of Registrable Securities held by the Investor which would
otherwise have been included in such registration and underwriting will not
thereby be limited. The inclusion of such shares shall be on the same terms as
the registration of shares held by the Investor. In the event that the
underwriters exclude some of the securities to be registered, the securities to
be sold for the account of the Company and any other holders shall be excluded
in their entirety prior to the exclusion of any Registrable Securities held by
the Investor.
ARTICLE 3
COMPANY REGISTRATION
3.1 Notice of Registration to the Investor. If at any time or from time to
time the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans on Form S-8 (or any
successor
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<PAGE>
form), or (ii) a registration relating solely to a Commission Rule 145
transaction on Form S-4 (or any successor form), the Company will:
(a) promptly give to the Investor written notice thereof; and
(b) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
within 15 days after receipt by the Investor of such written notice from the
Company described in Section 3.1(a).
3.2 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Investor as a part of the written notice given pursuant to Section
3.1(a). In such event, the right of the Investor to registration pursuant to
this Article 3 shall be conditioned upon the Investor's participation in such
underwriting and the inclusion of the Investor's Registrable Securities in the
underwriting to the extent provided herein. If the Investor proposes to
distribute its securities through such underwriting, it shall (together with the
Company) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
(a) Notwithstanding any other provision of this Article 3, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may exclude some or all
Registrable Securities from such registration and underwriting. The Company
shall so advise the Investor, and the number of shares of Common Stock to be
included in such registration shall be allocated as follows: first, for the
account of the Company, all shares of Common Stock proposed to be sold by the
Company; second, for the account of the Investor participating in such
registration, the number of shares of Common Stock requested to be included in
the registration by the Investor at the time of filing the registration
statement, and third, for the account of any other shareholders of the Company
participating in such registration, the number of shares of Common Stock
requested to be included in the registration by such other shareholders in
proportion, as nearly as practicable, to the respective amounts of Common Stock
that are proposed to be offered and sold by such other shareholders of Common
Stock at the time of filing the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriters'
marketing limitation shall be included in such registration.
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(b) The Company shall advise the Investor of any such limitation and
of the number of shares of Registrable Securities held by the Investor that may
be included in the registration and underwriting at the time of filing the
registration statement. If the Investor disapproves of the terms of any such
underwriting, the Investor may elect to withdraw therefrom by written notice to
the Company and the managing underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
(c) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Article 3 prior to the effectiveness of
such registration, whether or not the Investor has elected to include securities
in such registration.
ARTICLE 4
REGISTRATION ON FORM S-3
4.1 Request for Registration.
(a) In addition to the rights set forth in Articles 2 and 3 hereof,
if the Investor requests that the Company file a registration statement on Form
S-3 (or any successor to Form S-3) for a public offering of shares of
Registrable Securities in which the reasonably anticipated aggregate price to
the public, net of underwriting discounts and fees, would exceed $500,000 and
the Company is a registrant entitled to use Form S-3 (or any successor form to
Form S-3) to register such shares for such an offering, the Company shall use
its best efforts to cause such shares to be registered for the offering as soon
as practicable on Form S-3 (or any such successor form to Form S-3).
(b) Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Article 4:
(i) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
(ii) more than once in any twelve-month period.
(c) Subject to the foregoing clauses (i) and (ii), the Company shall
file a registration statement on Form S-3 covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
of the Investor; provided, however, that if the Company shall furnish to the
Investor a
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certificate signed by the chief executive officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders, as the result of a
pending corporate transaction, for such registration statement to be filed on or
before the date filing would be required, and it is therefore essential to defer
the filing of such registration statement, the Company shall have the right to
defer such filing for a period of not more than 90 days after receipt of the
request of the Investor (provided, however, that the Company shall not be
permitted to exercise such deferral right under this Section 4.1(c) or Section
2.1(b) hereof more than once in any 365-day period).
4.2 Underwriting.
(a) The distribution of the Registrable Securities covered by the
registration on Form S-3 shall be effected by means of the method of
distribution selected by the Investor. If such distribution is effected by means
of an underwriting, the right of the Investor to registration pursuant to this
Article 4 shall be conditioned upon the Investor's participation in such
underwriting, if any, and the inclusion of the Investor's Registrable Securities
in such underwriting.
(b) If the distribution of the Registrable Securities pursuant to
this Section 4.2 is effected by means of an underwriting, the Company and the
Investor shall enter into an underwriting agreement in customary form with a
managing underwriter of nationally recognized standing selected for such
underwriting by the Investor. Notwithstanding any other provision of this
Article 4, if the managing underwriter advises the Investor in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the underwriters may exclude some or all of the shares
requested to be included in such registration, provided, however, that the
Investor shall have first claim on the number of shares of Registrable
Securities that may be included in the registration. No Registrable Securities
excluded from the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such registration. No Registrable Securities
excluded from the underwriting by reason of the managing underwriter's marketing
limitation shall be included in such registration.
(c) If the distribution of the Registrable Securities pursuant to
this Section 4.2 is effected by means of an underwriting and if the Investor
disapproves of the terms of the underwriting, the Investor may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.
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<PAGE>
4.3 Inclusion of Shares by Company. If the distribution of the Registrable
Securities pursuant to this Article 4 is effected by means of an underwriting
and if the managing underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account or for the account of others in such registration if the managing
underwriter so agrees and if the number of Registrable Securities held by the
Investor requesting registration on Form S-3 which would otherwise have been
included in such registration and underwriting will not thereby be limited. The
inclusion of such shares shall be on the same terms as the registration of
shares held by the Investor requesting such registration. In the event that the
underwriters exclude some of the securities to be registered on Form S-3, the
securities to be sold for the account of the Company and any other holders shall
be excluded in their entirety prior to the exclusion of any Registrable
Securities held by the Investor.
ARTICLE 5
EXPENSES OF REGISTRATION
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Articles 2, 3 or 4 shall be borne by the
Company. Selling Expenses attributable to the sale of Registrable Securities by
the Investor shall be borne by the Investor.
ARTICLE 6
REGISTRATION PROCEDURES
In the case of each registration or qualification effected by the Company
pursuant to this Agreement, the Company will keep the Investor advised in
writing as to the initiation of each registration and qualification and as to
the completion thereof. At its expense, the Company will:
(a) Keep such registration or qualification effective and current for
a period of 180 days (or such longer period as may be necessary to accommodate
the filing of amendments or supplements necessary to comply with the Securities
Act) or until the Investor has completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) Furnish such number of prospectuses and other documents incident
thereto as the Investor from time to time may reasonably request;
(c) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be
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<PAGE>
reasonably requested by the Investor or any managing underwriter for the
distribution of the Registrable Securities covered by the registration
statement; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdiction;
(d) Use its best efforts to cause all Registrable Securities covered by
the registration statement to be listed or accepted for quotation on a national
securities exchange or automated quotation system;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. The Investor participating
in such underwriting shall also enter into and perform its obligations under
such an agreement;
(f) Subject to receiving reasonable assurances of confidentiality, for a
reasonable period after the filing of such registration statement, and
throughout each period during which the Company is required to keep a
registration effective, make available for inspection by the Investor, and any
underwriters, and their respective counsel, such financial and other information
and books and records of the Company, and cause the officers, directors,
employees, counsel and independent certified public accountants of the Company
to respond to such inquiries as shall be reasonably necessary, in the judgment
of such counsel, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act;
(g) Notify the Investor, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Securities Act, of the occurrence of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(h) Promptly notify the Investor and any underwriters, and confirm such
advice in writing, (i) when such registration statement or the prospectus
included therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such registration statement or
any post-effective amendment, when the same has become effective, (ii) of any
comments by the Commission, by the National Association of Securities Dealers
Inc. ("NASD"), and by the blue sky or securities commissioner or regulator of
any state with respect thereto or any
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request by any such entity for amendments or supplements to such registration
statement or prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of such
registration statement or the initiation or threatening of any proceedings for
that purpose, (iv) if at any time the representations and warranties of the
Company cease to be true and correct in all material respects, and (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities covered by the registration
statement for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose.
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ARTICLE 7
INDEMNIFICATION
7.1 The Company will indemnify the Investor, each of its officers,
directors, members, partners, shareholders, employees and agents, and each
person controlling any such persons within the meaning of Section 15 of the
Securities Act, with respect to which registration or qualification has been
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereof, incident to any such
registration or qualification, or (ii) any omission (or alleged omission) to
state therein, a material fact required to be stated therein or necessary to
make the statements therein, not misleading, or (iii) any violation (or alleged
violation) by the Company of any rule or regulation promulgated under the
Securities Act or any state securities laws applicable to the Company and
relating to action or inaction by the Company in connection with any such
registration or qualification, and will reimburse the Investor, each of its
officers, directors, members, partners, shareholders, employees and agents, and
each person controlling any such persons, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by the
Investor or underwriter and expressly intended for use in such registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof. Expenses (including attorneys' and accountants' fees)
incurred in defending a civil or criminal claim, action, suit, or proceeding
shall be paid by the Company in advance of the final disposition of the matter
upon receipt of an undertaking satisfactory to the Company by or on behalf of
any person or entity entitled to indemnification pursuant to this Section 7.1 to
repay such amount if such person or entity is ultimately determined not to be
entitled to indemnity.
7.2 The Investor will, if Registrable Securities held by the Investor are
included in the securities as to which such registration or qualification is
being effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, and each person who controls the Company or such
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underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance or (ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such
directors, officers, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular, other document or amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by the Investor and expressly intended for use in such
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof; provided, however, that the obligations of the
Investor hereunder shall be limited to an amount equal to the net proceeds to
the Investor from the sale of Registrable Securities sold pursuant to
registration as contemplated herein.
7.3 Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party, whose approval shall not unreasonably be
withheld. The Indemnified Party may participate in such defense at such party's
expense; provided, however, that the Indemnifying Party shall bear the expense
of such defense of the Indemnified Party if representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest. The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is materially prejudicial to the ability of the
Indemnifying Party to defend the action. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff
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<PAGE>
to such Indemnified Party of a release from all liability in respect of such
claim or litigation.
7.4 If the indemnification provided for in Section 7.1 or 7.2 is
unavailable or insufficient to hold harmless an Indemnified Party, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of the expenses, claims, losses, damages or
liabilities (or actions or proceedings in respect thereof) referred to in
Section 7.1 or 7.2, in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the sellers of Registrable Securities
on the other hand in connection with statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) or expenses, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the sellers of Registrable Securities and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Investor agree that it would not be just and equitable if contributions pursuant
to this Section 7.4 were to be determined by pro rata allocation (even if all
sellers of Registrable Securities were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in the first sentence of this Section 7.4.
The amount paid by an Indemnified Party as a result of the expenses, claims,
losses, damages or liabilities (or actions or proceedings in respect thereof)
referred to in the first sentence of this Section 7.4 shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any claim, action or proceeding which
is the subject of this Section 7.4. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of sellers of Registrable
Securities to contribute pursuant to this Section 7.4 shall be several in
proportion to the respective amount of Registrable Securities sold by them
pursuant to a registration statement.
ARTICLE 8
INFORMATION BY INVESTOR
The Investor holding Registrable Securities included in any registration shall
furnish in writing to the Company such information regarding the Investor and
the distribution proposed by the Investor as the Company may reasonably request
in writing and
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<PAGE>
as shall be reasonably required in connection with any registration or
qualification referred to in this Agreement.
ARTICLE 9
RULE 144 REPORTING
With a view to making available the benefits of certain rules and regulations
of the Commission which may at any time permit the sale of securities of the
Company to the public without registration, at such time as a public market
exists for the Common Stock of the Company, the Company agrees to:
9.1 Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times; and
9.2 Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), at any
time that it is subject to such reporting requirements; and
9.3 So long as the Investor owns any Registrable Securities, furnish to
the Investor forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company as the Investor may reasonably request in availing itself of any rule or
regulation of the Commission allowing the Investor to sell any such securities
without registration.
ARTICLE 10
TRANSFER OF REGISTRATION RIGHTS
The rights to cause the Company to register securities granted to the Investor
under Articles 2, 3 and 4 hereof may be assigned in connection with any
permitted transfer or assignment of the Investor's Registrable Securities. All
transferees and assignees of the rights to cause the Company to register
securities granted to the Investor under Articles 2, 3 and 4 hereof, as a
condition to the transfer of such rights, shall agree in writing to be bound by
the agreements set forth herein.
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<PAGE>
ARTICLE 11
LIMITATIONS ON REGISTRATION RIGHTS
GRANTED TO OTHER SECURITIES
11.1 Existing Registration Rights. The Company covenants, warrants and
represents that:
(a) The registration rights of the Company's Class B Preferred Stock
("Class B"), Class C Preferred Stock ("Class C") and Series D Preferred Stock
("Series D") are subordinated in all respects to the rights of holders of the
Series M Preferred in any offering made under Articles 2, 3 or 4 herein.
(b) If holders of Class B, Class C and/or Series D shares request
registration under circumstances similar to those in Articles 2, 3 or 4 hereof
(a "Requested Registration"), the Company shall:
(i) promptly give to the Investor written notice thereof;
(ii) include in any Requested Registration (and any
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within 15 days after receipt of such written notice from the
Company described in Section 11.1(b)(i) by the Investor;
(iii) pay any Registration Expenses related to the Registrable
Securities included in the Requested Registration; and
(iv) upon expiration of the 15-day period prescribed in
Section 11.1(b)(ii), promptly give each holder of Class B, Class C and/or Series
D written notice of the number of Registrable Securities to be included in the
Requested Registration and that if the underwriters exclude some of the
securities to be registered, the securities to be sold for any Class B, Class C
or Series D holder shall be excluded in their entirety prior to the exclusion of
any Registrable Securities.
11.2 Additional Registration Rights. The parties hereto agree that
additional holders of capital stock of the Company providing new financing to
the Company may, in connection with the Company's obtaining such new financing,
be granted registration rights subordinate to those granted herein, with respect
to any or all securities of the Company held by them; provided, however, that
from and after the date of this Agreement, the Company shall not without the
prior written consent of the Investor, enter into any agreement with any holder
or prospective holder of any securities of the Company providing for the grant
to such holder of registration rights superior to those granted herein.
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<PAGE>
ARTICLE 12
MISCELLANEOUS
12.1 Aggregation. Shares of capital stock of the Company owned by
partnerships and corporations having substantially common ownership interests or
managed by the same principals and owned by individual investors affiliated with
one another may be aggregated for the purposes of calculating the aggregate
percentage of capital stock of the Company owned by the Investor and any
permitted transferee hereunder.
12.2 Waivers and Amendments. With the written consent of the Company and
the Investor, the obligations and rights of the Company and the Investor under
this Agreement may be waived (either generally or in a particular instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely) or amended. This Agreement or any provision hereof may be
amended, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of the amendment, waiver, discharge or
termination is sought, except to the extent provided in this Section 12.2.
12.3 Damages. The Company recognizes and agrees that the Investor will not
have an adequate remedy if the Company fails to comply with the provisions of
this Registration Rights Agreement regarding registration and that damages will
not be readily ascertainable, and the Company expressly agrees that, in the
event of such failure, the Company shall not oppose an application by the
Investor, or any other person entitled to the benefits of these provisions,
requiring specific performance of any provisions hereof or enjoining the Company
from continuing to commit any such breach of such provisions.
12.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed entirely within the state without regard to principles of
conflicts of law.
12.5 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
12.6 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
12.7 Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and received
upon delivery in person, or one business day after delivery by national
overnight courier service
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<PAGE>
or by telecopier transmission with acknowledgment of transmission receipt, or
three business days after deposit via certified or registered mail, return
receipt requested, in each case addressed as follows:
if to the Company:
I-Link Incorporated
13751 South Wadsworth Park Drive
Suite 200
Draper, Utah 84020
Attention: John W. Edwards, President
Telecopier: 801-576-5075
with a copy to:
David E. Hardy, Esq.
60 E. South Temple
Suite 2200
Salt Lake City, Utah 84111
Telecopier: (801) 364-6664
if to the Investor, at the address shown in the records of the Company.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
12.8 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
12.9 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
I-LINK INCORPORATED
By:
------------------------------
John W. Edwards, President
WINTER HARBOR, L.L.C.
By: First Media, L.P., its General Manager/Member
By: First Media Corporation, sole General Partner
By:
Name:
-----------------------------
Title:
----------------------------
18
<PAGE>
Exhibit 4(w)
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of October __,
1997, by and among MEDCROSS, INC., a Florida corporation (the "Company"), WINTER
HARBOR, L.L.C., a Delaware limited liability company (the "New Investor"), and
those shareholders of the Company whose signatures appear on the signature page
hereof (collectively referred to herein as the "Existing Investors" and
individually as an "Existing Investor").
WHEREAS, concurrently with the execution and delivery of this Agreement and
pursuant to a Securities Purchase Agreement, dated as of September 30, 1997, by
and between the Company and the New Investor, the New Investor has agreed to
purchase from the Company shares of the Company's Series M Participating
Convertible Preferred Stock; and
WHEREAS, the obligation of the New Investor to enter into the Purchase
Agreement and to purchase the Series M Participating Convertible Preferred Stock
is conditioned upon the execution and delivery by each of the parties hereto of
this Agreement; and
WHEREAS, the Existing Investors collectively hold shares of the Company's
common stock or options or warrants to acquire such common stock; and
WHEREAS, the parties hereto desire to set forth their mutual agreement
regarding various matters relating to the Company, including certain
restrictions with respect to the ownership of shares of the Company's capital
stock, corporate governance and certain other matters;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Board" means the Board of Directors of the Company, as constituted from
time to time.
<PAGE>
"Business Day" means each day on which banking institutions in the City of
New York, New York are not authorized or obligated by law or executive order to
close.
"Bylaws" means the Company's Bylaws, as the same may hereafter be amended
in accordance with applicable law and the terms thereof and hereof.
"Charter" means the Company's Amended and Restated Articles of
Incorporation, as amended, as the same may hereafter be further amended in
accordance with applicable law and the terms thereof and hereof.
"Change in Control" shall be deemed to have occurred at such time as (i) a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power required to elect or
designate for election a majority of the Company's Board of Directors, or (ii)
during any period of twenty-four consecutive months, individuals who at the
beginning of such period constituted the Board (together with any new directors
whose election by the Board or whose nomination for election by the stockholders
of the Company was approved by a majority of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved or who have been elected by
the holders, as of the date hereof, of the Company's Common Stock) cease for any
reason to constitute a majority of the Board then in office.
"Class B Preferred Stock" means the Class B Variable Rate Cumulative
Convertible Preferred Stock, $10.00 par value per share, of the Company.
"Class C Preferred Stock" means the Class C Convertible Cumulative
Redeemable Preferred Stock, $10.00 par value per share, of the Company.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, $.007 par value per share, of the
Company.
"Co-Sale Shares" has the meaning set forth in Section 2.4(a).
"Election Notice" has the meaning set forth in Section 2.4(b).
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
including the rules and regulations of the Commission promulgated thereunder.
"Fully-Diluted Basis" gives effect, without duplication, to (i) all shares
of Common Stock outstanding at the time of determination plus (ii) all shares of
Common Stock issuable upon conversion of the Class B Preferred Stock, the Class
C Preferred Stock, the Series D Preferred Stock and the Series M Preferred Stock
or any other convertible securities or the exercise of any option, warrant or
similar right (whether or not presently exercisable) to acquire shares of Common
Stock, as if such Class B Preferred Stock, Class C Preferred Stock, Series D
Preferred Stock, Series M Preferred Stock or other convertible securities had
been so converted or such option, warrant or similar right had been so
exercised.
"Notice of Transfer" has the meaning set forth in Section 2.4(a).
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Purchase Agreement" means the Securities Purchase Agreement, dated as of
September 30, 1997, by and between the Company and the New Investor.
"Put Notice" has the meaning set forth in Section 2.6(a).
"Put Right" has the meaning set forth in Section 2.6.
"Representing Party" has the meaning set forth in Article 5.
"Securities Act" means the Securities Act of 1933, as amended, including
the rules and regulations of the Commission promulgated thereunder.
"Seller" has the meaning set forth in Section 2.4(a).
"Series D Preferred Stock" means the Series D Convertible Preferred Stock,
$10.00 par value per share, of the Company.
"Series M Preferred Stock" means the Series M Participating Convertible
Preferred Stock, $10.00 par value per share, of the Company.
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<PAGE>
"Shareholders" means the New Investor, the Existing Investors and such
other Persons that become parties to this Agreement pursuant to the terms of
this Agreement.
"Stock" means collectively, the Common Stock, the Class B Preferred Stock,
the Class C Preferred Stock, the Series D Preferred Stock and the Series M
Preferred Stock.
"Subsidiary" means, with respect to the Company, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by the Company and/or one or
more Subsidiaries of the Company and (ii) any partnership, limited liability
company, association, joint venture or other entity (a) in which the Company
and/or one or more Subsidiaries of the Company has more than a 50% equity
interest at the time or (b) as to which the Company and/or one or more of its
Subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise.
"Tag-Along Shares" has the meaning set forth in Section 2.4(b).
"Third Party" has the meaning set forth in Section 2.4(a).
"Transfer" (including with correlative meaning the term "Transferred")
means any transfer, sale, assignment, pledge, encumbrance or other disposition
of any of the capital stock of the Company held by a Shareholder or any portion
of the ownership interest therein, irrespective of whether any of the foregoing
are effected voluntarily or involuntarily, by operation of law or otherwise, or
whether inter vivos or upon death.
ARTICLE 2
TRANSFERS OF STOCK
SECTION 2.1 Transfers of Series M Preferred Stock. The New Investor may
Transfer all, or any part of, or interest in, the Series M Preferred Stock or
Common Stock held by it at any time provided that either a registration
statement under the Securities Act or applicable state securities laws shall
have become effective with regard thereto or such Transfer is made pursuant to
an exemption from registration under the Securities Act (or the regulations
promulgated thereunder) and applicable state securities laws. Notwithstanding
the foregoing provisions of this Section 2.1, the restrictions imposed by this
Section 2.1
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<PAGE>
upon the transferability of any Stock shall terminate when such Stock has been
registered under the Securities Act and sold by the holder thereof in accordance
with such registration. In connection with the termination of restrictions on
transferability of Stock provided for hereunder, the holder of a certificate
representing such Stock as to which such restrictions shall have terminated
shall be entitled to receive from the Company, without expense to such holder,
one or more new certificates not bearing the restrictive legend set forth in
Section 2.2.
SECTION 2.2 Restrictive Legend. Unless and until otherwise permitted by
Section 2.1, each certificate for Stock issued to the New Investor, or to any of
its successors, assigns or transferees, shall be stamped or otherwise imprinted
with the following restrictive legend:
"The securities represented by this Certificate have been acquired for
investment and have not been registered pursuant to the Securities Act of
1933, as amended (the "Act"), or any applicable state statutes. Such
securities may not be sold, transferred or otherwise disposed of unless (i)
a registration statement under the Act or applicable state securities laws
shall have become effective with regard thereto, or (ii) an exemption from
registration exists under the Act (or the regulations promulgated
thereunder) and applicable state securities laws and such exemption is
applicable thereto."
SECTION 2.3 Transfer of Rights. The rights granted to the New Investor
under this Agreement shall inure to the benefit of each of its successors,
assigns and transferees.
SECTION 2.4 Tag-Along Rights
(a) If any Existing Investor or group of Existing Investors desires
to Transfer shares of Stock (or any interest therein or any option, warrant or
other right to receive any shares of Stock) held by it or them (the "Co-Sale
Shares") in one transaction or a series of related transactions to any Person or
group of Persons (collectively, a "Third Party"), such Existing Investor or
group (collectively, the "Seller") shall deliver a written notice (the "Notice
of Transfer") to the Company prior to making any such Transfer of Co-Sale
Shares. The Notice of Transfer will contain a copy of the definitive
documentation pursuant to which the Co-Sale Shares, subject to compliance with
this Section 2.4, may be Transferred and will state (i) the Seller's bona fide
intention to Transfer, (ii) the name and address of the Third Party, (iii) the
number of Co-Sale Shares to be Transferred, (iv) the expected closing date of
the
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<PAGE>
transaction, and (v) confirmation that the Third Party has been informed of the
provisions of this Section 2.4 and has agreed to purchase Co-Sale Shares and
shares of Stock held by the New Investor proposed to be sold in accordance with
the terms of this Section 2.4. The Company shall promptly, and in any event
within five Business Days after receipt of such Notice of Transfer, deliver a
copy of such Notice of Transfer to the New Investor.
(b) The New Investor may elect to participate in the Transfer
contemplated by Section 2.4(a) above on the same terms and conditions applicable
to the Transfer of the Co-Sale Shares by delivering a written notice (an
"Election Notice") to the Seller and the Company within fifteen Business Days
after receipt of a Notice of Transfer, and the New Investor may elect to
Transfer in such contemplated Transfer up to that number of shares of Stock held
by it or issuable upon exercise of warrants issued pursuant to the Purchase
Agreement (collectively referred to herein as "Tag-Along Shares") that is equal
to the product of (i) the number of Co-Sale Shares proposed to be sold by the
Seller multiplied by (ii) a fraction the numerator of which is the total number
of shares of Stock owned by the New Investor on a Fully-Diluted Basis and the
denominator of which is the total number of shares of Stock held by the Seller
and by the New Investor on a Fully-Diluted Basis. If the New Investor fails to
deliver an Election Notice by the close of business on the fifteenth Business
Day after receipt of a Notice of Transfer, the New Investor shall be deemed to
have elected not to participate in the Transfer covered by such Election Notice.
(c) If the New Investor participates in a Transfer pursuant to this
Section, it shall deliver to the Third Party at a closing to be held at the
offices of the Company (or such other place as the parties agree) one or more
certificates, properly endorsed for Transfer, which represent the number of Tag-
Along Shares which the New Investor elects to Transfer, and may Transfer,
pursuant to this Section 2.4. Such certificates shall be transferred to the
Third Party simultaneously with the consummation of the Transfer of the Co-Sale
Shares pursuant to the terms and conditions specified in the Notice of Transfer
against receipt by the New Investor of the proceeds of the Transfer of the Tag-
Along Shares. If there is to be an agreement of sale or similar instrument with
respect to the proposed Transfer (a "Sale Agreement"), the Seller will furnish a
copy of the Sale Agreement in its then current form to the New Investor with the
Notice of Transfer. As promptly as practicable after receipt of an Election
Notice, if the Sale Agreement has not previously been executed, the Seller shall
furnish the New Investor with successive drafts of the Sale Agreement, if any,
as available. The New Investor shall have the right to withdraw
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<PAGE>
from any Transfer contemplated by this Section at any time prior to the
consummation of such Transfer.
(d) The exercise or non-exercise of the rights of the New Investor
hereunder to participate in one or more Transfers of Co-Sale Shares made by a
Seller shall not adversely affect its rights to participate in subsequent
Transfers of Co-Sale Shares (including by the Seller) which meet the conditions
specified in this Section 2.4.
(e) Any Transfer made pursuant to Section 2.4(a) shall be consummated
on the terms set forth in the Notice of Transfer, whether or not the New
Investor participates in such Transfer. The Company shall use reasonable efforts
to aid such closing, including, but not limited to, exchanging the New
Investor's certificates for new certificates in requested denominations.
(f) Notwithstanding anything in this Section 2.4 to the contrary, the
foregoing tag-along rights shall not apply to (i) pledges of stock to financial
institutions by any Existing Investor to secure personal borrowings, (ii) the
foreclosure by any such financial institution on any such pledged stock, (iii)
transfers from an Existing Investor to a person who is currently an Existing
Investor, (iv) other transfers or series of related transfers of fewer than
250,000 shares in the aggregate of Stock not involving a Change in Control or
(v) sales of registered shares of Common Stock in public, open-market
transactions.
SECTION 2.5 Preemptive Rights.
(a) The Company hereby grants to the New Investor a preemptive right
to purchase its pro rata share of all or any part of any New Securities (as
defined below) which the Company may, from time to time, propose to sell and
issue. The New Investor's pro rata share, for purposes of this preemptive right,
is the ratio that the number of shares of Stock held by the New Investor on a
Fully-Diluted Basis bears to the total number of shares of Common Stock of the
Company on a Fully-Diluted Basis then outstanding.
(b) Except as set forth in the next succeeding sentence, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of capital stock, and securities of any type whatsoever
that are, or may become, convertible into said shares of capital stock.
Notwithstanding the foregoing, "New Securities" does not include (i) securities
offered to the public generally pursuant to a registration statement filed with
the Commission and declared effective under the Securities Act, (ii) securities
issued in the
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<PAGE>
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization or in a transaction
governed by Rule 145 under the Exchange Act, (iii) options exercisable for
Common Stock issued to employees or consultants of the Company outstanding as of
the date of this Agreement or options issued to employees pursuant to a stock
option plan adopted by the Board of Directors and approved by the New Investor
after the date hereof, (iv) shares of Common Stock issued on conversion of
outstanding Class B Preferred Stock, Class C Preferred Stock, Series D Preferred
Stock or Series M Preferred Stock, (v) shares of Common Stock issued upon
exercise of warrants (A) outstanding as of the date of this Agreement or (B)
issued in connection with the sale of Series M Preferred Stock under the
Purchase Agreement, (vi) stock issued pursuant to any rights or agreements,
including without limitation convertible securities, options and warrants,
provided that the preemptive rights established by this Section 2.5 shall apply
with respect to the initial sale or grant by the Company of interests in its
capital stock pursuant to such rights or agreements, or (vii) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(c) In the event the Company proposes to undertake an issuance of New
Securities, it shall give the New Investor written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the same. The New Investor shall have thirty days from
the date of receipt of any such notice to agree to purchase up to its respective
pro rata share of such New Securities for the price and upon the terms specified
in the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
(d) If the New Investor fails to exercise such preemptive right
within said thirty-day period, the Company shall have ninety days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty days from the date of
said agreement) to sell the New Securities not elected to be purchased by the
New Investor at a price and upon terms no more favorable to the purchasers of
such securities than specified in the Company's notice to the New Investor. In
the event the Company has not sold the New Securities or entered into an
agreement to sell the New Securities within said ninety-day period (or sold and
issued New Securities in accordance with the foregoing within sixty days from
the date of said agreement), the Company shall not thereafter issue or sell any
of such New Securities without first offering such securities to the New
Investor in the manner provided above.
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<PAGE>
SECTION 2.6 Put Right. At any time on or after a Change in Control, the
New Investor shall have the right to cause the Company to purchase all (but not
less than all) of the equity interests in the Company then held by the New
Investor including, without limitation, all Series M Preferred Stock, Common
Stock and warrants held by the New Investor, upon the terms and conditions set
forth herein (the "Put Right").
(a) The Put Right, if exercised at all, must be exercised by the New
Investor by giving written notice (the "Put Notice") to the Company of its
election to exercise the Put Right. The price to be paid to the New Investor for
its equity interests in the Company pursuant to the exercise of the Put Right
shall be the Fair Market Value (as defined herein) of such shares as of the date
of the Put Notice, as the same shall be determined pursuant to Section 2.6(c).
(b) Notwithstanding any other provision of this Agreement, if the
purchase of such equity interests upon the exercise of the Put Right would, at
the time the Company incurs the obligation to purchase the equity interests,
violate any applicable statute or law, or any provision of the Company's Charter
or Bylaws, or any material credit agreement entered into between the Company and
a lending institution or other contractual obligation of the Company prior to
the exercise of the Put Right, or render the Company insolvent, the Company
shall use its best efforts to obtain any waiver or consent or to take any other
action to authorize or permit the purchase or payment required by this
Agreement, including without limitation (i) the sale of additional equity
interests, (ii) any necessary action under applicable law to reduce the
Company's stated capital or otherwise increase the Company's surplus or other
funds legally available, (iii) additional borrowings by, or a refinancing of,
the Company, and (iv) sale of the Company's assets. If sufficient funds of the
Company are not legally available to redeem all equity interests which are the
subject of the exercise of the Put Right, then funds to the extent legally
available shall be used for such redemption pro rata according to the number of
such equity interests so tendered (a "Partial Redemption") as of the date of
payment. The Company shall make additional Partial Redemptions beginning thirty
days after the date of the initial payment hereunder and each thirty days
thereafter until all tendered equity interests have been redeemed.
(c) The Fair Market Value of the equity interests (the "Transferred
Shares") which are the subject of the exercise of the Put Right shall be equal
to the price that would be payable with respect to the Transferred Shares if all
of the assets of
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the Company were sold to a third party in a transaction structured to maximize
cash sale proceeds, treating the business of the Company as a going concern, and
the Company then had been dissolved and liquidated and its remaining assets
distributed to its shareholders in accordance with their equity interests in the
Company (and without any discount for a minority position or illiquidity), after
first deducting from the cash proceeds resulting from such sale and any other
cash on hand held by the Company all liabilities of the Company (determined in
accordance with generally accepted accounting principles, and giving effect to
any brokerage fees that would be required to be paid in connection with any such
sale). Within the thirty-day period following the delivery of the Put Notice,
the Company and the New Investor shall negotiate in good faith in an effort to
reach mutual agreement as to the Fair Market Value of the Transferred Shares.
(d) If the Company and the New Investor are unable to reach agreement
as to the Fair Market Value of the Transferred Shares within such thirty-day
period, the Fair Market Value of the Transferred Shares shall be determined by
an appraisal process as set forth herein. Each of the Company and the New
Investor shall designate, within fifteen days after the conclusion of the
thirty-day negotiation period referred to above, an independent and experienced
telecommunications industry appraiser (each individually an "Appraiser" and
collectively the "Appraisers"). The Appraisers shall be instructed to complete
their appraisals of the Fair Market Value of the Transferred Shares by no later
than thirty days after their appointment. If the determination of the Appraiser
with the higher determination is not greater than 110% of the determination of
the other Appraiser, the Fair Market Value shall be equal to the average of the
determinations of the two Appraisers; provided, however, if the higher
determination is greater than 110% of the lower determination, then the two
Appraisers shall jointly select a third Appraiser within ten days after the
first date on which both of such two Appraisers have delivered their reports.
Such third Appraiser shall deliver its report of its good faith determination of
the Fair Market Value of the Transferred Shares within thirty days after such
appointment, and in such case the Fair Market Value shall be equal to the
average of the closest determinations; provided, however, that if the highest
and lowest of such three determinations differ from the middle determination by
an equal amount, the Fair Market Value shall be equal to such middle
determination. The cost of all such appraisals shall be borne by the Company.
(e) Payment for the Transferred Shares purchased pursuant to this
Agreement shall be made by wire transfer of
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immediately available federal funds in accordance with instructions provided by
the New Investor.
SECTION 2.7 Closing. Unless otherwise specified under the terms of this
Agreement, the closing (the "Closing") of any purchase of the equity interests
of the Company under this Agreement shall be held at the offices of the Company
and on such date and time as the parties to the Closing shall agree in writing;
provided, however, that in no event shall such Closing occur later than ninety
days after the occurrence of the event giving rise to the obligation to purchase
and sell such equity interests. At the Closing, the selling party shall deliver
to the purchasing party(ies) the stock certificate(s) evidencing the equity
interests of the Company to be sold or redeemed, properly endorsed in blank with
all transfer and excise taxes paid (and, where appropriate, stamps affixed
thereto). The selling party shall represent and warrant to the purchasing
party(ies) that such equity interests are being transferred free and clear of
all liens, encumbrances and claims. The purchasing party(ies) shall deliver to
the selling party payment of the purchase price for such equity interests
required to be paid at Closing hereunder by wire transfer of immediately
available federal funds, and, if the Company is a purchasing party, certified
copies of corporate resolutions authorizing such purchase.
ARTICLE 3
GOVERNANCE
SECTION 3.1 Composition of Board of Directors. The Board shall consist of
seven individuals. As provided in the Charter and the Bylaws, the New Investor,
so long as it holds any shares of Series M Preferred Stock, shall have the right
to appoint two directors.
SECTION 3.2 Removal and Vacancies. Each director appointed by the New
Investor pursuant to Section 3.1 shall be subject to removal only at the request
of the New Investor. If, as a result of death, disability, retirement,
resignation, removal (with or without cause) or otherwise, a director appointed
by the New Investor ceases to be a director, then, so long as it holds any
shares of Series M Preferred Stock, the New Investor shall have the right to
appoint another director to fill the vacancy so created.
SECTION 3.3 Voting Rights. The holders of the outstanding Series M
Preferred Stock shall vote on an "as converted" basis with holders of
outstanding Common Stock on the matters which are submitted to a vote of the
Company's shareholders. In addition, the holders of Series M Preferred Stock
shall have the right to vote as part of a separate class
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with other holders of the Company's preferred stock or a separate series of a
class with respect to matters as to which holders of a single class or a series
of a class are entitled to a separate vote under the Florida Business
Corporation Act.
SECTION 3.4 Conflicting Charter or Bylaw Provisions. Each party to this
Agreement shall vote its shares of Stock, and shall take all other actions
necessary, to ensure that the Company's Charter and Bylaws facilitate and do not
at any time conflict with the provisions of this Agreement.
ARTICLE 4
COVENANTS
SECTION 4.1 Approval Rights. So long as the New Investor holds any shares
of Series M Preferred Stock, the Company shall not, and shall not permit any of
its subsidiaries to, without the prior written consent of the New Investor:
(i) amend, modify or repeal the Charter or Bylaws of the
Company or the Articles of Incorporation, Bylaws, Operating Agreement or other
organizational document of any subsidiary, or take any action with respect to
the creation, authorization, designation or issuance of any class or series of
equity securities of the Company or any subsidiary or any option, warrants or
other rights to receive any class or series of equity securities of the Company
or any subsidiary (other than pursuant to employee benefit or incentive plans in
effect as of the date hereof or described in the Company's definitive proxy
statement for its 1997 annual shareholders meeting);
(ii) effect any merger, recapitalization or consolidation with
or into another entity, or enter into any binding share exchange or similar
transaction with any entity;
(iii) sell, transfer, lease or dispose of all or substantially
all of its assets in one transaction or a series of related transactions, or
liquidate, dissolve or wind-up its affairs;
(iv) sell, transfer, dispose of, lease, pledge or encumber (a
"disposition"), or engage in a series of related dispositions, of any of its
assets (including rights) having a value, in the aggregate for such transaction
or series of transactions, in excess of $250,000;
(v) lease or otherwise acquire any assets having a value, in
the aggregate, in excess of $250,000;
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(vi) incur or prepay any indebtedness (or guarantee obligations
of others or enter into any other guarantee or credit support arrangement) other
than trade debt incurred in the ordinary course of business;
(vii) pay any dividend or make other distributions or redemption
payments with respect to any of its equity interests;
(viii) conduct or engage in any business other than the business
in which it is presently engaged (and such other businesses as are reasonably
ancillary thereto);
(ix) form and own, in whole or in part, one or more
corporations, trusts, partnerships or other subsidiary entity;
(x) acquire, own or hold for investment any equity interests in
another entity or any option, warrant, or other debt or equity interest
convertible into or evidencing the right to acquire (whether or not for
additional consideration) any equity interest in such entity;
(xi) enter into any transaction or agreement (or amend any
agreement) with any affiliate of the Company or any of the Company's
shareholders;
(xii) adopt or amend its annual budget;
(xiii) hire, employ or discharge any of its executive officers,
managers or key employees;
(xiv) engage or discharge its independent certified public
accountants;
(xv) initiate or settle any litigation involving an amount in
controversy in excess of $250,000;
(xvi) adopt or amend any employee benefit plan or program;
(xvii) enter into any commitment or series of related commitments
involving a payment or payments of an aggregate amount in excess of $500,000;
(xviii) file for voluntary or involuntary protection under federal
or state bankruptcy or insolvency laws or make any assignment for the benefit of
creditors; or
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<PAGE>
(xix) take any action that would make it impossible for the
Company or any of its subsidiaries to carry on its ordinary business or take any
action that is in contravention of the Charter.
SECTION 4.2 Financial Statements. The Company shall maintain true and
complete books and records of account in accordance with generally accepted
accounting principles consistently applied. The Company shall furnish or cause
to be furnished to the New Investor:
(a) Within ninety days after the end of each fiscal year of the Company
(or such longer period, not to exceed fifteen calendar days, as shall be
permitted by the SEC for the timely filing of the quarterly report on Form 10-K
pursuant to Rule 12b-25 of the SEC), audited consolidated financial statements,
including an audited balance sheet showing the financial condition of the
Company and any subsidiaries as of the close of such fiscal year, together with
statements of income and cash flow, setting forth in comparative form with
respect to such financial statements figures for the previous fiscal year and to
the current year's annual budget, all in reasonable detail;
(b) As soon as reasonably possible, and in any event within thirty days
after the end of each month, monthly operating reports, and an unaudited balance
sheet, together with a statement of income and cash flows of the Company and its
subsidiaries for and as at the end of such month, setting forth in comparative
form with respect to the corresponding period for the previous fiscal year and
to the current month's budget;
(c) As soon as reasonably possible, the Company's annual financial plan
and budget; and
(d) Such other information regarding the business, affairs, operations
and financial condition of the Company as the New Investor may from time to time
reasonably request.
SECTION 4.3 Press Release and Filings. The Company shall provide the New
Investor, promptly after release or filing, with copies of any press releases or
other public announcements concerning the Company or any of its subsidiaries and
copies of any filing by the Company with the Commission.
SECTION 4.4. Inspection. The Company shall permit the New Investor and its
designated representatives to inspect the books and records and any of the
properties or assets of the Company and any of its subsidiaries at such
reasonable times during normal business hours, and to speak with such officers,
employees or agents of the Company and any of its subsidiaries and the
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Company's independent public accountants as the New Investor may from time to
time reasonably request.
SECTION 4.5 Maintenance of Insurance. The Company shall, and shall cause
each of its subsidiaries to, keep at all times all of their material properties
which are of an insurable nature insured against loss or damage with insurers
believed by the Company to be responsible to the extent that property of similar
character usually is so insured by companies similarly situated in like
businesses and geographic areas and owning like properties in accordance with
good business practice and said insurance is commonly available at commercially
reasonable rates.
SECTION 4.6 Taxes. The Company shall pay prior to delinquency all
material taxes, assessments and governmental levies and charges, except for
those taxes, assessments and governmental levies and charges contested in good
faith by appropriate proceedings and for which the Company shall have set aside
on its books reserves (segregated to the extent required by generally accepted
accounting principles, consistently applied in the United States).
SECTION 4.7 Corporate Existence; Compliance with Laws. The Company shall,
and shall cause each of its subsidiaries to, maintain its corporate or limited
liability company existence in full force and effect. The Company shall, and
shall cause each of its subsidiaries to, comply with all applicable laws, rules
and regulations.
SECTION 4.8 Future Registration Rights. Except as expressly permitted in
the Registration Rights Agreement (as that term is defined in the Purchase
Agreement), the Company shall not, without the prior written consent of the New
Investor, agree with the holders of any securities issued or to be issued by the
Company to register such securities under the Securities Act nor will it grant
any incidental registration rights.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Each of the Company and each Shareholder (each, a "Representing Party")
hereby represents and warrants to each other Representing Party as follows:
SECTION 5.1 Organization, Qualification and Power. Such Representing
Party (other than any Representing Party which is an individual) is a
corporation, limited partnership or limited liability company, as the case may
be, duly organized, validly existing and in good standing under the laws of the
state of its
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organization, and it has the requisite corporate, partnership or limited
liability company power and authority, as the case may be, to own and hold its
properties, and to carry on its business as conducted or presently proposed to
be conducted. Such Representing Party (other than any Representing Party which
is an individual) has requisite corporate, partnership or limited liability
company power and authority to execute, deliver and perform this Agreement.
SECTION 5.2 Authorization of Agreement; No Conflict. The execution,
delivery and performance by such Representing Party of this Agreement have been
duly authorized by all requisite corporate, partnership, limited liability
company and individual action, as the case may be, of such Representing Party,
and will not violate any provision of law, any order of any court or other
agency of government, any of such Representing Party's organizational documents,
if any, or any provision of any indenture, agreement or other instrument to
which such Representing Party or any of such Representing Party's properties or
assets is bound, or conflict, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument.
SECTION 5.3 Validity. This Agreement has been duly executed and delivered
by such Representing Party and constitutes a legal, valid and binding obligation
of such Representing Party, enforceable against such Representing Party in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and except as to the extent the availability of equitable remedies may
be limited to general principles of equity.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Arbitration. To the fullest extent not prohibited by law, any
controversy, claim or dispute arising out of or relating to this Agreement,
including the determination of the scope or applicability of this Agreement to
arbitrate, shall be settled by final and binding arbitration in accordance with
the rules then in effect of the American Arbitration Association ("AAA"), as
modified or supplemented under this section, and subject to the Federal
Arbitration Act, 9 U.S.C. (S)(S) 1-16. The decision of the arbitrators shall be
final and binding; provided, however, that where a remedy for breach is
prescribed hereunder or limitations on remedies are prescribed, the arbitrators
shall be bound by such restrictions, and judgment upon the award
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rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
If any series of claims arising out of the same or related transactions
shall involve claims which are arbitrable under the preceding paragraph and
claims which are not, the arbitrable claims shall first be finally determined
before suit may be instituted upon the others and the parties will take such
action as may be necessary to toll any statutes of limitations, or defenses
based upon the passage of time, that are applicable to such non-arbitrable
claims during the period in which the arbitrable claims are being determined.
In the event of any controversy, claim or dispute that is subject to
arbitration under this Section 6.1, any party thereto may commence arbitration
hereunder by delivering notice to the other party or parties thereto. Within
five business days of delivery of a list of qualified potential arbitrators from
AAA, such parties shall attempt to agree on one arbitrator; provided that if
such parties cannot agree on one arbitrator within such time period, each party
to the controversy, claim or dispute shall within five business days thereafter
appoint one arbitrator, and the two arbitrators so appointed shall within five
business days of their appointment mutually agree upon and appoint one
additional arbitrator (or, if such arbitrators cannot agree on an additional
arbitrator, the additional arbitrator shall be appointed by the AAA as provided
under its rules); provided that persons eligible to be selected as arbitrators
shall be limited to attorneys at law who (i) are on the AAA's Large, Complex
Case Panel, (ii) have practiced law for at least fifteen years as an attorney
specializing in either general commercial litigation or general corporate and
commercial matters and (iii) are experienced in matters involving the
telecommunications industry.
The arbitration hearing shall commence no later than thirty business days
after the completion of the selection of the arbitrators or at such other time
as the parties shall reasonably agree. Consistent with the intent of the parties
hereto that the arbitration be conducted as expeditiously as possible, the
parties agree that (i) discovery shall be limited to the production of such
documents and the taking of such depositions as the arbitrator(s) determine are
reasonably necessary to the resolution of the controversy, claim or dispute and
(ii) the arbitrator(s) shall limit the presentation of evidence by each side in
such arbitration to not more than ten full days (or the equivalent thereof) or
such shorter period as the arbitrator(s) shall determine to be necessary in
order to resolve the controversy, claim or dispute. The arbitrator(s) shall be
instructed to render a decision within thirty calendar days of
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the close of the arbitration hearing. If arbitration has not been completed
within one hundred and twenty days of the commencement of such arbitration
hearing, any party to the arbitration may initiate litigation upon ten days
written notice to the other party(ies); provided, however, that if one party has
requested the other to participate in an arbitration and the other has failed to
participate, the requesting party may initiate litigation before the expiration
of such one hundred twenty-day period; and provided, further, that if any party
to the arbitration fails to meet any of the time limits set forth in this
Section 6.1 or set by the arbitrators in the arbitration, any other party may
provide ten days written notice of its intent to institute litigation with
respect to the controversy, claim or dispute without the need to continue or
complete the arbitration and without awaiting the expiration of such one hundred
twenty-day period. The parties hereto further agree that if any of the rules of
the AAA are contrary to or conflict with any of the time periods provided for
hereunder, or with any other aspect of the matters set forth in this Section
6.1, that such rules shall be modified in all respects necessary to accord with
the provisions of this Section 6.1 (and the arbitrators shall be so instructed
by the parties).
The arbitrators shall base their decision on the terms of this Agreement
and the law of the State of Delaware, regardless of the law that might be
applicable under conflicts of law principles, and shall render their decision in
writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrator(s) shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Washington, D.C.
SECTION 6.2 Survival. The representations, warranties, obligations,
undertakings and agreements contained in this Agreement shall survive the
execution and delivery of this Agreement, the issuance of and payment for the
Series M Preferred Stock and any disposition of the Series M Preferred Stock.
SECTION 6.3 Entire Agreement; Amendment. This Agreement embodies the
entire agreement of the parties hereto with respect to the subject matter
hereof. Any provision of this Agreement may be amended, waived or modified if,
but only if, such amendment, waiver or modification is in writing and is signed
by each of the parties hereto; whenever any provision of this Agreement requires
action or approval by the holders of a specified number of shares of any class
or series of Stock, such action or approval may be evidenced by a written
consent executed
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by the requisite holders of such class or series, without any requirement of a
meeting or prior notice to the other holders of such class or series.
SECTION 6.4 Binding Effect; Benefits. This Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
permitted assigns. Except as expressly provided herein, nothing in this
Agreement is intended to confer on any Persons, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement. Nothing in this Agreement
shall be construed to give the Shareholders or any other Person any claim
against the Company or its assets, other than as a shareholder of the Company.
SECTION 6.5 Recapitalization and Exchanges Affecting the Common stock.
All the provisions of this Agreement shall apply, to the full extent set forth
herein with respect to any and all securities of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of any class or series of Stock or by reason of any stock dividend,
split, reverse split, combination, recapitalization, reclassification, merger,
consolidation or otherwise.
SECTION 6.6 Notices. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed effectively
given and received when delivered in person or by national overnight courier
service or by certified or registered mail, return receipt requested, or by
telecopier, addressed as follows:
(a) if to the Company, at
Medcross, Inc.
13751 South Wadsworth Park Drive
Suite 200
Draper, Utah 84020
Attention: John W. Edwards, President
Telecopier: 801-576-5075
with copy to:
David E. Hardy, Esq.
60 E. South Temple
Suite 2200
Salt Lake City, Utah 84111
Telecopier: (801) 364-6664
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<PAGE>
(b) if to the New Investor, at
Winter Harbor, L.L.C.
c/o First Media, L.P.
11400 Skipwith Lane
Potomac, Maryland 20854
Attention: Ralph W. Hardy, Jr.
Telecopier: (301) 983-2425
with copy to:
Ralph W. Hardy, Jr., Esq.
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Telecopier: (202) 776-2222
(c) if to any other holder of Common Stock and any other Shareholder
at its address reflected on the records of the Company;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.7 Severability. The invalidity, illegality or unenforceability
of one or more of the provisions of this Agreement in any jurisdiction shall not
affect the validity, legality or enforceability of the remainder of this
Agreement in such jurisdiction or the validity, legality or enforceability of
this Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
SECTION 6.8 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement.
SECTION 6.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
SECTION 6.10 APPLICABLE LAW. THE LAWS OF THE STATE OF DELAWARE SHALL
GOVERN THE INTERPRETATION, VALIDITY AND PERFORMANCE OF THE TERMS OF THIS
AGREEMENT, REGARDLESS OF THE LAW THAT MIGHT BE APPLIED UNDER PRINCIPLES OF
CONFLICTS OF LAW.
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<PAGE>
SECTION 6.11 Further Assurances. Each party hereto 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 any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
SECTION 6.12 Specific Performance. Each of the parties hereto acknowledges
and agrees that in the event of any breach of this Agreement, the non-breaching
party would be irreparably harmed and could not be made whole by monetary
damages. It is accordingly agreed (a) that the parties hereto will waive the
defense in any action for specific performance that a remedy at law would be
adequate and (b) that the parties hereto, in addition to any other remedy to
which they may be entitled at law or in equity, shall be entitled to compel
specific performance of this Agreement in any arbitration conducted in
accordance with Section 6.1 of this Agreement or in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction of such action.
SECTION 6.13 Rights Cumulative; Waiver. The rights and remedies of the
Shareholders and the Company under this Agreement shall be cumulative and not
exclusive of any rights or remedies which any party hereto would otherwise have
hereunder or at law or in equity or by statute, and no failure or delay by any
such party in exercising any right or remedy shall impair any such right or
remedy or operate as a waiver of such right or remedy, nor shall any single or
partial exercise of any power or right preclude such party's other or further
exercise or the exercise of any other power or right. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure by
any party hereto to exercise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time or
times hereunder.
SECTION 6.14 Construction. The use of the singular or plural or masculine,
feminine or neuter gender shall not be given an exclusionary meaning and, where
applicable, shall be intended to include the appropriate number or gender, as
the case may be.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Shareholders Agreement
as of the day and year first above written.
COMPANY:
MEDCROSS, INC.
By:
------------------------------------
John W. Edwards, President
NEW INVESTOR:
WINTER HARBOR, L.L.C.
By: First Media, L.P., its General Manager/Member
By: First Media Corporation, sole General Partner
By:
Name:
----------------------------------
Title:
---------------------------------
EXISTING INVESTORS:
---------------------------------------
John W. Edwards
---------------------------------------
Karl S. Ryser, Jr.
---------------------------------------
David E. Hardy
<PAGE>
Exhibit 4(x)
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement"), dated as of October __, 1997, by
and between MEDCROSS, INC., a Florida corporation (the "Company"), and WINTER
HARBOR, L.L.C., a Delaware limited liability company (the "Investor").
R E C I T A L S:
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company is issuing and selling to the Investor Series A Warrants, Series B
Warrants and Series C Warrants of the Company (being referred to herein as the
"Warrants"), such Warrants initially entitling the holders thereof to purchase
shares of Common Stock of the Company (the "Common Stock"), subject to
adjustment as hereinafter provided (the Common Stock and, pursuant to Article 7
hereof, such other securities as may be issuable upon exercise of the Warrants
being referred to herein as the "Warrant Shares"); and
WHEREAS, the Company wishes to define the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company and
the holders of the Warrants (the "Warrantholders");
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Definitions. As used in this Agreement, the following
terms have the meanings specified below:
"Amended Articles" means the Amended and Restated Articles of Incorporation
of the Company as amended to include the Articles of Amendment setting forth the
rights, preferences and privileges of the Series M Preferred Stock.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in the City of New York, New York are
permitted or required to close.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles set forth in opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession,
in each case as the same are applicable to the circumstances as of the date of
the determination.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity.
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Purchase Agreement" means that certain Securities Purchase
Agreement by and between the Company and the Investor, dated as of September 30,
1997.
"Series M Preferred Stock" means the Series M Participating Convertible
Preferred Stock issued to the Investor.
ARTICLE 2
ISSUANCE, FORM AND EXECUTION OF WARRANT CERTIFICATES
SECTION 2.1 Issuance of Warrants. The Warrants shall be originally issued
by the Company in connection with the issuance of Series M Preferred Stock
pursuant to the Securities Purchase Agreement. The Warrants shall be evidenced
by Warrant Certificates, and each Warrant Certificate shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to the registered holder of such
Warrants) the number of shares of Common Stock (as may be adjusted pursuant to
Article 7 hereof) issuable to the Warrantholder upon exercise of such Warrants,
at the price specified herein and therein.
SECTION 2.2 Form of Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") shall be in registered form only and shall
be substantially in the form set forth in Exhibits A-1, A-2 and A-3 attached
hereto, shall be dated the date on which signed by the Company and may have such
letters,
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numbers or other marks of identification or designation printed, lithographed,
engraved or otherwise affixed thereon as the Company may deem appropriate and as
are not inconsistent with the provisions of this Agreement or the Securities
Purchase Agreement, or as may be required to comply with any law or with any
rule or regulation made pursuant thereto.
SECTION 2.3 Execution of Warrant Certificates. Warrant Certificates shall
be executed on behalf of the Company by the president, any vice president or the
treasurer of the Company and signed by the secretary or any assistant secretary
of the Company and have affixed thereon the seal of the Company. Each such
signature and seal may be manual or facsimile.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before countersignature and delivery
by the Company, such Warrant Certificates, nevertheless, may be countersigned,
issued and delivered with the same force and effect as though such person had
not ceased to be such officer; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Agreement
such person was not such an officer of the Company. Upon countersignature on
behalf of the Company and delivery, the Warrant Certificate shall be valid and
binding upon the Company, and the Warrantholder thereof shall be entitled to all
of the benefits of this Agreement.
ARTICLE 3
REGISTRATION
SECTION 3.1 Registration. The Company shall number and register the
Warrant Certificates in a register (the "Warrant Register") maintained at 13751
South Wadsworth Park Drive, Suite 200, Draper, Utah 84020 (the "Office") as they
are issued by the Company (or such other location as the Company may establish
after giving notice thereof to the Warrantholders). The Company shall keep
copies of this Agreement available for inspection by the Warrantholders during
normal business hours at the Office.
ARTICLE 4
TRANSFER, EXCHANGE OR REPLACEMENT OF WARRANT CERTIFICATES
SECTION 4.1 Registration of Transfers. The Company shall from time to time
register the transfer of any outstanding Warrant Certificate on the Warrant
Register maintained at the Office, upon surrender thereof accompanied by a
written instrument or
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instruments of transfer in form reasonably satisfactory to the Company, duly
endorsed by the registered holder thereof or by such Warrantholder's appointed
legal representative or attorney-in-fact, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. Upon
any such registration or transfer in such name or names as may be directed in
writing by the Warrantholder, the Company shall execute and deliver (or cause to
be delivered) a new Warrant Certificate(s) without charge to such Warrantholder,
or to the Person or Persons entitled to receive the same, and the surrendered
Warrant Certificate shall be canceled by the Company.
SECTION 4.2 Exchanges of Warrant Certificates. Each Warrant Certificate
may be exchanged at the option of the Warrantholder without charge to such
Warrantholder when surrendered to the Company at the Office properly endorsed in
the manner described in Section 4.1 hereof for another Warrant Certificate(s) of
like tenor and representing in the aggregate a like number of shares of Common
Stock, as may be adjusted pursuant to Article 7 hereof. Thereupon, the Company
shall execute and deliver to the Person(s) entitled thereto a new Warrant
Certificate(s) as so requested. Warrant Certificates surrendered for exchange
shall be canceled by the Company.
SECTION 4.3 Mutilated or Missing Warrant Certificates. In the event that
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing Warrants for a like amount of
Warrant Shares, but only, in case of a lost, stolen or destroyed Warrant
Certificate, upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction and the absence of actual notice to the Company that such
Warrant Certificate has been acquired by a bona fide purchaser or holder in due
course. Every substitute Warrant Certificate executed and delivered pursuant to
this Section 4.3 in lieu of any lost, stolen or destroyed Warrant Certificate
shall constitute an additional contractual obligation of the Company, whether or
not the lost, stolen or destroyed Warrant Certificate shall be at any time
enforceable by anyone, and shall be entitled to the benefits of (but shall be
subject to all the limitations of rights set forth in) this Agreement equally
and proportionately with any and all other Warrant Certificates duly executed
and delivered hereunder. The provisions of this Section 4.3 are exclusive with
respect to the replacement of mutilated, lost, stolen or destroyed Warrant
Certificates.
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ARTICLE 5
EXERCISE OF WARRANTS; EXERCISE PRICE; EXERCISE PERIOD
SECTION 5.1 Exercise of Warrants. Subject to the provisions of this
Agreement, each Warrantholder shall have the right to purchase from the Company
the number of shares of Common Stock that the Warrantholder may at the time be
entitled to purchase on exercise of the Warrants and payment of the Exercise
Price (as defined below) for such Warrant Shares.
SECTION 5.2 Mechanics of Exercise.
(a) Subject to the provisions of this Agreement, Warrants may be
exercised by the Warrantholder in whole or in part upon surrender at the Office
to the Company of the Warrant Certificate(s) evidencing the Warrants, together
with the form of election to purchase (the "Election to Purchase"), in the form
set forth as Exhibit B hereto, duly completed and signed by such Warrantholder
or by such Warrantholder's appointed legal representative or attorney-in-fact
and upon payment in full of the Exercise Price for each Warrant exercised.
Payment of the aggregate Exercise Price shall be made by certified or official
bank check payable to the order of the Company.
(b) Upon due exercise of the Warrants and surrender of the Warrant
Certificate, duly completed and signed, and payment of the Exercise Price as
aforesaid, the Company shall cause to be issued to or upon the written order of
the Warrantholder and in such name or names as the Warrantholder may designate
in the Election to Purchase, the Warrant Shares so purchased. If all of the
items referred to in the first sentence of the preceding paragraph are received
by the Company at or prior to 1:00 p.m., Delaware time, on a Business Day, the
exercise of the Warrants to which such items relate will be effective on such
Business Day. If all of such items are received after 1:00 p.m., Delaware time,
on a Business Day, the exercise of the Warrants to which such items relate will
be effective on the next Business Day.
(c) The number and kind of Warrant Shares for which Warrants may be
exercised shall be subject to adjustment from time to time as set forth in
Article 7 hereof.
(d) The Warrants shall be exercisable as provided herein at the
election of the Warrantholder in whole or in part. In the event that the holder
of a Warrant Certificate shall exercise Warrants with respect to fewer than all
the Warrant Shares evidenced thereby, a new Warrant Certificate(s) evidencing
the remaining unexercised Warrant Shares shall be issued to such Warrantholder,
and the Company is hereby irrevocably authorized to execute and deliver the
required new Warrant Certificate(s)
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pursuant to provisions of Article 2 and Article 3 of this Agreement.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be canceled and disposed of by the Company.
SECTION 5.3 Exercise Price. The price at which each of the Series A
Warrants, the Series B Warrants, and the Series C Warrants shall be exercisable
in exchange for Warrant Shares shall be the price as set forth below (as such
price may be adjusted pursuant to Article 7 hereof) (being referred to herein as
the "Exercise Price"):
(a) $2.75 per Warrant Share for Series A Warrants;
(b) $4.00 per Warrant Share for Series B Warrants; and
(c) $4.69 per Warrant Share for Series C Warrants.
SECTION 5.4 Exercise Period. The right to exercise the Series A Warrants
shall terminate on the date which is thirty months from the date of issuance of
the Series A Warrants, and the right to exercise the Series B Warrants and the
Series C Warrants shall terminate on the date which is five years from the date
of issuance of the Series B Warrants or Series C Warrants, respectively (each
such respective date in the case of the Series A Warrants, Series B Warrants and
Series C Warrants being referred to herein as the "Expiration Date"). A
Warrantholder may exercise any Warrant from the date of issuance up to and
including the applicable Expiration Date. The Company shall record the
applicable Expiration Date of each Warrant in the Warrant Register.
SECTION 5.5 Cashless Exercise.
(a) At any time prior to the Expiration Date of any Warrants, the
Warrantholder may, at its option, exchange such Warrants, in whole or in part (a
"Warrant Exchange"), into the number of fully paid and non-assessable Warrant
Shares determined in accordance with this Section 5.5, by surrendering the
Warrant Certificate relating to such Warrants at the Office, accompanied by a
notice stating such Warrantholder's intent to effect such exchange, the number
of Warrant Shares to be exchanged and the date on which the Warrantholder
requests that such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the Notice of
Exchange, or, if later, the date the Notice of Exchange is received by the
Company (the "Exchange Date"). Certificates for the Warrant Shares issuable upon
such Warrant Exchange and, if applicable, a new Warrant Certificate of like
tenor evidencing the balance of the Warrant Shares remaining subject to the
Warrantholder's Warrant Certificate, shall be issued as of the Exchange Date and
delivered to the Warrantholder within three days following the Exchange Date.
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In connection with any Warrant Exchange, the Warrantholder's Warrant Certificate
shall represent the right to subscribe for and acquire the number of Warrant
Shares (rounded to the next highest integer) equal to (A) the number of Warrant
Shares specified by the Warrantholder in its Notice of Exchange (the "Total
Share Number") less (B) the number of Warrant Shares equal to the quotient
obtained by dividing (i) the product of the Total Share Number and the existing
Exercise Price per Warrant Share by (ii) the Market Price (as hereafter defined)
of a share of Common Stock.
(b) As used in this Section 5.5, the phrase "Market Price" at any date
shall be deemed to be the last reported sale price, or, in case no such reported
sale takes place on such day, the average of the last reported sale prices for
the last three trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq Stock Market, National Market ("Nasdaq"), or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted by Nasdaq, the average closing bid price as furnished by the
National Association of Securities Dealers, Inc. ("NASD") through Nasdaq or
similar organization if Nasdaq is no longer reporting such information, or if
the Common Stock is not quoted on Nasdaq, as determined in good faith by
resolution of the Board of Directors of the Company, based on the best
information available to it for the two days immediately preceding such issuance
or sale and the day of such issuance or sale.
ARTICLE 6
RESERVATION OF WARRANT SHARES
SECTION 6.1 Reservation. The Company shall at all times keep reserved,
free from preemptive rights, out of its authorized Common Stock, or other
securities of the Company issuable upon the exercise of the Warrants, a number
of shares of Common Stock, or such other securities, sufficient to provide for
the exercise of the right of purchase represented by all outstanding and
unexpired Warrants.
SECTION 6.2 Covenant. The Company covenants that any Warrant Shares will,
upon issuance, be validly issued and upon payment of the exercise price
therefor, fully paid and free from all taxes payable by the Company, liens,
charges and security interests (except any liens, charges or security interests
created or suffered to be created by any of the Warrantholders), and will not be
subject to any restrictions on voting or transfer thereof that are created by
the Company, except for such restrictions on transfer under the Securities Act
or applicable state securities laws.
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ARTICLE 7
ADJUSTMENTS AFFECTING THE EXERCISE OF WARRANTS
SECTION 7.1 Special Definitions. For purposes of this Article 7, the
following definitions shall apply:
(a) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 7.2 below, deemed to be issued) by
the Company after the Original Issue Date, other than shares of Common Stock
issued or issuable:
(i) upon conversion of shares of the Company's Class B
Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or Series M
Preferred Stock outstanding on the Original Issue Date;
(ii) upon the exercise of Warrants issued under the Securities
Purchase Agreement;
(iii) as a dividend or distribution on the Company's Class B
Preferred Stock, Class C Preferred Stock, Series D Preferred Stock, Series M
Preferred Stock or Warrants;
(iv) in connection with an acquisition or other transaction by
the Company, in either case approved by the Investor, unless the Company agrees
to include such issuance in the definition of Additional Shares of Common Stock
in connection with obtaining the approval of the Investor to such acquisition or
other transaction;
(v) by reason of a dividend, stock split, split-up or other
distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common Stock by the foregoing clauses (i), (ii), (iii), and
(iv) or this clause (v); or
(vi) upon the exercise of options excluded from the definition
of "Option" in Section 7.1(c).
(b) "Convertible Securities" shall mean any evidences of indebtedness,
shares or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
(c) "Option" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities, excluding
(i) options granted to employees or issued to consultants of the Company or
warrants which, in each such case, are outstanding as of the date of this
Agreement, (ii) any Warrants issued under this Agreement or as a direct result
of the issuance of Series M Preferred Stock pursuant to the Securities
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Purchase Agreement, or (iii) options granted to employees or consultants
pursuant to stock option plans adopted by the Board of Directors and approved by
the Compensation Committee of the Board of Directors and by the Investor after
the date hereof.
(d) "Original Issue Date" shall mean the date on which a Warrant was
first issued.
SECTION 7.2 Issue of Securities Deemed Issue of Additional Shares of
Common Stock. If the Company at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities and the exercise of such Options therefor, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issuance or, in case such a record date shall have been fixed, as of the close
of business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 7.4 hereof) of such Additional Shares of Common
Stock would be less than the applicable Exercise Price in effect on the date of
and immediately prior to such issuance, or such record date, as the case may be,
and provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(a) No further adjustment in the Exercise Price shall be made upon the
subsequent issuance of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(b) If such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Exercise Price
computed upon the original issuance thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(c) No readjustment pursuant to clause (b) above shall have the effect
of increasing the Exercise Price to an amount which exceeds the Exercise Price
on the original adjustment date; and
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(d) In the event of any change in the number of shares of Common
Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Exercise Price then in effect shall
forthwith be readjusted to such Exercise Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised or converted prior to such change been made upon the
basis of such change, but no further adjustment shall be made for the actual
issuance of Common Stock upon the exercise or conversion of any such Option or
Convertible Security.
SECTION 7.3 Adjustments of Exercise Price Upon Issuance of Additional
Shares of Common Stock. In the event the Company shall at any time after the
Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 7.2,
but excluding shares issued as a dividend or distribution as provided in Section
7.6 or upon a stock split or combination as provided in Section 7.5), without
consideration or for a consideration per share (determined pursuant to Section
7.4 hereof) less than the applicable Exercise Price in effect on the date of and
immediately prior to such issuance, then and in such event, such Exercise Price
shall be reduced, concurrently with such issuance, to such lower price per share
at which such Additional Shares of Common Stock are being issued (or deemed
issued).
SECTION 7.4. Determination of Consideration. For purposes of this Section
7.4, the consideration received by the Company for the issuance of any
Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property. Such consideration shall:
(i) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding amounts paid or payable for
accrued interest or accrued dividends;
(ii) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issuance, as
determined in good faith by the Board of Directors; and
(iii) in the event Additional Shares of Common Stock are issued
together with other shares of securities or other assets of the Company for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (i) and (ii) above, as determined in
good faith by the Board of Directors.
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(b) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to have
been issued pursuant to Section 7.2, relating to Options and Convertible
Securities, shall be determined by dividing:
(i) the total amount, if any, received or receivable by the
Company as consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Company upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise
of such Options or the conversion or exchange of such Convertible Securities.
SECTION 7.5. Adjustment for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the Original Issue Date for the
Warrants effect a subdivision of the outstanding Common Stock, the Exercise
Price of each Warrant then in effect immediately before that subdivision shall
be proportionately decreased and the number of shares of Common Stock issuable
upon exercise of such Warrant shall be proportionately increased. If the Company
shall at any time or from time to time after the Original Issue Date for the
Warrants combine the outstanding shares of Common Stock, the Exercise Price of
each Warrant then in effect immediately before the combination shall be
proportionately increased and the number of shares of Common Stock issuable upon
exercise of such Warrant shall be proportionately decreased. Any adjustment
under this Section 7.5 shall become effective at the close of business on the
date the subdivision or combination becomes effective.
SECTION 7.6. Adjustment for Certain Dividends and Distributions. In the
event the Company at any time or from time to time after the Original Issue Date
for the Warrants shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
Exercise Price for the Warrants then in effect shall be decreased as of the time
of such issuance or, in the event such a record date shall have been fixed, as
of the close of business on
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such record date, by multiplying the Exercise Price for the Warrants then in
effect by a fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution; provided,
however, if such record date shall have been fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Exercise Price for the Warrants shall be recomputed accordingly as of the
close of business on such record date and thereafter the Exercise Price for the
Warrants shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.
SECTION 7.7 Adjustments for Other Dividends and Distributions. In the
event the Company at any time or from time to time after the Original Issue Date
for the Warrants shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, then and
in each such event provision shall be made so that the holders of the Warrants
shall receive upon exercise thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company that
they would have received had their Warrants been exercised on the date of such
event and had thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them as
aforesaid during such period giving application to all adjustments called for
during such period, under this paragraph with respect to the rights of the
holders of the Warrants.
SECTION 7.8 Adjustment for Reclassification, Exchange, or Substitution.
If the Common Stock issuable upon the exercise of the Warrants shall be changed
into the same or a different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend provided for above, or a
reorganization, merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of the Warrants shall have the right
thereafter to convert each such share of Common Stock issuable upon the exercise
of the Warrants into the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification, or other
change, by holders of the number of
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shares of Common Stock for which such Warrants might have been exercised
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
SECTION 7.9 Adjustment for Merger or Reorganization. In case of any
consolidation or merger of the Company with or into another Company, each
Warrant shall thereafter be exercisable for the kind and amount of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Company deliverable upon exercise of such Warrant would
have been entitled upon such consolidation or merger; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions in this Article 7 set forth
with respect to the rights and interest thereafter of the holders of the
Warrants, to the end that the provisions set forth in this Article 7 (including
provisions with respect to changes in and other adjustments of the Exercise
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the exercise of the Warrants.
SECTION 7.10 Adjustment of Exercise price for Series B Warrants and Series
C Warrants. In addition to any other adjustment to the Exercise Price provided
hereunder, in the event that, as of the time of exercise of any of the Series B
Warrants or Series C Warrants, the average closing bid price of the Common Stock
for the five trading days immediately preceding the date of such exercise (the
"Average Bid Price") is less than the Exercise Price then in effect for the
Series B Warrants or the Series C Warrants, or both, as the case may be, then
such Exercise Price shall be decreased to equal the Average Bid Price; provided,
however, that notwithstanding the foregoing, if the Average Bid Price is less
than $2.75, the Exercise Price for the Series B Warrants, or the Series C
Warrants, or both, as the case may be, shall be deemed to be equal to $2.75. Any
adjustment under this Section 7.10 shall become effective immediately.
SECTION 7.11 Notice of Adjustment to Exercise Price. Whenever the Exercise
Price is required to be adjusted as provided in this Article 7, the Company
shall forthwith compute the adjusted Exercise Price and shall prepare a
certificate setting forth such adjusted Exercise Price and showing in reasonable
detail the facts upon which such adjustment is based. Whenever the Exercise
Price is adjusted, the Company shall promptly mail, or cause to be mailed, to
the Warrantholders a statement setting forth the adjustment and the reasons for
such adjustment.
SECTION 7.12 Form of Warrant Certificate. Irrespective of any adjustments
in the Exercise Price or the kind of Warrant Shares purchasable upon the
exercise of the Warrants, Warrant
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Certificates evidencing such Warrants theretofore or thereafter issued may
continue to express the same number and kind of Warrant Shares as are stated in
the Warrant Certificates initially issuable pursuant to this Agreement.
SECTION 7.13 No Impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Warrant Shares to be issued upon the exercise of
the Warrants from time to time outstanding will, when issued, be fully paid and
non-assessable. In addition, without limiting the generality of Section 6.1, the
Company shall take all such action as shall be necessary so that, after any
adjustment to the Exercise Price required hereunder, the total number of shares
of Common Stock or other capital stock of the Company then authorized by the
Amended Articles and available for the purpose of issuance upon such exercise
shall exceed the total number of shares of Common Stock issuable upon the
exercise of all of the outstanding Warrants. The Company will not, by amendment
of its Articles of Incorporation 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 hereunder by the Company, but will
at all times in good faith assist in the carrying out of all the provisions of
this Section 7 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrantholders against
impairment.
ARTICLE 8
NOTICES TO WARRANTHOLDERS
SECTION 8.1 Notices to Warrantholders
(a) Notices to holders of Warrants shall be mailed to such holders at
the addresses of such holders as they appear in the Warrant Register. Any such
notice shall be sufficiently given if sent by first-class certified or
registered mail, postage prepaid, facsimile or overnight courier.
(b) In the event (i) of any consolidation or merger or binding
exchange of interests to which the Company is a party and for which approval of
the Investor or any holders of equity interests of the Company is required, or
of the conveyance or sale of all or substantially all of the assets of the
Company, or of any change of the Common Stock or other securities issuable upon
exercise of the Warrants; or (ii) the Company shall make any distribution in
respect of the Common Stock; or (iii) of the voluntary or involuntary
dissolution, liquidation or winding up of the Company; then the Company shall
send to each Warrantholder at least thirty days prior to the applicable date
hereinafter
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specified, a written notice stating (A) the date for the determination of the
holders of Common Stock (or other securities issuable upon the exercise of the
Warrants) entitled to receive any such distribution, (B) the initial expiration
date set forth in any offer for exchange of interests, or (C) the date on which
any such consolidation, merger, exchange of interests, conveyance, transfer,
reclassification, dissolution, liquidation or winding up is expected to become
effective or consummated, and the date as of which it is expected that holders
of record of Common Stock (or other securities issuable upon the exercise of the
Warrants) shall be entitled to exchange such Common Stock for securities or
other property, if any, deliverable upon such reclassification, consolidation,
merger, exchange of interests, conveyance, transfer, dissolution, liquidation or
winding up.
SECTION 8.2 Notices to Company. Any notice or demand authorized by this
Agreement to be given to or on the Company shall be delivered in person or by
facsimile transmission, by courier guaranteeing overnight delivery or mailed by
first-class United States certified or registered mail, postage prepaid, to the
Company as follows:
Medcross, Inc.
13751 South Wadsworth Park Drive
Suite 200
Draper, Utah 84020
Attention: John W. Edwards, President
Telecopier: 801-576-5075
with copy to:
David E. Hardy, Esq.
60 E. South Temple
Suite 2200
Salt Lake City, Utah 84111
Telecopier: (801) 364-6664
SECTION 8.3 Receipt of Notice. Any notice hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered, sent by
overnight courier or sent by United States mail, or by telex or facsimile
transmission, and will be deemed received (a) if sent by certified or registered
mail, return receipt requested, when actually received, (b) if sent by overnight
courier, when actually received, (c) if sent by telex or facsimile transmission,
on the date sent provided confirmatory notice is sent by overnight courier or by
first-class mail, postage prepaid, and (d) if delivered by hand, on the date of
receipt.
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<PAGE>
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Arbitration
(a) To the fullest extent not prohibited by law, any controversy,
claim or dispute arising out of or relating to this Agreement, including the
determination of the scope or applicability of this Agreement to arbitrate,
shall be settled by final and binding arbitration in accordance with the rules
then in effect of the American Arbitration Association ("AAA"), as modified or
supplemented under this section, and subject to the Federal Arbitration Act, 9
U.S.C. (S)(S)1-16. The decision of the arbitrators shall be final and binding;
provided, however, that where a remedy for breach is prescribed hereunder or
limitations on remedies are prescribed, the arbitrators shall be bound by such
restrictions, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
(b) If any series of claims arising out of the same or related
transactions shall involve claims which are arbitrable under the preceding
paragraph and claims which are not, the arbitrable claims shall first be finally
determined before suit may be instituted upon the others and the parties will
take such action as may be necessary to toll any statutes of limitations, or
defenses based upon the passage of time, that are applicable to such non-
arbitrable claims during the period in which the arbitrable claims are being
determined.
(c) In the event of any controversy, claim or dispute that is subject
to arbitration under this Section 9.1, any party thereto may commence
arbitration hereunder by delivering notice to the other party or parties
thereto. Within five business days of delivery of a list of qualified potential
arbitrators from AAA, such parties shall attempt to agree on one arbitrator;
provided that if such parties cannot agree on one arbitrator within such time
period, each party to the controversy, claim or dispute shall within five
business days thereafter appoint one arbitrator, and the two arbitrators so
appointed shall within five business days of their appointment mutually agree
upon and appoint one additional arbitrator (or, if such arbitrators cannot agree
on an additional arbitrator, the additional arbitrator shall be appointed by the
AAA as provided under its rules); provided that persons eligible to be selected
as arbitrators shall be limited to attorneys at law who (i) are on the AAA's
Large, Complex Case Panel, (ii) have practiced law for at least fifteen years as
an attorney specializing in either general commercial litigation or general
corporate and commercial matters and (iii) are experienced in matters involving
the telecommunications industry.
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<PAGE>
(d) The arbitration hearing shall commence no later than thirty
business days after the completion of the selection of the arbitrators or at
such other time as the parties shall reasonably agree. Consistent with the
intent of the parties hereto that the arbitration be conducted as expeditiously
as possible, the parties agree that (i) discovery shall be limited to the
production of such documents and the taking of such depositions as the
arbitrator(s) determine are reasonably necessary to the resolution of the
controversy, claim or dispute and (ii) the arbitrator(s) shall limit the
presentation of evidence by each side in such arbitration to not more than ten
full days (or the equivalent thereof) or such shorter period as the
arbitrator(s) shall determine to be necessary in order to resolve the
controversy, claim or dispute. The arbitrator(s) shall be instructed to render a
decision within thirty calendar days of the close of the arbitration hearing. If
arbitration has not been completed within one hundred and twenty days of the
commencement of such arbitration hearing, any party to the arbitration may
initiate litigation upon ten days written notice to the other party(ies);
provided, however, that if one party has requested the other to participate in
an arbitration and the other has failed to participate, the requesting party may
initiate litigation before the expiration of such one hundred twenty-day period;
and provided, further, that if any party to the arbitration fails to meet any of
the time limits set forth in this Section 9.1 or set by the arbitrators in the
arbitration, any other party may provide ten days written notice of its intent
to institute litigation with respect to the controversy, claim or dispute
without the need to continue or complete the arbitration and without awaiting
the expiration of such one hundred twenty-day period. The parties hereto further
agree that if any of the rules of the AAA are contrary to or conflict with any
of the time periods provided for hereunder, or with any other aspect of the
matters set forth in this Section 9.1, that such rules shall be modified in all
respects necessary to accord with the provisions of this Section 9.1 (and the
arbitrators shall be so instructed by the parties).
(e) The arbitrators shall base their decision on the terms of this
Agreement and the law of the State of Delaware, regardless of the law that might
be applicable under conflicts of law principles, and shall render their decision
in writing and include in such decision a statement of the findings of fact and
conclusions of law upon which the decision is based. Each party agrees to
cooperate fully with the arbitrator(s) to resolve any controversy, claim or
dispute. The arbitrator(s) shall not be empowered to award punitive damages or
damages in excess of actual damages. The venue for all arbitration proceedings
shall be Washington, D.C.
SECTION 9.2 Payment of Taxes. The Company covenants and agrees that it
will pay when due and payable all documentary, stamp and other taxes
attributable to the issuance or delivery of the
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<PAGE>
Warrant Certificates or of the Warrant Shares purchasable upon the exercise of
Warrants; provided, however, the Company shall not be required to pay any tax or
taxes that may be payable in respect of any transfer involving the issue of any
Warrant Certificate(s) or any certificate(s) for Warrant Shares in a name other
than that of the Warrantholder of such exercised Warrant Certificate(s).
SECTION 9.3 Amendment.
(a) The Company may modify this Agreement and the terms of the
Warrants only with the consent of the Warrantholders representing at least a
majority of the Warrant Shares for the purpose of adding any provision to or
changing in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of the holders of the outstanding Warrants;
provided, however, that no such modification that (i) materially and adversely
affects the exercise rights of the holders of the Warrants, or (ii) reduces the
percentage required for modification, may be made without the consent of the
holder of all outstanding Warrants.
(b) Any such modification or amendment will be conclusive and binding
on all present and future holders of Warrant Certificates whether or not they
have consented to such modification or amendment or waiver and whether or not
notation of such modification or amendment is made upon such Warrant
Certificates. Any instrument given by or on behalf of any holder of a Warrant
Certificate in connection with any consent to any modification or amendment will
be conclusive and binding on all subsequent holders of such Warrant Certificate.
SECTION 9.4 Termination. This Agreement shall terminate on or upon (a)
the repurchase by the Company of all Warrants, (b) the fifteenth day following
the date on which all of the Warrant Shares have been issued upon the exercise
of all Warrants issued pursuant hereto, or (c) upon expiration of the Exercise
Period applicable to the Series B Warrants and the Series C Warrants.
SECTION 9.5 Reports to Warrantholders. The Company will cause to be
delivered, by first-class mail, postage prepaid, facsimile or overnight courier,
to each Warrantholder at such Warrantholder's address appearing on the Warrant
Register, a copy of any reports delivered by the Company to any of the holders
of Series M Preferred Stock or to holders of the Common Stock.
SECTION 9.6 GOVERNING LAW. THE LAWS OF THE STATE OF DELAWARE SHALL GOVERN
THIS AGREEMENT AND THE WARRANT CERTIFICATES WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
SECTION 9.7 Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Warrantholders
and the holders of Warrant Shares any
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<PAGE>
legal or equitable right, remedy or claim under this Agreement; this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrantholders
and the holders of Warrant Shares.
SECTION 9.8 Counterparts. This Agreement may be executed in any number of
counterparts, and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 9.9 Severability of Provisions. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.10 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement.
SECTION 9.11 Access to Company Records. So long as Warrants remain
outstanding, the Investor shall be entitled to review the financial and
corporate books and records of the Company and to meet with the executive
officers and independent accountants of the Company for purposes reasonably
related to the Investor's ownership of the Warrants, which review and/or
meetings shall take place at reasonable times during the normal business hours
of the Company and in such a manner as to not unduly interfere with the conduct
of the Company's business.
- 19 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed, as of the date first above written.
MEDCROSS, INC.
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
WINTER HARBOR, L.L.C.
By: First Media, L.P., its General Manager/Member
By: First Media Corporation, its sole
General Partner
By:
Name:
------------------------------------
Title:
-----------------------------------
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<PAGE>
EXHIBIT A-1
Medcross, Inc.
Common Stock Purchase Warrant
Number ____
Series A Warrant Certificate Evidencing Right to Purchase
______ Shares of Common Stock
This is to certify that WINTER HARBOR, L.L.C., a Delaware limited liability
company, or assigns, is entitled to purchase at any time or from time to time up
to the above-referenced number of shares of Common Stock ("Common Stock"), of
Medcross, Inc., a Florida corporation (the "Company"), for the Exercise Price
for the Series A Warrants specified in the Warrant Agreement, dated as of
October __, 1997, among the Company and Winter Harbor, L.L.C. (the "Warrant
Agreement"), pursuant to which this Warrant Certificate is issued. All rights of
the holder of this Warrant Certificate are subject to the terms and provisions
of the Warrant Agreement, copies of which are available for inspection the
Company's office located at 13751 South Wadsworth Park Drive, Suite 200, Draper,
Utah 84020 (the "Office"). The Expiration Date (as defined in the Warrant
Agreement) of the right to purchase Common Stock pursuant to this Certificate is
March 31, 2000.
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES OF
COMMON STOCK THAT MAY BE PURCHASED UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE LAW.
SUCH WARRANTS AND SHARES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE LAW, OR (2) AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Subject to the provisions of the Act, applicable state laws and such
Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable, in whole or in part, at the Office by the holder hereof in person
or by a duly authorized attorney, upon surrender of this Warrant Certificate,
together with the assignment hereof duly endorsed. Until transfer of this
Warrant Certificate on the books of the Company, the Company may treat the
registered holder hereof as the owner hereof for all purposes.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ___ day of October, 1997 in Draper, Utah by its proper
corporate officers thereunto duly authorized.
MEDCROSS, INC.
a Florida corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Attest:
--------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE>
Exhibit A-2
Medcross, Inc.
Common Stock Purchase Warrant
Number ____
Series B Warrant Certificate Evidencing Right to Purchase
______ Shares of Common Stock
This is to certify that WINTER HARBOR, L.L.C., a Delaware limited liability
company, or assigns, is entitled to purchase at any time or from time to time up
to the above-referenced number of shares of Common Stock ("Common Stock"), of
Medcross, Inc., a Florida corporation (the "Company"), for the Exercise Price
for the Series B Warrants specified in the Warrant Agreement, dated as of
October __, 1997, among the Company and Winter Harbor, L.L.C. (the "Warrant
Agreement"), pursuant to which this Warrant Certificate is issued. All rights of
the holder of this Warrant Certificate are subject to the terms and provisions
of the Warrant Agreement, copies of which are available for inspection the
Company's office located at 13751 South Wadsworth Park Drive, Suite 200, Draper,
Utah 84020 (the "Office"). The Expiration Date (as defined in the Warrant
Agreement) of the right to purchase Common Stock pursuant to this Certificate is
September 30, 2002.
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES OF
COMMON STOCK THAT MAY BE PURCHASED UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE LAW.
SUCH WARRANTS AND SHARES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE LAW, OR (2) AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Subject to the provisions of the Act, applicable state laws and such
Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable, in whole or in part, at the Office by the holder hereof in person
or by a duly authorized attorney, upon surrender of this Warrant Certificate,
together with the assignment hereof duly endorsed. Until transfer of this
Warrant Certificate on the books of the Company, the Company may treat the
registered holder hereof as the owner hereof for all purposes.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ___ day of October, 1997 in Draper, Utah by its proper
corporate officers thereunto duly authorized.
MEDCROSS, INC.
a Florida corporation
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Attest:
---------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE>
Exhibit A-3
Medcross, Inc.
Common Stock Purchase Warrant
Number ____
Series C Warrant Certificate Evidencing Right to Purchase
______ Shares of Common Stock
This is to certify that WINTER HARBOR, L.L.C., a Delaware limited liability
company, or assigns, is entitled to purchase at any time or from time to time up
to the above-referenced number of shares of Common Stock ("Common Stock"), of
Medcross, Inc., a Florida corporation (the "Company"), for the Exercise Price
for the Series C Warrants specified in the Warrant Agreement, dated as of
October __, 1997, among the Company and Winter Harbor, L.L.C. (the "Warrant
Agreement"), pursuant to which this Warrant Certificate is issued. All rights of
the holder of this Warrant Certificate are subject to the terms and provisions
of the Warrant Agreement, copies of which are available for inspection the
Company's office located at 13751 South Wadsworth Park Drive, Suite 200, Draper,
Utah 84020 (the "Office"). The Expiration Date (as defined in the Warrant
Agreement) of the right to purchase Common Stock pursuant to this Certificate is
September 30, 2002.
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE SHARES OF
COMMON STOCK THAT MAY BE PURCHASED UPON EXERCISE HEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE LAW.
SUCH WARRANTS AND SHARES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE LAW, OR (2) AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Subject to the provisions of the Act, applicable state laws and such
Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable, in whole or in part, at the Office by the holder hereof in person
or by a duly authorized attorney, upon surrender of this Warrant Certificate,
together with the assignment hereof duly endorsed. Until transfer of this
Warrant Certificate on the books of the Company, the Company may treat the
registered holder hereof as the owner hereof for all purposes.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ___ day of October, 1997 in Draper, Utah by its proper
corporate officers thereunto duly authorized.
MEDCROSS, INC.
a Florida corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Attest:
---------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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<PAGE>
EXHIBIT B
Election to Purchase
(To be executed by the registered holder if
such holder desires to exercise any Warrant Certificate)
The undersigned, the registered holder of the attached Warrant Certificate,
hereby irrevocably elects to exercise Warrants represented by such Warrant
Certificate and acquire an aggregate of ______________ shares of Common Stock of
Medcross, Inc., a Florida corporation, and herewith tenders payment for such
Common Stock in the amount of $__________ (by certified check or official bank
check) in accordance with the terms hereof. The undersigned requests that the
aforementioned Common Stock be registered in the name of _______________, whose
address is ________________________ _________________________.
Dated:___________________
Name of registered holder of Warrant Certificate:
- --------------------------------------------------------------------------------
(please print)
Address of registered holder:
---------------------------------------------------
Signature:
------------------------------
(Note: the signature to the foregoing Election must correspond to the name as
written upon the face of the Warrant Certificate in every particular, without
alteration or any change whatsoever.)
<PAGE>
Exhibit 4(y)
ARTICLES OF AMENDMENT TO THE AMENDED
AND RESTATED ARTICLES OF INCORPORATION
OF
MEDCROSS, INC.
Pursuant to Article III of the Amended and Restated Articles of
Incorporation of the Corporation (the "Articles of Incorporation"), and the
provisions of Section 607.0602 of the Florida Business Corporation Act, the
board of directors of the Corporation (the "Board of Directors") has resolved to
amend Article III of the Articles of Incorporation.
1. The name of the corporation is Medcross, Inc.
2. Article III is hereby amended by adding Section III(g), which shall read in
its entirety as follows:
"(g) Of the 500,000 shares of Preferred Stock authorized hereunder,
29,000 shares of Preferred Stock shall be designated as Series M Participating
Convertible Preferred Stock (the "Series M Preferred Stock"), shall have a par
value of $10.00 per share, and shall have the following rights and preferences:
1. Dividends.
(a) Priority of Dividends. No dividends shall be declared or set
aside for the Corporation's Common Stock, 12% Cumulative Convertible Preferred
Stock, Class A Preferred Stock, Class B Preferred Stock, Class C Preferred
Stock, Series D Preferred Stock or, except as permitted pursuant to Section
III(g)(3)(b), any other class of capital stock of the Corporation (such Common
Stock, 12% Cumulative Convertible Preferred Stock, Class A Preferred Stock,
Class B Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or,
except as permitted pursuant to Section III(g)(3)(b), other class of capital
stock of the Corporation being collectively referred to as "Junior Stock"),
unless at the same time or prior thereto all accrued and unpaid dividends on the
Series M Preferred Stock shall be declared, set aside and paid on all the then
outstanding shares of Series M Preferred Stock. In the event that funds legally
available for distribution on any Dividend Payment Date (as defined as Section
1(b)) are insufficient to fully pay the cash dividend due and payable on such
Dividend Payment Date to all holders of outstanding Series M Preferred Stock,
then all funds legally available for distribution shall be paid in cash to
holders of Series M Preferred Stock pro rata in accordance with the number of
shares of Series M Preferred Stock held by such
<PAGE>
holder. Any remaining dividend amount owed to holders of the Series M Preferred
Stock shall be accrued in accordance with Section 1(b). After the payment of all
accrued and unpaid dividends on the Series M Preferred Stock in accordance with
this Section 1, the holders of the shares of Series M Preferred Stock shall be
entitled to participate with the Common Stock in the issuance of any dividends
on the Common Stock on a per share basis.
(b) Dividend Rate; Dividend Payment Dates. Each holder of the
Series M Preferred Stock shall be entitled to receive when and as declared by
the Board of Directors, out of funds legally available therefor, cumulative cash
dividends, in preference and priority to dividends on any Junior Stock, that
shall accrue on the Liquidation Price (as defined in Section 2(a)) of each share
of the Series M Preferred Stock at the rate of ten percent (10%) per annum, from
and including the Original Issue Date of such share (as defined in Section
4(f)(i)(B)) to and including the date on which such share ceases to be
outstanding. The accrued dividends will be adjusted for stock splits, stock
dividends, combinations, recapitalizations, reclassifications and similar events
(together referred to as "Recapitalization Events") which affect the number of
outstanding shares of the Series M Preferred Stock. Accrued dividends on the
Series M Preferred Stock shall be payable out of funds legally available
therefor on January 1, 1998 and thereafter quarterly on April 1, July 1,
October 1, and January 1 of each year (each a "Dividend Payment Date"), to the
holders of record of the Series M Preferred Stock as of the close of business on
the applicable record date. Dividends shall be fully cumulative and shall accrue
on a daily basis based on a 365-day or 366-day year, as the case may be, without
regard to the occurrence of a Dividend Payment Date and whether or not such
dividends have been declared and whether or not there are any unrestricted funds
of the Corporation legally available for the payment of dividends. The amount of
dividends "accrued" with respect to any share of Series M Preferred Stock as of
the first Dividend Payment Date after the Original Issue Date, or as of any
other date after the Original Issue Date that is not a Dividend Payment Date,
shall be calculated on the basis of the actual number of days elapsed from and
including the Original Issue Date, in the case of the first Dividend Payment
Date and any date of determination prior to the first Dividend Payment, or from
and including the last preceding Dividend Payment Date, in the case of any other
date of determination, to and including such date of determination which is to
be made, in each case based on a year of 365 or 366 days, as the case may be
(the "Dividend Period"). Whenever the Board of Directors of the Corporation
declares any dividend pursuant to this Section 1, notice of the applicable
record date and related
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<PAGE>
Dividend Payment Date shall be given in accordance with Section 4(n).
(c) Compounding of Dividends; Addition to Conversion Value and to
Liquidation Price. On each Dividend Payment Date, all dividends that have
accrued on each share of Series M Preferred Stock during the immediately
preceding Dividend Period shall, to the extent not paid on such Dividend Payment
Date for any reason (whether or not such unpaid dividends have been earned or
declared or there are any unrestricted funds of the Corporation legally
available for the payment of dividends), be added to the Conversion Value (as
defined in Section 4(b)) of such share effective as of such Dividend Payment
Date and shall remain a part thereof. All dividends that have accrued on each
share of Series M Preferred Stock during any Dividend Period shall, to the
extent not paid in full on the first Dividend Payment Date after the end of such
Dividend Period for any reason (whether or not such unpaid dividends have been
earned or declared or there are any unrestricted funds of the Corporation
legally available for the payment of dividends), be added to the Liquidation
Price of such share effective as of the first Dividend Payment Date after the
last day of such Dividend Period and shall remain a part thereof to and
including the date on which the Liquidation Price or Redemption Price of such
share is paid in full to the holder of such share pursuant to Sections 2 or 6,
respectively. No accrued dividends (or dividends accrued thereon) which have
been added to the Liquidation Price or Conversion Value of any Series M
Preferred Stock may be subsequently declared or, except in accordance with
Section 2 or 6, paid by the Corporation without the consent of the holders of a
majority of the shares of Series M Preferred Stock.
(d) Pro Rata Declaration and Payment of Dividends. All dividends
paid with respect to shares of the Series M Preferred Stock pursuant to this
Section 1 shall be declared and paid pro rata to all the holders of the shares
of Series M Preferred Stock outstanding as of the applicable record date.
2. Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the sale of all or substantially
all of its assets, or the merger or consolidation of the Corporation as a result
of which the then shareholders of the Corporation do not continue to hold more
than a 50% interest in the successor entity or a transaction or series of
related transactions in which the Corporation's shareholders transfer more than
50% of the voting power of the Corporation (each such event, a "Liquidation"),
except as provided in Section 2(b) below, the holder of each share of Series M
Preferred Stock
-3-
<PAGE>
then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders before payment to the
holders of Common Stock by reason of their ownership thereof, an amount (the
"Liquidation Price"), payable in cash (and, to the extent sufficient cash is not
available for such payment, property at its fair market value), equal to (i)
$2,750.00 per share, plus (ii) an amount equal to all dividends accrued on such
share of Series M Preferred Stock since the Original Issue Date thereof which,
pursuant to Section 1(c), have been added to and remain part of the Liquidation
Price as of such time of determination, whether or not such unpaid dividends
have been earned or declared or there are any unrestricted funds of the
Corporation legally available for the payment of dividends (the "Accrued
Dividend Amount"), plus (iii) the difference in amount, if any, between the
Accrued Dividend Amount and the amount necessary to effect a cumulative
preferred return at the rate of ten percent (10%) per annum compounded annually
since the Original Issue Date thereof.
(b) If upon any such Liquidation the remaining assets of the
Corporation available for distribution to its shareholders shall be insufficient
to pay the holders of shares of Series M Preferred Stock and the holders of
shares of the Class B Preferred Stock, Class C Preferred Stock and Series D
Preferred Stock the full amount to which they shall be entitled, then the entire
assets of the Corporation shall be distributed among the holders of shares of
Series M Preferred Stock and the holders of shares of the Class B Preferred
Stock, the Class C Preferred Stock and the Series D Preferred Stock ratably in
proportion to the full amount to which such holders are entitled.
(c) After the payment of all preferential amounts required to be
paid to the holders of Series M Preferred Stock and the holders of Preferred
Stock, other than the Series M Preferred Stock, upon the Liquidation of the
Corporation, the holders of the shares of Series M Preferred Stock shall be
entitled to participate with the Common Stock in the distribution of all
remaining assets and funds of the corporation available for distribution to its
shareholders.
3. Voting Rights.
(a) Each holder of shares of Series M Preferred Stock shall be
entitled to votes equal in the aggregate to the number of votes to which the
number of whole shares of Common Stock into which the shares of Series M
Preferred Stock held by such holder are convertible would be entitled (as
adjusted from time to time pursuant to Section 4 hereof), at each meeting of the
shareholders of the Corporation (and for purposes of written actions of
shareholders in lieu of meetings) with respect to any
-4-
<PAGE>
and all matters presented to the shareholders of the Corporation for their
action or consideration. Except as otherwise provided herein or required by law,
holders of shares of Series M Preferred Stock shall vote with the holders of
shares of Common Stock and any other class of stock entitled to vote and not as
a separate class. Any class vote pursuant to this Section 3 or required by law
shall be determined by the holders of a majority of the shares of Series M
Preferred Stock as of the applicable record date.
(b) The Corporation shall not amend, alter or repeal the
preferences, privileges, special rights or other powers of the Series M
Preferred Stock so as to affect adversely the Series M Preferred Stock, without
the written consent or affirmative vote of the holders of a majority of the then
outstanding shares of Series M Preferred Stock, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class. For
this purpose, without limiting the generality of the foregoing, the
authorization or issuance of any Preferred Stock having an equal right or a
preference or priority over the Series M Preferred Stock as to the right to
receive dividends or amounts distributable upon Liquidation of the Corporation
shall be deemed to affect adversely the Series M Preferred Stock. In addition,
the holders of the Series M Preferred Stock shall have the right to vote as a
class on all matters requiring their vote or approval under, and in the manner
set forth in, the Florida Business Corporation Act.
(c) After the Original Issue Date, the Corporation shall not, and
shall not permit any of its subsidiaries to, without the consent or affirmative
vote of the holders a majority of the then outstanding shares of the Series M
Preferred Stock given in writing or by vote at a meeting, consenting or voting
(as the case may be) as a separate class:
(i) amend, modify or repeal the Articles of Incorporation or
Bylaws of the Corporation or the Articles of Incorporation, Bylaws, Operating
Agreement or other organizational document of any subsidiary, or take any action
with respect to the creation, authorization, designation or issuance of any
class or series of equity securities of the Corporation or any subsidiary or any
option, warrants or other rights to receive any class or series of equity
securities of the Corporation or any subsidiary (other than pursuant to employee
benefit or incentive plans in effect as of the date hereof or described in the
Corporation's definitive proxy statement for its 1997 annual shareholders
meeting);
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(ii) effect any merger, recapitalization or consolidation with
or into another entity, or enter into any binding share exchange or similar
transaction with any entity;
(iii) sell, transfer, lease or dispose of all or substantially
all of its assets in one transaction or a series of related transactions, or
liquidate, dissolve or wind-up its affairs;
(iv) sell, transfer, dispose of, lease, pledge or encumber (a
"disposition"), or engage in a series of related dispositions, of any assets
(including rights) having a value, in the aggregate for such transaction or
series of transactions, in excess of $250,000;
(v) lease or otherwise acquire any assets having a value, in
the aggregate, in excess of $250,000;
(vi) incur or prepay any indebtedness (or guarantee obligations
of others or enter into any other guarantee or credit support arrangement) other
than trade debt incurred in the ordinary course of business;
(vii) pay any dividend, or make other distributions or
redemption payments with respect to any of its equity interests;
(viii) conduct or engage in any business other than the
business in which it is presently engaged (and such other businesses as are
reasonably ancillary thereto);
(ix) form and own, in whole or in part, one or more
corporations, trusts, partnerships or other subsidiary entity;
(x) acquire, own or hold for investment any equity interests in
another entity or any option, warrant, or other debt or equity interest
convertible into or evidencing the right to acquire (whether or not for
additional consideration) any equity interest in such entity;
(xi) enter into any transaction or agreement (or amend any
agreement) with any affiliate of the Corporation or any of the Corporation's
shareholders;
(xii) adopt or amend its annual budget;
(xiii) hire, employ or discharge any of its executive officers,
managers or key employees;
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(xiv) engage or discharge its independent certified public
accountants;
(xv) initiate or settle any litigation involving an amount in
controversy in excess of $250,000;
(xvi) adopt or amend any employee benefit plan or program;
(xvii) enter into any commitment or series of related
commitments involving a payment or payments of an aggregate amount in excess of
$500,000;
(xviii) file for voluntary or involuntary protection under
federal or state bankruptcy or insolvency laws or make any assignment for the
benefit of creditors; or
(xix) take any action that would make it impossible for the
Corporation or any of its subsidiaries to carry on its ordinary business or take
any action that is in contravention of these Articles of Incorporation.
(d) In addition to and distinct from the matters described in
Sections 3(b) and 3(c) above, holders of Series M Preferred Stock, voting as a
separate class, shall have the right to elect two individuals to be members of
the Corporation's Board of Directors. Each director duly elected to the Board of
Director of the Corporation in accordance with this Section 3(d) shall be
subject to removal only at the request of the holders of a majority of the
shares of Series M Preferred Stock.
4. Conversion at the Option of a Holder. The holders of the Series M
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right to Convert. Each share of Series M Preferred Stock shall
be convertible, at the option of the holder thereof, at any time and from time
to time prior to the fifth anniversary of the Original Issue Date, into such
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing (i) the Conversion Value (as defined below) of such share determined
as of such time by (ii) the Conversion Price (as defined below) determined as of
such time. In the event of a Liquidation of the Corporation, the Conversion
Rights shall terminate at the close of business on the last full day preceding
the date fixed for the payment of any amounts distributable on Liquidation to
the holders of Series M Preferred Stock.
(b) Conversion Value. The "Conversion Value" measured per share of
the Series M Preferred Stock shall be the sum of (A)
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$2,750.00, plus (B) an amount equal to all dividends accrued on such share of
Series M Preferred Stock since the Original Issue Date which, pursuant to
Section 1(c), have been added to and remain part of the Conversion Value at such
time, whether or not such unpaid dividends have been earned or declared or there
are any unrestricted funds of the Corporation legally available for the payment
of dividends, plus (C) an amount equal to all dividends accrued on such share of
Series M Preferred Stock since the most recent Dividend Payment Date through and
including such time, whether or not such unpaid dividends have been earned or
declared or there are any unrestricted funds of the Corporation legally
available for the payment of dividends.
(c) Conversion Price. The Conversion Price at which shares of
Common Stock shall be deliverable upon conversion of Series M Preferred Stock
without the payment of additional consideration by the holder thereof shall
initially be $2.75 or, in the case of an automatic conversion pursuant to
Section 5 below, the lower of $2.75 or 50% of the average closing bid price of
the Common Stock for the ten trading days immediately preceding the fifth
anniversary of the Original Issue Date (the "Conversion Price"). Such initial
Conversion Price, and the rate at which shares of Series M Preferred Stock may
be converted into shares of Common Stock, shall be subject to adjustment as
provided in this Section 4.
(d) Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of the Series M Preferred Stock pursuant to this
Section 4 or Section 5. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the then effective Conversion Price.
(e) Mechanics of Conversion.
(i) In order for a holder of Series M Preferred Stock to convert
shares of Series M Preferred Stock into shares of Common Stock, such holder
shall surrender the certificate or certificates for such shares of Series M
Preferred Stock, at the office of the transfer agent for the Series M Preferred
Stock (or at the principal office of the Corporation if the Corporation serves
as its own transfer agent), together with written notice that such holder elects
to convert all or any number of the shares of Series M Preferred Stock
represented by such certificate or certificates. If required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or its attorney duly
authorized in writing. The date of receipt of such certificates and notice by
the
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transfer agent (or by the Corporation if the Corporation serves as its own
transfer agent) shall be the conversion date ("Conversion Date"). The
Corporation shall, as soon as practicable after the Conversion Date, issue and
deliver at such office to such holder of Series M Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any fraction of a share. As of
the Conversion Date, the person entitled to receive certificates of Common Stock
shall be regarded for all corporate purposes as the holder of the number of
shares of Common Stock to which it is entitled upon the conversion.
(ii) The Corporation shall at all times when the Series M
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series M Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series M Preferred Stock.
(iii) All shares of Series M Preferred Stock which shall have
been surrendered for conversion as herein provided in this Section 4 or which
shall have been automatically converted pursuant to Section 5 shall no longer be
deemed to be outstanding and all rights with respect to such shares shall
immediately cease and terminate on the Conversion Date, in the case of
conversions pursuant to this Section 4, or the fifth anniversary of the Original
Issue Date, in the case of automatic conversions pursuant to Section 5, except
only the right of the holders thereof to receive shares of Common Stock in
exchange therefor. Any shares of Series M Preferred Stock so converted shall be
retired and canceled and shall not be reissued, and the Corporation may from
time to time take such appropriate action as may be necessary to reduce the
authorized Series M Preferred Stock accordingly.
(f) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Section 4(f),
the following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding (I) options granted to employees or issued to consultants
of the Corporation or warrants which, in each such case, are outstanding as of
the Original Issue Date, (II) any warrants issued in connection with or as a
direct result of the issuance of Series M Preferred Stock
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pursuant to the Securities Purchase Agreement dated as of September 30, 1997, by
and between the Corporation and Winter Harbor, L.L.C. (the "Securities Purchase
Agreement"), or (III) options granted to employees or consultants pursuant to
stock option plans adopted by the Board of Directors and approved by the
Compensation Committee of the Board of Directors after the Original Issue Date.
(B) "Original Issue Date" shall mean the date on which a
share of Series M Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 4(f)(iii) below, deemed
to be issued) by the Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable:
(I) upon conversion of shares of Class B Preferred
Stock, Class C Preferred Stock, Series D Preferred Stock or Series M Preferred
Stock outstanding on the Original Issue Date;
(II) upon the exercise of Warrants issued under the
Securities Purchase Agreement;
(III) as a dividend or distribution on Class B
Preferred Stock, Class C Preferred Stock, Series D Preferred Stock or Series M
Preferred Stock;
(IV) in connection with an acquisition or other
transaction by the Corporation, in either case approved by the holders of at
least a majority of the then outstanding shares of the Series M Preferred Stock,
unless the Corporation agrees to include such issuance in the definition of
Additional Shares of Common Stock in connection with obtaining the approval of
the holders of at least a majority of the then outstanding shares of the Series
M Preferred Stock to such acquisition or other transaction;
(V) by reason of a dividend, stock split, split-up
or other distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common Stock by the foregoing clauses (I), (II), (III) and
(IV) or this clause (V); or
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(VI) upon the exercise of options excluded from the
definition of "Option" in Section 4(f)(i)(A).
(ii) Adjustment of Conversion Price. If the consideration per
share (determined pursuant to Section 4(f)(v)) for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to, the
issuance of such Additional Shares of Common Stock, the Conversion Price shall
be adjusted to such lower price per share at which such Additional Shares of
Common Stock are being issued or deemed issued.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock. If the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities and the exercise of such Options therefor, shall
be deemed to be Additional Shares of Common Stock issued as of the time of such
issuance or, in case such a record date shall have been fixed, as of the close
of business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 4(f)(v) hereof) of such Additional Shares of
Common Stock would be less than the Conversion Price in effect on the date of
and immediately prior to such issuance, or such record date, as the case may be,
and provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(A) No further adjustment in the Conversion Price shall be
made upon the subsequent issuance of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issuance thereof (or upon the
occurrence of a record date with respect thereto), and
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any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) No readjustment pursuant to clause (B) above shall
have the effect of increasing the Conversion Price to an amount which exceeds
the Conversion Price on the original adjustment date; and
(D) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any Option or
Convertible Security, including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised or converted prior to such change been made upon the
basis of such change, but no further adjustment shall be made for the actual
issuance of Common Stock upon the exercise or conversion of any such Option or
Convertible Security.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation shall at any time after
the Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
4(f)(iii), but excluding shares issued as a dividend or distribution as provided
in Section 4(h) or upon a stock split or combination as provided in Section
4(g)), without consideration or for a consideration per share (determined
pursuant to Section 4(f)(v) hereof) less than the Conversion Price in effect on
the date of and immediately prior to such issuance, then and in such event, the
Conversion Price shall be reduced, concurrently with such issuance, to such
lower consideration per share at which such Additional Shares of Common Stock
are being issued (or deemed issued).
(v) Determination of Consideration. For purposes of this
Section 4(f), the consideration received by the Corporation for the issuance of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be computed at
the aggregate of cash received by the Corporation,
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excluding amounts paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issuance, as
determined in good faith by the Corporation's Board of Directors; and
(III) in the event Additional Shares of Common Stock are
issued together with other shares of securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Corporation's Board of Directors.
(B) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Section 4(f)(iii), relating to Options and
Convertible Securities, shall be determined by dividing:
(I) the total amount, if any, received or receivable by
the Corporation as consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
(II) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(g) Adjustment for Stock Splits and Combinations. If the Corporation
shall at any time or from time to time after the Original Issue Date for the
Series M Preferred Stock effect a subdivision of the outstanding Common Stock,
the Conversion Price then in effect immediately before that subdivision shall be
proportionately decreased and the number of shares of Common Stock issuable upon
conversion of a share of the Series M Preferred Stock shall be proportionately
increased. If the Corporation shall at any time or from time to time after the
Original Issue Date for the Series M Preferred Stock combine the
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outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the combination shall be proportionately increased and the
number of shares of Common Stock issuable upon conversion of a share of the
Series M Preferred Stock shall be proportionately decreased. Any adjustment
under this paragraph shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(h) Adjustment for Certain Dividends and Distributions. In the event
the Corporation at any time or from time to time after the Original Issue Date
for the Series M Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then and in
each such event the Conversion Price for the Series M Preferred Stock then in
effect shall be decreased as of the time of such issuance or, in the event such
a record date shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price for the Series M Preferred Stock then
in effect by a fraction:
(i) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution; provided,
however, if such record date shall have been fixed and such dividend is not
fully paid or if such distribution is not fully made on the date fixed therefor,
the Conversion Price for the Series M Preferred Stock shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Conversion Price for the Series M Preferred Stock shall be adjusted pursuant to
this paragraph as of the time of actual payment of such dividends or
distributions.
(i) Adjustments for Other Dividends and Distributions. In the event
the Corporation at any time or from time to time after the Original Issue Date
for the Series M Preferred Stock shall make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, then and in each such event provision shall be made so that the
holders of the Series M Preferred Stock shall receive upon conversion thereof in
addition
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to the number of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation that they would have received had their Series M
Preferred Stock been converted on the date of such event and had thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period giving application to all adjustments called for during such period,
under this paragraph with respect to the rights of the holders of the Series M
Preferred Stock.
(j) Adjustment for Reclassification, Exchange, or Substitution. If
the Common Stock issuable upon the conversion of the Series M Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation, or sale of
assets provided for below), then and in each such event each holder of the
Series M Preferred Stock shall have the right thereafter to convert each such
share of Common Stock issuable upon the conversion of the Series M Preferred
Stock into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series M Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(k) Adjustment for Merger or Reorganization. In case of any
consolidation or merger of the Corporation with or into another corporation,
each share of Series M Preferred Stock shall thereafter be convertible into the
kind and amount of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of such Series M Preferred Stock would have been entitled upon
such consolidation or merger; and, in such case, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made in the
application of the provisions in this Section 4 set forth with respect to the
rights and interest thereafter of the holders of the Series M Preferred Stock,
to the end that the provisions set forth in this Section 4 (including provisions
with respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series M Preferred Stock.
(l) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any
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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
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series M Preferred Stock against
impairment.
(m) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series M 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 M Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments; (ii) the Conversion Price then in effect; and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series M Preferred Stock.
(n) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another corporation; or
(iv) of the Liquidation of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series M Preferred Stock, and shall cause to
be mailed to the holders of the Series M Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the record date specified in (A) below or
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twenty days before the date specified in (B) below, a notice stating:
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, or Liquidation is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, or
Liquidation.
5. Automatic Conversion.
(a) Immediately upon the fifth anniversary of the Original Issue
Date, each share of the Series M Preferred Stock then outstanding shall be
automatically converted into such number of fully paid and non-assessable shares
of Common Stock as is determined by dividing (i) the Conversion Value (as
defined in Section 4) determined as of such time by (ii) the Conversion Price
(as defined in Section 4) determined as of such time.
(b) On the date fixed for conversion, all rights with respect to the
Series M Preferred Stock so converted will terminate. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
its attorney duly authorized in writing. As soon as practicable after the date
of such mandatory conversion and the surrender of the certificate or
certificates for Series M Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on such
conversion in accordance with the provisions hereof and cash as provided in
Section 4(d) in respect of any fraction of a share of Common Stock otherwise
issuable upon such conversion.
(c) All certificates evidencing shares of Series M Preferred Stock
which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and canceled and the
shares of Series M Preferred Stock represented thereby converted
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into Common Stock for all purposes as of the date of conversion set forth in
Section 5(a) above, notwithstanding the failure of the holder or holders thereof
to surrender such certificates.
6. Optional Redemption.
(a) At any time on or after a Change in Control (as such term is
defined herein), each holder of Series M Preferred Stock may tender all (but not
less than all) of its shares of Series M Preferred Stock to the Corporation, and
thereupon the Corporation shall pay to such holder, in cash, an amount equal to
the Fair Market Value of such shares, as determined in accordance with the
procedure set forth herein payable with respect to such shares. The Corporation
shall provide each holder of Series M Preferred Stock with a written notice of
the occurrence of a Change in Control (addressed to the holder at its address as
it appears on the stock transfer books of the Corporation), not earlier than
sixty nor later than twenty days before the date of such occurrence. Any holder
of shares of Series M Preferred Stock that elects to have such shares redeemed
shall notify the Corporation of such election in writing. Such notice shall
specify a date for optional redemption payments to be made, which shall be a
date not earlier than the date of the occurrence of the Change in Control (the
"Redemption Date"). If on the Redemption Date sufficient funds of the
Corporation are not legally available to redeem all outstanding shares of Series
M Preferred Stock so tendered for redemption, then funds to the extent legally
available shall be used for such redemption pro rata according to the number of
shares of Series M Preferred Stock so tendered (a "Partial Redemption") as of
the Redemption Date. The Corporation shall make additional Partial Redemptions
beginning thirty days after the Redemption Date and each thirty days thereafter
until all tendered shares of Series M Preferred Stock have been redeemed.
(b) For purposes of this Section 6, a "Change in Control" shall be
deemed to have occurred at such time as (i) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power
required to elect or designate for election a majority of the Corporation's
Board of Directors, or (ii) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Corporation's
Board of Directors (together with any new directors whose election by the Board
of Directors or whose nomination for election by the stockholders of the
Corporation was approved by a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for
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election was previously so approved or who have been elected by the holders, as
of the date hereof, of the Corporation's Common Stock) cease for any reason to
constitute a majority of the Board of Directors then in office.
(c) For purposes of the provisions of this Section 6, the Fair Market
Value of the shares of the Series M Preferred Stock shall be determined in
accordance with the procedures set forth in this Section 6(c).
(i) The Fair Market Value of the shares of the Series M
Preferred Stock shall be equal to the price that would be payable with respect
to the shares if all of the assets of the Corporation were sold to a third party
in a transaction structured to maximize cash sale proceeds, treating the
business of the Corporation as a going concern, and the Corporation then had
been dissolved and liquidated and its remaining assets distributed to its
shareholders in accordance with their equity interests in the Corporation (and
without any discount for a minority position or illiquidity), after first
deducting from the cash proceeds resulting from such sale and any other cash on
hand held by the Corporation all liabilities of the Corporation (determined in
accordance with generally accepted accounting principles, and giving effect to
any brokerage fees that would be required to be paid in connection with any such
sale). Within the thirty-day period following the delivery of the holder's
election to have its shares of Series M Preferred Stock redeemed, the
Corporation and such holder shall negotiate in good faith in an effort to reach
mutual agreement as to the Fair Market Value of the shares.
(ii) If the Corporation and such holder are unable to reach
agreement as to the Fair Market Value of the shares within such thirty-day
period, the Fair Market Value of the shares shall be determined by an appraisal
process as set forth herein. Each of the Corporation and such holder shall
designate, within fifteen days after the conclusion of the thirty-day
negotiation period referred to above, an independent and experienced
telecommunications industry appraiser (each individually an "Appraiser" and
collectively the "Appraisers"). The Appraisers shall be instructed to complete
their appraisals of the Fair Market Value of the shares by no later than thirty
days after their appointment. If the determination of the Appraiser with the
higher determination is not greater than 110% of the determination of the other
Appraiser, the Fair Market Value shall be equal to the average of the
determinations of the two Appraisers; provided, however, if the higher
determination is greater than 110% of the lower determination, then the two
Appraisers shall jointly select a third Appraiser within ten days after the
first date on which both of such two Appraisers have
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delivered their reports. Such third Appraiser shall deliver its report of its
good faith determination of the Fair Market Value of the shares within thirty
days after such appointment, and in such case the Fair Market Value shall be
equal to the average of the closest determinations; provided, however that if
the highest and lowest of such three determinations differ from the middle
determination by an equal amount, the Fair Market Value shall be equal to such
middle determination. The cost of all such appraisals shall be borne by the
Corporation.
7. Preemptive Rights.
(a) Each holder of the Series M Preferred Stock shall be entitled to
a preemptive right to purchase its pro rata share of all or any part of any New
Securities (as defined below) which the Corporation may, from time to time,
propose to sell and issue. Such holder's pro rata share, for purposes of this
preemptive right, is the ratio that the number of whole shares of Common Stock
into which the shares of Series M Preferred Stock held by such holder are
convertible plus the number of shares of any other class of Common Stock or
Preferred Stock (on a fully diluted basis) then held by the holder bears to the
total number of shares of Common Stock of the Corporation on a fully-diluted
basis then outstanding.
(b) Except as set forth in the next succeeding sentence, "New
Securities" shall mean any shares of capital stock of the Corporation, including
Common Stock, whether now authorized or not, and rights, options or warrants to
purchase said shares of capital stock, and securities of any type whatsoever
that are, or may become, convertible into said shares of capital stock.
Notwithstanding the foregoing, "New Securities" does not include (i) securities
offered to the public generally pursuant to a registration statement filed with
the Securities and Exchange Commission and declared effective under the
Securities Act of 1933, as amended, (ii) securities issued in the acquisition of
another corporation by the Corporation by merger, purchase of substantially all
of the assets or other reorganization or in a transaction governed by Rule 145
under the Exchange Act, (iii) options exercisable for Common Stock issued to
employees or consultants of the Corporation outstanding as of the Original Issue
Date or options issued to employees pursuant to a stock option plan adopted by
the Board of Directors and approved by the holders of Series M Preferred Stock
after the Original Issue Date, (iv) shares of Common Stock issued on conversion
of outstanding Class B Preferred Stock, Class C Preferred Stock, Series D
Preferred Stock or Series M Preferred Stock; (v) shares of Common Stock issued
upon exercise of warrants (A) outstanding as of the Original Issue Date or (B)
issued in connection with the sale of Series M Preferred under
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the Securities Purchase Agreement, (vi) stock issued pursuant to any rights or
agreements, including without limitation convertible securities, options and
warrants, provided that the preemptive rights established by this Section 7
shall apply with respect to the initial sale or grant by the Corporation of
interests in its capital stock pursuant to such rights or agreements, or (vii)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Corporation.
(c) In the event the Corporation proposes to undertake an issuance of
New Securities, it shall give the holders of the Series M Preferred Stock
written notice of its intention, describing the type of New Securities, and the
price and terms upon which the Corporation proposes to issue the same. Each
holder of Series M Preferred Stock shall have thirty days from the date of
receipt of any such notice to agree to purchase up to its respective pro rata
share of such New Securities for the price and upon the terms specified in the
notice by giving written notice to the Corporation and stating therein the
quantity of New Securities to be purchased.
(d) If any holder fails to exercise such preemptive right within said
thirty-day period, the Corporation shall have ninety days thereafter to sell or
enter into an agreement (pursuant to which the sale of New Securities covered
thereby shall be closed, if at all, within sixty days from the date of said
agreement) to sell the New Securities not elected to be purchased by holders of
the Series M Preferred Stock at the price and upon the terms no more favorable
to the purchasers of such securities than specified in the Corporation's notice.
In the event the Corporation has not sold the New Securities or entered into an
agreement to sell the New Securities within said ninety-day period (or sold and
issued New Securities in accordance with the foregoing within sixty days from
the date of said agreement), the Corporation shall not thereafter issue or sell
any of such New Securities, without first offering such securities in the manner
provided above."
3. The foregoing amendment was duly adopted by the Board of Directors without
the requirement of shareholder action by unanimous written consent on September
22, 1997, pursuant to the provisions of the Florida Business Corporation Act.
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IN WITNESS WHEREOF, Medcross, Inc. has caused these Articles of Amendment
to the Amended and Restated Articles of Incorporation to be executed by its
President and attested to by its Secretary this ___ day of ___________, 1997.
MEDCROSS, INC.
By:
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John E. Edwards, President
ATTEST:
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David E. Hardy, Secretary
