FORM 8-K
Securities and Exchange Commission
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) 3/27/97
GLOBALINK, INC.
(Exact Name of Registrant as specified in its Charter)
Delaware 33-60296 54-1473222
(State or other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation) Number)
9302 Lee Highway, 12th Floor, Fairfax, Virginia 22031
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: 703-273-5600
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Item 2. Acquisition or Disposition of Assets
Pursuant to the Subscription Agreement dated March 27, 1997, the Company sold
2,502 shares of Series A-3 Convertible Preferred Stock at $1,000.00 per share
for aggregate consideration of $2,502,000 to The Pangaea Fund Limited, a British
Virgin Islands Corporation.
Each share of Series A-3 Convertible Preferred Stock (the "Preferred Stock") is
convertible into such number of shares of Common Stock determined by dividing
(x) $1,000.00 by (y) the lower of (1) the product of (A) eighty-five percent
times (B) the arithmetic average of the Closing Price of the Common Stock on the
five consecutive trading days immediately preceding the Conversion Date or (2)
$3.44 (subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events). The
Preferred Stock was issued in three separate stock certificates of 834 shares
each. The three stock certificates may be converted on the ninetieth (90th), one
hundred twentieth (120th) and one hundred fiftieth (150th) day following the
Closing Date, respectively. In no event shall the number of shares of Common
Stock into which the Preferred Stock are convertible exceed twenty percent (20%)
of the shares of Common Stock of the Company outstanding as of the Closing Date.
On the date which is 730 days after the Issuance Date all of the shares of the
Preferred Stock then outstanding shall be converted into shares of Common Stock.
The Pangaea Fund Limited also received warrants to purchase 85,568 shares of
Common Stock of the Company exercisable at any time after the Closing Date at
$4.30 per share.
In connection with this transaction, Tanner Unman Securities, Inc., the
Placement Agent for the transaction, received warrants to purchase 25,020 shares
of Common Stock of the Company exercisable at any time after the Closing Date at
$3.44 per share. The Company has also agreed to issue warrants to purchase
20,000 shares of Common Stock at $4.30 per share to Prudential Securities
Incorporated in exchange for Prudential's agreement that Prudential would not be
entitled to any cash compensation in connection with the sale by the Company of
the Preferred Stock.
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The Company has agreed, at its sole cost and expense, to file a registration
statement within thirty (30) days of the Closing Date on an appropriate form
with the United States Securities and Exchange Commission covering all shares of
Common Stock underlying the Preferred Stock, Warrants and Placement Agent
Warrants and to use its best efforts to have such registration statement
declared effective as soon as possible thereafter.
The transaction is exempt from registration under the Securities Act of 1933, as
amended, and Rule 506 promulgated thereunder.
Item 7. Financial Statements and Exhibits
Exhibits
3.01 Certificate of Designation of Series A-3
Preferred Stock
10.01 Subscription Agreement dated March 27, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 7, 1997 GLOBALINK, INC.
By:/s/ Mark A. Paiewonsky
--------------------------------
Mark A. Paiewonsky
Chief Financial & Accounting
Officer
GLOBALINK, INC.
CERTIFICATE OF DESIGNATIONS
OF
SERIES A-3 CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation Law
of the State of Delaware)
Globalink, Inc., a Delaware corporation (the "Corporation"),
in accordance with the provisions of Section 103 of the General Corporation Law
of the State of Delaware (the "DGCL") DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of
the Corporation by the Certificate of Incorporation of the Corporation, the
Board of Directors of the Corporation, by unanimous written consent, dated March
26, 1997, adopted a resolution providing for the creation of a series of the
Corporation's Preferred Stock, $ .01 par value, which series is designated
"Series A-3 Convertible Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors does hereby provide for the creation of a series of the Preferred
Stock, $ .01 par value (hereafter called the "Preferred Stock"), of the
Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights have
not been set forth in the Certificate of Incorporation, as amended, of the
Corporation, does hereby fix the same as follows:
SERIES A-3 CONVERTIBLE PREFERRED STOCK
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A-3 Convertible Preferred Stock" (the "Series A-3
Convertible Preferred Stock"), and the number of shares constituting the Series
A-3 Convertible Preferred Stock shall be 2,502, and shall not be subject to
increase.
Section 2. Stated Capital. The amount to be represented in
stated capital at all times for each share of Series A-3 Convertible Preferred
Stock shall be $1,176.50.
Section 3. Rank. All Series A-3 Convertible Preferred Stock
shall rank (i) senior to the Common Stock, $.01 par value (collectively the
"Common Stock"), of the Corporation, now or hereafter issued, as to payment of
distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and (ii) on a parity with any
additional series of preferred stock of any class which the Board of Directors
or the stockholders may from time to time authorize, as to distributions of
assets upon liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
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Section 4. Dividends and Distributions. (a) The holders of
shares of Series A-3 Convertible Preferred Stock shall not be entitled to
receive any dividends.
(b) The Corporation shall not pay or declare and set apart for
such payment any dividend on shares of Common Stock, Junior Dividend Stock or
Junior Liquidation Stock (as defined herein) other than (1) dividends on shares
of Common Stock solely in the form of additional shares of Common Stock, (2)
dividends on Junior Dividend Stock solely in the form of shares of Common Stock
or additional shares of Junior Dividend Stock or (3) dividends on Junior
Liquidation Stock solely in the form of shares of Common Stock or additional
shares of Junior Liquidation Stock unless, contemporaneously therewith, the
Corporation shall pay or declare and set apart for payment dividends on the
shares of Series A-3 Convertible Preferred Stock in an amount per share of
Series A-3 Convertible Preferred Stock equal to the aggregate amount of
dividends the holder of such share of Series A-3 Convertible Preferred Stock
would otherwise have been entitled to receive had such holder converted such
share of Series A-3 Convertible Preferred Stock in accordance with Section 9(a)
(but without regard to the limitations on conversion contained in the proviso to
the second sentence of Section 9(a) or in Section 9(d)) into shares of Common
Stock as if the Conversion Date (as defined herein) were the earlier of (x) the
record date for the payment of such dividend on shares of Common Stock, Junior
Dividend Stock or Junior Liquidation Stock, as the case may be, and (y) the
trading day prior to the date on which ex-dividend trading in the Common Stock,
Junior Dividend Stock or Junior Liquidation Stock, as the case may be, begins
with respect to such dividend thereon. "Junior Dividend Stock" shall mean Common
Stock or any other class or series of the Corporation's capital stock ranking
junior as to dividend rights to the Series A-3 Convertible Preferred Stock.
(c) Neither the Corporation nor any subsidiary of the
Corporation shall redeem, repurchase or otherwise acquire in any one transaction
or series of related transactions any shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock if the number of shares so repurchased,
redeemed or otherwise acquired in such transaction or series of related
transactions is more than either (x) 5.0% of the number of shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one person or group of affiliated
persons, unless the Corporation or such subsidiary offers to purchase for cash
from each holder of shares of Series A-3 Convertible Preferred Stock at the time
of such redemption, repurchase or acquisition the same percentage of such
holder's shares of Series A-3 Convertible Preferred Stock as the percentage of
the number of outstanding shares of Common Stock, Junior Dividend Stock or
Junior Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series A-3 Convertible Preferred Stock
equal to $1,176.50.
(d) Neither the Corporation nor any subsidiary of the
Corporation shall (1) make any tender offer or exchange offer (a "Tender Offer")
for outstanding shares of Common Stock, unless the Corporation contemporaneously
therewith makes an offer, or (2) enter into an agreement regarding a Tender
Offer for outstanding shares of Common Stock by any person other than the
Corporation or any subsidiary of the Corporation, unless such person agrees with
the Corporation to make an offer, in either such case to each holder of
outstanding shares of Series A-3 Convertible Preferred Stock to purchase for
cash at the time of purchase in such Tender Offer the same percentage of shares
of Series A-3 Convertible Preferred Stock held by such holder as the
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percentage of outstanding shares of Common Stock offered to be purchased in such
Tender Offer at a price per share of Series A-3 Convertible Preferred Stock
equal to $1,176.50.
Section 5. Liquidation Preference. In the event of a
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary, the holders of Series A-3 Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether such assets
constitute stated capital or surplus of any nature, an amount per share of
Series A-3 Convertible Preferred Stock equal to $1,000.00 ("the Liquidation
Preference"), and no more, before any payment shall be made or any assets
distributed to the holders of Common Stock or any other class or series of the
Corporation's capital stock ranking junior as to liquidation rights to the
Series A-3 Convertible Preferred Stock (collectively, the "Junior Liquidation
Stock"); provided, however, that such rights shall accrue to the holders of
Series A-3 Convertible Preferred Stock only in the event that the Corporation's
payments with respect to the liquidation preference of the holders of capital
stock of the Corporation ranking senior as to liquidation rights to the Series
A-3 Convertible Preferred Stock (the "Senior Liquidation Stock") are fully met.
After the liquidation preferences of the Senior Liquidation Stock are fully met,
the entire assets of the Corporation available for distribution shall be
distributed ratably among the holders of the Series A-3 Convertible Preferred
Stock and any other class or series of the Corporation's capital stock having
parity as to liquidation rights with the Series A-3 Convertible Preferred Stock
(the "Parity Liquidation Stock") in proportion to the respective preferential
amounts to which each is entitled (but only to the extent of such preferential
amounts). After payment in full of the liquidation price of the shares of the
Series A-3 Convertible Preferred Stock and the Parity Liquidation Stock, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities, or other property in and of
itself will be considered a liquidation, dissolution, or winding up of the
Corporation.
Section 6. No Mandatory Redemption. The shares of Series A-3
Convertible Preferred Stock shall not be subject to mandatory redemption by the
Corporation, except as provided in Section 9(e).
Section 7. No Sinking Fund. The shares of Series A-3
Convertible Preferred Stock shall not be subject to the operation of a purchase,
retirement, or sinking fund.
Section 8. No Optional Redemption. The shares of Series A-3
Convertible Preferred Stock shall not be subject to redemption at the option of
the Corporation.
Section 9. Conversion.
(a) Conversion at Option of Holder. (i) Subject to the
limitations set forth in the legends to appear on certificates for the shares of
Series A-3 Convertible Preferred Stock as provided in Section 9(a)(ii), the
holders of the Series A-3 Convertible Preferred Stock may, upon surrender of the
certificates therefor, convert any or all of their shares of Series A-3
Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as hereinafter provided. Commencing
on the respective dates following initial issuance of shares of Series A-3
Convertible Preferred Stock (such date of initial issuance being referred to
herein as the "Issuance Date") shown on the certificates for shares of Series
A-3 Convertible Preferred Stock and at any time thereafter to and including the
day prior to the Mandatory Conversion Date, each share of Series A-3 Convertible
Preferred Stock may be
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converted at the office of any transfer agent for the Common Stock, initially
into such number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share) determined
by dividing (x) the Conversion Amount by (y) the lower of (1) the product of (A)
the Conversion Percentage times (B) the arithmetic average of the Closing Price
of the Common Stock on the five consecutive trading days immediately preceding
the Conversion Date or (2) $3.44 (subject to equitable adjustments for stock
splits, stock dividends, combinations, recapitalizations, reclassifications and
similar events occurring on or after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Delaware), in each case
subject to adjustment as hereinafter provided (the "Conversion Rate"); provided,
however, that in no event shall any holder be entitled to convert any shares of
Series A-3 Convertible Preferred Stock in excess of that number of shares of
Series A-3 Convertible Preferred Stock upon conversion of which the sum of (1)
the number of shares of Common Stock beneficially owned by such holder and any
person whose beneficial ownership of shares of Common Stock would be aggregated
with such holder's beneficial ownership of shares of Common Stock for purposes
of Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Regulation 13D-G thereunder (each a "Related Person" and
collectively, the "Related Persons") (other than shares of Common Stock deemed
beneficially owned through the ownership of unconverted shares of Series A-3
Convertible Preferred Stock and unexercised Warrants) and (2) the number of
shares of Common Stock issuable upon the conversion of the number of shares of
Series A-3 Convertible Preferred Stock with respect to which the determination
in this proviso is being made, would result in beneficial ownership by any
holder of shares of Series A-3 Convertible Preferred Stock (including any
Related Persons of such holder) of more than 4.9% of the outstanding shares of
Common Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of the proviso to the immediately preceding sentence. For purposes of
the proviso to the second preceding sentence, the Corporation shall be entitled
to rely, and shall be fully protected in relying, on any statement or
representation made by a holder to the Corporation in connection with a
particular conversion, without any obligation on the part of the Corporation to
make any inquiry or investigation or to examine its records or the records of
any transfer agent for the Common Stock. The "Conversion Price" shall be equal
to the Conversion Amount divided by the Conversion Rate.
(ii) Each certificate for shares of Series A-3 Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain one of the following legends as agreed in writing by the
initial holder of such shares of Series A-3 Convertible Preferred Stock at the
time of original issuance thereof:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE
HOLDER HEREOF UNTIL ON OR AFTER THE 90TH DAY FOLLOWING THE
ORIGINAL ISSUANCE THEREOF."
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE
HOLDER HEREOF UNTIL ON OR AFTER THE 120TH DAY FOLLOWING THE
ORIGINAL ISSUANCE THEREOF."
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE
HOLDER HEREOF UNTIL ON OR AFTER THE 150TH DAY FOLLOWING THE
ORIGINAL ISSUANCE THEREOF."
Any new certificate issued upon transfer of any shares of Series A-3 Convertible
Preferred Stock
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or, in connection with a conversion of shares of Series A-3 Convertible
Preferred Stock, to evidence the unconverted balance of shares of Series A-3
Convertible Preferred Stock shall bear the same legend as the certificate
surrendered to the Corporation in connection herewith, if applicable.
(b) Certain Definitions.
As used herein, the "Closing Price" of any security on any
date shall mean the closing bid price of such security on such date on the
principal securities exchange or market on which such security is traded, as
reported by such exchange or market; provided, however, that if on any date
there shall be no reported closing bid price of such security, the "Closing
Price" on such date shall be the closing bid of such security on the date next
preceding such date on which a closing bid price for such security has been so
reported; provided further, however, that if on any date there shall be no
reported closing bid price of such security and at the time the closing bid
price for such date is being determined there shall be known a closing bid price
so reported for the date next subsequent to such date on which a closing bid
price shall have been so reported, then the Closing Price on such date for which
there shall have been no reported closing bid price shall be the lower of (x)
the Closing Price as determined pursuant to the first proviso to this definition
and (y) the closing bid price as so reported for such succeeding day for which a
closing bid price as so reported is known.
As used herein, the "Conversion Amount" initially shall be
equal to $1,000.00, subject to adjustment as hereinafter provided.
As used herein, "Conversion Date" shall mean the date on which
the notice of conversion is actually received by the transfer agent for the
Common Stock, in case of a conversion at the option of the holder pursuant to
Section 9(a).
As used herein, "Conversion Percentage" shall mean 85 percent.
As used herein, "Registration Statement" shall mean the
Registration Statement required to be filed by the Corporation with the SEC
pursuant to Section 2(a) of the Registration Rights Agreement.
As used herein, "Registration Rights Agreement" shall mean the
Registration Rights Agreement between the Corporation and the original holder of
the Series A-3 Convertible Preferred Stock.
As used herein, "SEC" shall mean the United States Securities
and Exchange Commission.
As used herein, "Subscription Agreement" shall mean the
Subscription Agreement between the Corporation and an original holder of shares
of Series A-3 Convertible Preferred Stock, pursuant to which such holder
purchased shares of Series A-3 Convertible Preferred Stock.
(c) Other Provisions. (1) Notwithstanding anything in this
Section 9 to the contrary, no change in the Conversion Amount shall actually be
made until the cumulative effect of the adjustments called for by this Section 9
since the date of the last change in the Conversion Amount would change the
Conversion Amount by more than 1%. However, once the cumulative effect would
result in such a change, then the Conversion Rate shall actually be changed to
reflect
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all adjustments called for by this Section 9 and not previously made.
Notwithstanding anything in this Section 9, no change in the Conversion Amount
shall be made that would result in a Conversion Price of less than the par value
of the Common Stock into which shares of Series A-3 Convertible Preferred Stock
are at the time convertible.
(2) The right of the holders of Series A-3 Convertible
Preferred Stock to convert their shares shall be exercised by delivering (which
may be done by telephone line facsimile transmission) to the transfer agent for
the Common Stock (the "Transfer Agent") a written notice, duly signed by or on
behalf of the holder, stating the number of shares of Series A-3 Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreements (a "Conversion Notice"). If a holder of Series A-3 Convertible
Preferred Stock elects to convert any shares of Series A-3 Convertible Preferred
Stock in accordance with Section 9(a), such holder shall not be required to
physically surrender the certificate(s) representing such shares of Series A-3
Convertible Preferred Stock to the Transfer Agent unless all of the shares of
Series A-3 Convertible Preferred Stock represented thereby are so converted.
Each holder of shares of Series A-3 Convertible Preferred Stock and the
Corporation shall maintain records showing the number of shares so converted and
the dates of such conversions or shall use such other method, satisfactory to
such holder and the Corporation, so as to not require physical surrender of such
certificates upon each such conversion. In the event of any dispute or
discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any shares of Series A-3 Convertible Preferred Stock evidenced by a
particular certificate therefor are converted as aforesaid, the holder of Series
A-3 Convertible Preferred Stock may not transfer the certificate(s) representing
such shares of Series A-3 Convertible Preferred Stock unless such holder first
physically surrenders such certificate(s) to the Transfer Agent, whereupon the
Corporation will forthwith issue and deliver upon the order of such holder of
shares of Series A-3 Convertible Preferred Stock new certificate(s) of like
tenor, registered as such holder of shares of Series A-3 Convertible Preferred
Stock (upon payment by such holder of shares of Series A-3 Convertible Preferred
Stock of any applicable transfer taxes) may request, representing in the
aggregate the remaining number of shares of Series A-3 Convertible Preferred
Stock represented by such certificate(s). Each holder of shares of Series A-3
Convertible Preferred Stock, by acceptance of a certificate for such shares,
agrees that (1) by reason of the provisions of this paragraph and Section 9(e),
following conversion of any shares of Series A-3 Convertible Preferred Stock
represented by such certificate, the number of shares of Series A-3 Convertible
Preferred Stock represented by such certificate may be less than the number of
shares stated on such certificate and the number of shares of Common Stock from
the Maximum Share Amount (as defined herein) allocated to the shares of Series
A-3 Convertible Preferred Stock represented by such certificate for purposes of
conversion of such shares may be less than the number thereof on such
certificate and (2) the Corporation may place a legend on the certificates for
shares of Series A-3 Convertible Preferred Stock which refers to or describes
the provisions of this paragraph. The Corporation shall pay any tax arising in
connection with any conversion of shares of Series A-3 Convertible Preferred
Stock except that the Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery upon conversion of shares of Common Stock or other securities or
property in a name other than that of the holder of the shares of the Series A-3
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
The number of shares of Common Stock to be issued upon each conversion of shares
of Series A-3 Convertible Preferred Stock shall be the number set forth in the
applicable Conversion Notice which number shall be conclusive absent manifest
error.
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The Corporation shall notify a holder who has given a Conversion Notice of any
claim of manifest error one business day after such holder gives a Conversion
Notice and no such claim of error shall limit or delay performance of the
Corporation's obligation to issue upon such conversion the number of shares of
Common Stock which are not in dispute.
(3) The Corporation (and any successor corporation) shall take
all action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series A-3 Convertible Preferred
Stock outstanding upon the basis hereinbefore provided are at all times reserved
by the Corporation (or any successor corporation), free from preemptive rights,
for such conversion, subject to the provisions of the next succeeding paragraph.
If the Corporation shall issue any securities or make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of the Series A-3 Convertible Preferred Stock shall be convertible as
herein provided, the Corporation shall at the same time also make proper
provision so that thereafter there shall be a sufficient number of shares of
Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series A-3 Convertible Preferred Stock on the new
basis. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all of the outstanding
shares of Series A-3 Convertible Preferred Stock, the Corporation promptly shall
seek such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(4) In case of any consolidation or merger of the Corporation
with any other corporation (other than a wholly-owned subsidiary of the
Corporation) in which the Corporation is not the surviving corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause appropriate
provision to be made so that each holder of shares of Series A-3 Convertible
Preferred Stock then outstanding shall have the right thereafter to convert such
shares of Series A-3 Convertible Preferred Stock into the kind and amount of
shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, or share exchange by a holder of the
number of shares of Common Stock into which such shares of Series A-3
Convertible Preferred Stock could have been converted immediately prior to the
effective date of such consolidation, merger, sale, transfer, or share exchange.
If, in connection with any such consolidation, merger, sale, transfer, or share
exchange, each holder of shares of Common Stock is entitled to elect to receive
either securities, cash, or other assets upon completion of such transaction,
the Corporation shall provide or cause to be provided to each holder of Series
A-3 Convertible Preferred Stock the right to elect the securities, cash, or
other assets into which the Series A-3 Convertible Preferred Stock held by such
holder shall be convertible after completion of any such transaction on the same
terms and subject to the same conditions applicable to holders of the Common
Stock (including, without limitation, notice of the right to elect, limitations
on the period in which such election shall be made, and the effect of failing to
exercise the election). The Corporation shall not effect any such transaction
unless the provisions of this paragraph have been complied with. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, or share exchanges.
(5) If a holder shall have given a Conversion Notice for
shares of Series A-3 Convertible Preferred Stock, the Corporation shall issue
and deliver to such person certificates for the Common Stock issuable upon such
conversion within three business days after such Conversion Notice is given and
the person converting shall be deemed to be the holder of record of the
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Common Stock issuable upon such conversion, and all rights with respect to the
shares surrendered shall forthwith terminate except the right to receive the
Common Stock or other securities, cash, or other assets as herein provided. If a
holder shall have given a Conversion Notice as provided herein, the
Corporation's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of any action or inaction by
the converting holder to enforce the same, any waiver or consent with respect to
any provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any other
obligation of the Corporation to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the holder of any obligation to the Corporation, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Corporation to the holder in connection with such conversion.
If the Corporation fails to issue and deliver the certificates for the Common
Stock to the holder converting shares of Series A-3 Convertible Preferred Stock
pursuant to the first sentence of this paragraph as and when required to do so,
in addition to any other liabilities the Corporation may have hereunder and
under applicable law (1) the Corporation shall pay or reimburse such holder on
demand for all out-of-pocket expenses, including, without limitation, fees and
expenses of legal counsel, incurred by such holder as a result of such failure
and (2) such holder may by written notice (which may be given by mail, courier,
personal service or telephone line facsimile transmission) or oral notice
(promptly confirmed in writing) given at any time prior to delivery to such
holder of the certificates for the shares of Common Stock issuable upon such
conversion of shares of Series A-3 Convertible Preferred Stock, rescind such
conversion, whereupon such holder shall have the right to convert such shares of
Series A-3 Convertible Preferred Stock thereafter in accordance herewith.
(6) No fractional shares of Common Stock shall be issued upon
conversion of Series A-3 Convertible Preferred Stock but, in lieu of any
fraction of a share of Common Stock which would otherwise be issuable in respect
of the aggregate number of such shares surrendered for conversion at one time by
the same holder, the Corporation at its option (a) may pay in cash an amount
equal to the product of (i) the arithmetic average of the Closing Price of a
share of Common Stock on the three consecutive trading days ending on the
trading day immediately preceding the Conversion Date and (ii) such fraction of
a share or (b) may issue an additional share of Common Stock.
(7) The Conversion Amount shall be adjusted from time to time
under certain circumstances, subject to the provisions of the first three
sentences of the first paragraph of this Section 9(c), as follows:
(i) In case the Corporation shall issue rights or warrants on
a pro rata basis to all holders of the Common Stock entitling such holders to
subscribe for or purchase Common Stock on the record date referred to below at a
price per share less than the average daily Closing Prices of the Common Stock
on the 30 consecutive business days commencing 45 business days before the
record date (the "Current Market Price"), then in each such case the Conversion
Amount in effect on such record date shall be adjusted in accordance with the
formula
C1 = C x O + N
-----
O + N x P
-----
M
where
<PAGE>
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable pursuant to
the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which
amount shall include amounts received by the Corporation in respect
of the issuance and the exercise of such rights or warrants).
M = the Current Market Price per share of Common Stock on the record date.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants. If
any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined) evidences
of its indebtedness or assets (including securities, but excluding any warrants
or subscription rights referred to in subparagraph (i) above and any dividend or
distribution paid in cash out of the retained earnings of the Corporation), then
in each such case the Conversion Amount then in effect shall be adjusted in
accordance with the formula
C1 = C x M
-----
M - F
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Market Price per share of Common Stock on the record date
mentioned below.
F = the aggregate amount of such cash dividend and/or the fair market
value on the record date of the assets or securities to be
distributed divided by the number of shares of Common Stock
outstanding on the record date. The Board of Directors shall
determine such fair market value, which determination shall be
conclusive.
Such adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution.
For purposes of this subparagraph (ii), "Junior Stock" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series A-3 Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant
to the fourth paragraph of this Section 9(c), the holder of any Series A-3
Convertible Preferred Stock thereafter surrendered for conversion shall become
entitled to receive securities, cash, or assets other than Common Stock, the
number or amount of such securities or property so receivable upon conversion
shall be subject
<PAGE>
to adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.
(8) Except as otherwise provided above in this Section 9, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable on
the Common Stock.
(9) Whenever the Conversion Amount is adjusted as herein
provided, the Corporation shall send to each transfer agent, if any, for the
Series A-3 Convertible Preferred Stock and the Common Stock, and to the
principal securities exchange, if any, on which the Series A-3 Convertible
Preferred Stock and the Common Stock is traded, or the Nasdaq National Market if
the Series A-3 Convertible Preferred Stock or Common Stock is admitted for a
quotation thereon, a statement signed by the Chairman of the Board, the
President, or any Vice President of the Corporation and by its Treasurer or its
Secretary or an Assistant Secretary stating the adjusted Conversion Amount
determined as provided in this Section 9, and any adjustment so evidenced, given
in good faith, shall be binding upon all stockholders and upon the Corporation.
Whenever the Conversion Amount is adjusted, the Corporation will give notice by
mail to the holders of
record of Series A-3 Convertible Preferred Stock, which notice shall be made
within 15 days after the effective date of such adjustment and shall state the
adjustment and the Conversion Amount. Notwithstanding the foregoing notice
provisions, failure by the Corporation to give such notice or a defect in such
notice shall not affect the binding nature of such corporate action of the
Corporation.
(10) Whenever the Corporation shall propose to take any of the
actions specified in Section 9(c)(4) or in subparagraphs (i) or (ii) of Section
9(c)(7) which would result in any adjustment in the Conversion Amount under this
Section 9(c), the Corporation shall cause a notice to be mailed at least 20 days
prior to the date on which the books of the Corporation will close or on which a
record will be taken for such action, to the holders of record of the
outstanding Series A-3 Convertible Preferred Stock on the date of such notice.
Such notice shall specify the action proposed to be taken by the Corporation and
the date as of which holders of record of the Common Stock shall participate in
any such actions or be entitled to exchange their Common Stock for securities or
other property, as the case may be. Failure by the Corporation to mail the
notice or any defect in such notice shall not affect the validity of the
transaction.
Notwithstanding any other provision of this Section 9, no
adjustment in the Conversion Amount need be made (a) for a transaction referred
to in subparagraphs (i) or (ii) of Section 9(c)(7) if holders of Series A-3
Convertible Preferred Stock are to participate in the transaction or
distribution on a basis and with notice that the Board of Directors determines
such transaction to be fair to the holders of the Series A-3 Convertible
Preferred Stock and appropriate in light of the basis on which holders of the
Common Stock or, in the case of a transaction referred to in said subparagraph
(ii), holders of Junior Stock participate in the transaction; (b) for sales of
Common Stock pursuant to a plan for reinvestment of dividends and interest,
provided that the purchase price in any such sale is at least equal to the fair
market value of the Common Stock at the time of such purchase, or pursuant to
any plan adopted by the Corporation for the benefit of its employees, directors,
or consultants; or (c) after such time as a holder of shares of Series A-3
Convertible Preferred Stock becomes entitled to receive only cash upon
conversion of such shares (in which case no interest shall accrue on the amount
of such cash for any period prior to the date which is three business days after
surrender of the certificates for such shares for conversion).
(d) Mandatory Conversion. So long as the Corporation shall
be in compliance
<PAGE>
in all material respects with its obligations to the holders of the Series A-3
Convertible Preferred Stock (including its obligations under the Registration
Rights Agreement and the provisions of this Certificate of Designations) and so
long as the Registration Statement shall be effective (or all the shares of
Common Stock into which shares of Series A-3 Convertible Preferred Stock then
outstanding are convertible may be sold by each holder of record of such shares
of Series A-3 Convertible Preferred Stock within a period of three months under
Rule 144), on the date which is 730 days after the Issuance Date (the "Mandatory
Conversion Date") all of the shares of Series A-3 Convertible Preferred Stock
then outstanding shall be converted, in accordance with the provisions, and
subject to the limitations, of Section 9(a), into shares of Common Stock to the
extent the same are at such time convertible into shares of Common Stock. On the
Mandatory Conversion Date, the Corporation shall mail by first class mail or
otherwise deliver to each holder of Series A-3 Convertible Preferred Stock a
notice (a "Section 9(d) Notice"), which shall state (1) the number of shares of
Series A-3 Convertible Preferred Stock held by such holder which have been
converted into shares of Common Stock in accordance with this Section 9(d) and
(2) the Mandatory Conversion Date. If the Corporation shall give a Section 9(d)
Notice, then, unless theretofore converted by the holder in accordance herewith,
and so long as the Registration Statement shall remain effective on the
Mandatory Conversion Date (or all the shares of Common Stock into which shares
of Series A-3 Convertible Preferred Stock then outstanding are convertible may
be sold by each holder of record of such shares of Series A-3 Convertible
Preferred Stock within a period of three months under Rule 144) and the
Corporation shall be in compliance in all material respects with its obligations
to the holders of the Series A-3 Convertible Preferred Stock (including its
obligations under the Registration Rights Agreements and the provisions of this
Certificate of Designations) on the Mandatory Conversion Date, then on the
Mandatory Conversion Date properly set forth therein, all shares of Series A-3
Convertible Preferred Stock which, on the Mandatory Conversion Date are
convertible in accordance with Section 9(a) hereof, shall be converted into such
number of shares of Common Stock as shall be determined pursuant to this Section
9 as if the conversion of such number of shares of Series A-3 Convertible
Preferred Stock were made by the holders thereof in accordance herewith and as
if the Mandatory Conversion Date were the Conversion Date. Upon the surrender of
certificates for shares of Series A-3 Convertible Preferred Stock by the holder
after a Section 9(d) Notice is given, the Corporation shall issue and, within
three trading days after such surrender, deliver to or upon the order of such
holder that number of shares of Common Stock as shall be issuable in respect to
the conversion of the number of shares of Series A-3 Convertible Preferred Stock
converted into Common Stock as shall be determined in accordance herewith.
(e) Maximum Share Amount. (1) Notwithstanding any other
provision herein, unless Stockholder Approval shall have been obtained from the
stockholders of the Corporation or waived by the American Stock Exchange, Inc.
(the "AMEX"), the Corporation shall not be required to issue upon conversion of
shares of Series A-3 Convertible Preferred Stock more than 1,135,646 shares
(such amount to be subject to equitable adjustment from time to time for stock
splits, stock dividends, combinations, capital reorganizations and similar
events relating to the Common Stock occurring after the date of filing this
Certificate of Designations with the Secretary of State of the State of
Delaware) of Common Stock (the "Maximum Share Amount"), upon conversion of
shares of Series A-3 Convertible Preferred Stock pursuant to this Section 9. The
Maximum Share Amount shall be allocated among the shares of Series A-3
Convertible Preferred Stock at the time of initial issuance thereof pro rata
based on the total number of authorized shares of Series A-3 Convertible
Preferred Stock provided in Section 1. Each certificate for shares of Series A-3
Convertible Preferred Stock initially issued shall bear a notation as to the
number of shares constituting the portion of the Maximum Share Amount allocated
to the shares of Series A-3
<PAGE>
Convertible Preferred Stock represented by such certificate for purposes of
conversion thereof. The Corporation shall maintain records which show the number
of shares of Common Stock issued by the Corporation upon conversion of shares of
Series A-3 Convertible Preferred Stock represented by each certificate, which
records shall be controlling in the absence of manifest error. Upon surrender of
any certificate for shares of Series A-3 Convertible Preferred Stock for
transfer or re-registration thereof (or, at the option of the holder, for
conversion pursuant to Section 9(a) of less than all of the shares of Series A-3
Convertible Preferred Stock represented thereby), the Corporation shall make a
notation on the new certificate issued upon such transfer or re-registration or
evidencing such unconverted shares, as the case may be, as to the remaining
number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series A-3 Convertible Preferred Stock
evidenced by such new certificate. If any certificate for shares of Series A-3
Convertible Preferred Stock is surrendered for split-up into two or more
certificates representing an aggregate number of shares of Series A-3
Convertible Preferred Stock equal to the number of shares of Series A-3
Convertible Preferred Stock represented by the certificate so surrendered (as
reduced by any contemporaneous conversion of shares of Series A-3 Convertible
Preferred Stock represented by the certificate so surrendered), each certificate
issued on such split-up shall bear a notation of the portion of the Maximum
Share Amount allocated thereto determined by pro rata allocation from among the
remaining portion of the Maximum Share Amount allocated to the certificate so
surrendered. If any shares of Series A-3 Convertible Preferred Stock represented
by a single certificate are converted in full pursuant to Section 9, all of the
portion of the Maximum Share Amount allocated to such shares of Series A-3
Convertible Preferred Stock which remains unissued after such conversion shall
be re-allocated pro rata to the outstanding shares of Series A-3 Convertible
Preferred Stock held of record by the holder of record at the close of business
on the date of such conversion of the shares of Series A-3 Convertible Preferred
Stock so converted, and if there shall be no other shares of Series A-3
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series A-3 Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than
five business days after the occurrence, give notice to each holder (by
telephone line facsimile transmission at such number as such holder has
specified in writing to the Corporation for such purposes or, if such holder
shall not have specified any such number, by overnight courier or first class
mail, postage prepaid, at such holder's address as the same appears on the stock
books of the Corporation) and any holder may at any time after the occurrence
give notice to the Corporation, in either case, if on any ten trading days
within any period of 20 consecutive trading days the Corporation would not have
been required to convert shares of Series A-3 Convertible Preferred Stock of
such holder in accordance with Section 9(a) as a consequence of the limitations
set forth in Section 9(e)(1) had all outstanding shares of Series A-3
Convertible Preferred Stock held by such holder been converted into Common Stock
on each such day, determined without regard to the limitation, if any, on such
holder contained in the proviso to the second sentence of Section 9(a) (any such
notice, whether given by the Corporation or a holder, an "Inconvertibility
Notice"). If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder shall have given any Inconvertibility
Notice, then within ten business days after such Inconvertibility Notice is
given or was required to be given, the holder receiving or giving, as the case
may be, the Inconvertibility Notice shall have the right by written notice to
the Corporation (which written notice may be contained in the Inconvertibility
Notice given by the holder) to direct the Corporation to redeem the portion of
such holder's outstanding shares of Series A-3 Convertible Preferred Stock
(which, if applicable, shall be all of such holder's outstanding shares of
Series A-3 Convertible Preferred Stock) as shall not, on the business day prior
to the date of such redemption, be convertible into
<PAGE>
shares of Common Stock by reason of the limitations set forth in Section 9(e)(1)
(determined without regard to the limitation, if any, on such holder contained
in the proviso to the second sentence of Section 9(a)), within ten business days
after such holder so directs the Corporation, at a price per share equal to the
Share Limitation Redemption Price (as defined herein) unless prior to the date
the Corporation is required to redeem such shares of Series A-3 Convertible
Preferred Stock the Corporation delivers a written notice to the holder
otherwise so entitled to redemption of such shares of Series A-3 Convertible
Preferred Stock stating that the Corporation has elected to seek the Stockholder
Approval (a "Stockholder Approval Notice"). If a holder directs the Corporation
to redeem outstanding shares of Series A-3 Convertible Preferred Stock and,
prior to the date the Corporation is required to redeem such shares of Series
A-3 Convertible Preferred Stock, the Corporation would have been able, within
the limitations set forth in Section 9(e)(1), to convert all of such holder's
outstanding shares of Series A-3 Convertible Preferred Stock (determined without
regard to the limitation, if any, on such holder contained in the proviso to the
second sentence of Section 9(a)) on any ten trading days within any period of 20
consecutive trading days commencing after the period of 20 consecutive trading
days which gave rise to the applicable Inconvertibility Notice from the
Corporation or such holder of shares of Series A-3 Convertible Preferred Stock,
as the case may be, had all of such holder's outstanding shares of Series A-3
Convertible Preferred Stock been surrendered for conversion into Common Stock on
each of such ten trading days within such 20 trading day period, then the
Corporation shall not be required to redeem any shares of Series A-3 Convertible
Preferred Stock by reason of such Inconvertibility Notice.
(3) If the Corporation shall have given a Stockholder Approval
Notice, then the Corporation thereafter shall (i) use its best efforts to
convene a meeting of the stockholders of the Corporation or to seek written
consents in lieu thereof to obtain the Stockholder Approval and (ii) make
payments to the holder otherwise entitled to redemption pursuant to Section
9(e)(2) in such amounts and at such times as shall be determined pursuant to
this Section 9(e)(3). The amount to be paid by the Corporation to such holder
shall be determined as of each Computation Date, and such amount shall be equal
to (A) in the case of the first Computation Date, two percent (2%), and (B) in
the case of the second Computation Date and each Computation Date thereafter,
three percent (3%), in each case of the purchase price paid by such holder
pursuant to the Subscription Agreement (each, a "Periodic Amount"); provided,
however, that if any Computation Date is less than 30 days subsequent to another
Computation Date, then the Periodic Amount payable on the later Computation Date
shall be pro rated. The Periodic Amount shall be paid by the Corporation within
five business days after each Computation Date and shall be payable in cash;
provided, however, that the Corporation may elect in lieu of payment of any
Periodic Amount in cash to either (C) deliver to the holder shares of Common
Stock having an Aggregate Market Value equal to the amount of the Periodic
Amount if, but only if, such shares are freely tradeable by the holder without
any restriction under the Securities Act of 1933, as amended, or any state
securities or "blue sky" law or (D) permanently reduce the Conversion Percentage
for conversion of all outstanding Series A-3 Convertible Preferred Stock
pursuant to Section 9 by (i) in the case of the first Computation Date, two
percent (2%) and (ii) in the case of the second Computation Date and each
Computation Date thereafter, three percent (3%). The Corporation shall notify
each holder of any election pursuant to clauses (C) and (D) above as part of the
Stockholder Approval Notice. If the Corporation shall default in making the cash
payments or share deliveries as described above when due, the holder, in lieu of
receiving such cash payments or shares, may elect, by giving written notice to
the Corporation, to reduce the applicable Conversion Percentage as and when
provided in clause (D) above. The payments, share deliveries and reductions in
the Conversion Percentage provided for in this paragraph shall be in addition to
and shall not limit the Corporation's obligations to redeem the Series A-3
Convertible Preferred Stock pursuant to this
<PAGE>
Section 9(e).
As used in this Section 9(e)(3), the following terms shall
have the following meanings:
"Aggregate Market Value" of any shares of Common Stock as of
any Computation Date means the product obtained by multiplying (a) such number
of shares of Common Stock times (b) the Average Market Price of the Common Stock
for the Measurement Period for such Computation Date.
"Average Market Price" of any security for any period shall be
computed as the arithmetic average of the Closing Price of such security for
each trading dat in such period on the principal trading market for such
security, as reported by such market.
"Computation Date" means (1) the date on which the Stockholder
Approval Notice is given, (2) if the Stockholder Approval has not theretofore
been obtained, each date which is 30 days after a Computation Date and (3) the
date subsequent to the prior Computation Date on which the Stockholder Approval
is obtained.
"Measurement Period" means the period of five consecutive
trading days for the Common Stock ending on (or, if such Computation Date is not
a trading day, on the last trading dat preceding) each Computation Date.
If (x) the Stockholder Approval is sought but is not obtained
at a meeting of the Stockholders of the Corporation or any adjournment thereof
(or through solicitation of written consents), (y) the Corporation abandons its
efforts to obtain the Stockholder Approval or (z) the Stockholder Approval is
not obtained within 60 days after the earliest Incovertibility Notice in respect
of which shares of Series A-3 Convertible Preferred Stock have not been redeemed
by reason of the Corporation's decision to seek the Stockholder Approval, then
in each such case the Corporation shall thereafter promptly (but in no event
more than 10 days thereafter) redeem such portion (which may be all, if all
shares of Series A-3 Convertible Preferred Stock are not convertible by reason
of the limitation in Section 9(e)(1)) of the outstanding shares of Series A-3
Convertible Preferred Stock as shall not, on the business day prior to the date
of such redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 9(e)(1), on and subject to the terms and
conditions of this Section 9(e).
(4) Notwithstanding the giving of any notice by the
Corporation to the holders of Series A-3 Convertible Preferred Stock pursuant to
Section 9(e)(1) or the giving or the absence of any notice by the holders of the
Series A-3 Convertible Preferred Stock in response thereto or any redemption of
shares of Series A-3 Convertible Preferred Stock pursuant to Section 9(e)(2),
thereafter the provisions of Section 9(e)(2) and 9(e)(3) shall continue to be
applicable on any occasion unless the Stockholder Approval shall have been
obtained from the stockholders of the Corporation or waived by the AMEX and all
of the Corporation's obligations under Section 9(e)(3) have been satisfied.
(5) As used herein, the term "Share Limitation Redemption
Date" means each date on which the Corporation is required to redeem shares of
Series A-3 Convertible Preferred Stock as provided in this Section 9(e). On each
Share Limitation Redemption Date, the Corporation shall make payment in
immediately available funds of the applicable Share Limitation Redemption Price
to such holder of shares of Series A-3 Convertible Preferred Stock to be
<PAGE>
redeemed to or upon the order of such holder as specified by such holder in
writing to the Corporation at least one business day prior to such Share
Limitation Redemption Date. If the Corporation is required to redeem all or any
portion of a holder's outstanding shares of Series A-3 Convertible Preferred
Stock pursuant to this Section 9(e), the Corporation shall make payment to such
holder of the shares of Series A-3 Convertible Preferred Stock to be redeemed in
respect of each share of Series A-3 Convertible Preferred Stock to be redeemed
of an amount equal to the product obtained by multiplying (A) the amount of the
Liquidation Preference of such share of Series A-3 Convertible Preferred Stock
times (B) 117.65% (the "Share Limitation Redemption Price"). Upon redemption of
less than all of the shares of Series A-3 Convertible Preferred Stock evidenced
by a particular certificate, promptly, but in no event later than three business
days after surrender of such certificate to the Corporation, the Corporation
shall issue a replacement certificate for the shares of Series A-3 Convertible
Preferred Stock evidenced by such certificate which have not been redeemed. Only
whole shares of Series A-3 Convertible Preferred Stock may be redeemed.
(6) As used in this Section 9(e), "Stockholder Approval" means
the approval by a majority of the votes cast by the holders of shares of Common
Stock (in person or by proxy) at a meeting of the stockholders of the
Corporation (duly convened at which a quorum was present), or a written consent
of holders of shares of Common Stock entitled to such number of votes given
without a meeting, of the issuance by the Corporation of 20% or more of the
outstanding Common Stock of the Corporation for less than the greater of the
book or market value of such Common Stock on conversion of the Series A-3
Convertible Preferred Stock, as and to the extent required under Rule 713 of the
AMEX (or any successor or replacement provision thereof). Although the
Stockholder Approval shall relieve the Corporation of its obligation to redeem
shares of Series A-3 Convertible Preferred Stock, the Corporation shall not be
entitled to delay or defer any redemption of shares of Series A-3 Convertible
Preferred Stock required by this Section 9(e) in order to seek the Stockholder
Approval.
Section 10. Voting Rights. Except as otherwise required by
law or expressly provided herein, shares of Series A-3 Convertible Preferred
Stock shall not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority
of the outstanding shares of the Series A-3 Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Certificate of Incorporation if the amendment, alteration, or repeal materially
and adversely affects the powers, preferences, or special rights of the Series
A-3 Convertible Preferred Stock, or (2) the creation and issuance of any Senior
Dividend Stock or Senior Liquidation Stock; provided, however, that any increase
in the authorized preferred stock of the Corporation or the creation and
issuance of any stock which is both Junior Dividend Stock and Junior Liquidation
Stock or any other capital stock of the Corporation ranking on a parity with the
Series A-3 Convertible Preferred Stock shall not be deemed to affect materially
and adversely such powers, preferences, or special rights.
Section 11. Outstanding Shares. For purposes of this
Certificate of Designations, all shares of Series A-3 Convertible Preferred
Stock shall be deemed outstanding except (i) from the date of surrender of
certificates representing shares of Series A-3 Convertible Preferred Stock for
conversion into Common Stock, all shares of Series A-3 Convertible Preferred
Stock converted into Common Stock and (ii) from the date of registration of
transfer, all shares of Series A-3 Convertible Preferred Stock held of record by
the Corporation or any subsidiary or
<PAGE>
Affiliate (as defined herein) of the Corporation. For the purposes of this
Certificate of Designations, "Affiliate" means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Corporation. "Control" is the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Decrease to be signed by its Chief Executive Officer this 13th day of March,
1997.
GLOBALINK, INC.
By:
Harry E. Hagerty, Jr.
Chairman and Chief Executive Officer
ATTEST:
By:
John F. McCarthy, III
Secretary
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set
forth below, by and between GLOBALINK, INC., a Delaware corporation, with
headquarters located at 9302 Lee Highway, 12th Floor, Fairfax, Virginia 22031
(the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from securities
registration provided by Regulation D under the Securities Act of 1933, as
amended (the "1933 Act"); and
WHEREAS, the Buyer wishes to purchase, upon the terms and
subject to the conditions of this Agreement, shares of non-voting convertible
preferred stock of the Company which are convertible into shares of Common
Stock, $.01 par value (the "Common Stock"), of the Company and in connection
therewith to receive warrants to purchase shares of Common Stock, subject to
acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE; WARRANTS; PURCHASE PRICE.
(a) Purchase. The Buyer hereby agrees to purchase from the
Company the number of shares (the "Preferred Shares") of Series A-3 Convertible
Preferred Stock, $.01 par value (the "Preferred Stock"), of the Company set
forth on the signature page of this Agreement, having the terms and conditions
as set forth in the form of Certificate of Designations attached hereto as Annex
I (the "Certificate of Designations") at the price per share and for the
aggregate purchase price set forth on the signature page of this Agreement. The
Buyer hereby agrees that certificates for a number of Preferred Shares equal to
one third of the total number of Preferred Shares shall bear each of the three
legends set forth in Section 9(a)(ii) of the terms of the Preferred Stock in the
Certificate of Designations. In addition to issuance of the Preferred Stock, the
Company shall issue to the Buyer on the Closing Date (as herein defined)
warrants to purchase shares of Common Stock, such warrants to be in the form
attached hereto as Annex II (the "Warrants"). The number of shares of Common
Stock initially purchasable upon exercise of the Warrants to be issued to the
Buyer on the Closing Date shall be 85,568. The shares of Common Stock issuable
upon conversion of the Preferred Stock are referred to herein as the "Conversion
Shares." The shares of Common Stock issuable upon exercise of the Warrants are
referred to herein as the "Warrant Shares." The Conversion Shares and the
Warrant Shares are referred to herein collectively as the "Common Shares." The
Common Shares, the Preferred Shares and the Warrants are referred to herein
collectively as the "Securities."
(b) Form of Payment. The Buyer shall pay the purchase price
for the Preferred Shares by delivering good funds in United States Dollars to
the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex III (the "Joint Escrow Instructions").
Such delivery of funds shall be made against delivery by the Company of the
certificates for the Preferred Shares registered in the name of the Buyer.
Promptly following payment by the Buyer to the Escrow Agent of the purchase
price of the Preferred Shares, but in no event later than the Closing Date, the
Company shall deliver certificates for the Warrants, duly executed by the
Company and registered in the name of the Buyer, to the Escrow Agent. By signing
this Agreement, the Buyer and the Company each
<PAGE>
agrees to all of the terms and conditions of, and becomes a party to, the Joint
Escrow Instructions, all of the provisions of which are incorporated herein by
this reference as if set forth in full.
(c) Method of Payment. Payment of the purchase price for the
Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch
Attorney Escrow Account
Reference: Pangaea/Globalink
Not later than 4:00 p.m., New York City time, on the date which is three New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Buyer, the
Buyer shall deposit with the Escrow Agent an amount equal to the aggregate
purchase price for the Preferred Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS
TO INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
(a) The Buyer is acquiring the Preferred Shares and Warrants
for its own account for investment only and not with a view towards the public
sale or distribution thereof;
(b) The Buyer is an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3);
(c) All subsequent offers and sales of the Securities by the
Buyer shall be made pursuant to registration of the Securities being offered and
sold under the 1933 Act or pursuant to an exemption from registration;
(d) The Buyer understands that the Preferred Shares and the
Warrants are being offered and sold, and the Common Shares are being offered, to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein and in the Prospective Purchaser Questionnaire, a
true and accurate copy of which has been delivered by the Buyer to the Company
(the "Questionnaire"), in order to determine the availability of such exemptions
and the eligibility of the Buyer to acquire the Preferred Shares and the
Warrants and to receive an offer of the Common Shares;
(e) The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred Shares and
the Warrants and the offer of the Common Shares which have been requested by the
Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to
ask questions of the Company and have received complete and satisfactory answers
to any such inquiries. Without limiting the generality of the foregoing, the
Buyer has had the opportunity to obtain and to review the Company's (1) Annual
Report on Form 10-KSB
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for the fiscal year ended December 31, 1995, (2) Quarterly Reports on Form
10-QSB for the fiscal quarters ended March 31, 1996, June 30, 1996 and September
30, 1996, (3) Current Report on Form 8-K, dated March 28, 1996, (4) definitive
Proxy Statement for its 1996 Annual Meeting of Stockholders, and (5) Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996, in each case
as filed with the SEC, and (6) the Company's press release dated February 21,
1997. The Buyer understands that its investment in the Securities involves a
high degree of risk;
(f) The Buyer understands that the offering of the Preferred
Shares and the Warrants is not part of an offering which is subject to any
condition respecting the minimum amount of securities to be sold and that such
offering is not being made on an "all-or-none" basis; and the Buyer understands
that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the Securities; and
(g) This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and
agrees with, the Buyer that:
(a) Concerning the Securities. The Securities have been duly
authorized; the Preferred Shares, when issued and paid for in accordance with
this Agreement, and the Common Shares, when issued upon conversion of the
Preferred Shares and upon exercise of the Warrants, as the case may be, will be
duly and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder. There are
no preemptive rights of any stockholder of the Company, as such, to acquire any
of the Common Shares. The Common Stock is listed for trading on the American
Stock Exchange, Inc. (the "AMEX") and no suspension of trading in the Common
Stock is in effect.
(b) Securities Purchase Agreement; Registration Rights
Agreement; Warrants. This Agreement, the Registration Rights Agreement, the form
of which is attached hereto as Annex IV (the "Registration Rights Agreement")
and the Warrants, have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered on behalf of the Company and this
Agreement is and the Registration Rights Agreement and the Warrants, when
executed and delivered by the Company, will be, valid and binding agreements of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(c) Non-contravention. The execution and delivery of this
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the issuance of the Preferred Shares and the
Warrants and the other transactions contemplated by this Agreement, the
Registration Rights Agreement and the terms of the Warrants do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the certificate of incorporation
or by-laws of the Company, or any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, or any applicable law, rule or
regulation or any applicable decree, judgment or order of
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any court, United States federal or state regulatory body, administrative agency
or other governmental body having jurisdiction over the Company or any of its
properties or assets.
(d) Approvals. No authorization, approval or consent of or
filing with any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained by the Company for the issuance and sale of the
Securities as contemplated by this Agreement, other than (1) approval of the
listing of the Common Shares by the AMEX and (2) the requirements of any
applicable blue sky laws.
(e) SEC Reporting Status and Filings. The Company has filed
with the SEC all reports and other information required to be filed under
Sections 13(a), 14 and 15(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Since December 31, 1995, the Company has not filed any reports
or other information with the SEC pursuant to Sections 13(a), 14 and 15(d) of
the 1934 Act other than the reports and other information identified in Section
2(e) hereof.
(f) Information Provided. The information provided by or on
behalf of the Company to the Buyer and referred to in Section 2(e) of this
Agreement does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
(g) Absence of Certain Changes. Since December 31, 1995, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company, except as disclosed in the documents
referred to in Section 2(e) hereof.
(h) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the properties, business, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries taken as a whole or
the transactions contemplated by this Agreement or any of the documents
contemplated hereby or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of such other documents.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Transfer Restrictions. The Buyer acknowledges that (1) the
Preferred Shares and the Warrants have not been and are not being registered
under the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement, the Common Shares have not been and are not being registered
under the 1933 Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Buyer shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; (2) any sale of
the Securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any such resale of Securities under circumstances in which
the seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than
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pursuant to the Registration Rights Agreement) under the 1933 Act or to comply
with the terms and conditions of any exemption thereunder (other than pursuant
to Section 4(d) hereof and pursuant to the Registration Rights Agreement).
(b) Restrictive Legend. The Buyer acknowledges and agrees that
the certificates for the Preferred Shares and the Warrants and, until such time
as the Common Shares have been registered under the 1933 Act as contemplated by
the Registration Rights Agreement, the certificates for the Common Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Common Shares and the Warrants):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities
under the Securities Act of 1933, as amended, or an opinion of counsel
that registration is not required under said Act.
Once the Registration Statement required to be filed by the Company pursuant to
Section 2 of the Registration Rights Agreement has been declared effective,
thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any Common Shares
issued prior to the date such Registration Statement is declared effective by
the SEC and remove any stop-transfer restriction relating thereto promptly, but
in no event later than three days after surrender of such certificates by the
Buyer and (2) the Company shall not place any restrictive legend on certificates
for Common Shares issued on conversion of the Preferred Shares or exercise of
the Warrants or impose any stop-transfer restriction thereon.
(c) Registration Rights Agreement. The parties hereto agree
to enter into the Registration Rights Agreement on or before the Closing Date.
(d) Form D. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to the Buyer promptly after such filing. The Buyer agrees to cooperate with the
Company in connection with such filing and, upon request of the Company, to
provide all information relating to the Buyer reasonably required for such
filing.
(e) AMEX Listing; Reporting Status. The Company has filed a
listing application for the Common Shares with the AMEX and shall provide
evidence of such filing to the Buyer. The Company shall obtain the approval of
the listing of the Common Shares, subject to official notice of issuance, by the
AMEX on or prior to the Closing Date. So long as the Buyer beneficially owns any
of the Preferred Shares, the Warrants or the Common Shares, the Company shall
file all reports required to be filed with the SEC pursuant to Section 13 or
15(d) of the 1934 Act and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
(f) Use of Proceeds. The Company will use the proceeds from
the sale of the Preferred Shares for the Company's internal working capital
purposes and not for the purpose of any investment in or loan to any other
corporation, partnership, enterprise or other person; provided, however, that
the proceeds may be used for loans to companies which are wholly-owned
subsidiaries of the Company at all times when such loans are outstanding.
(g) Blue Sky Laws. On or before the Closing Date, the Company
shall take such action as shall be necessary to qualify, or to obtain an
exemption for, the Preferred Shares and the Warrants for sale to the Buyer
pursuant to this Agreement and the Common Shares for
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issuance to the Buyer upon conversion of the Preferred Shares and on exercise of
the Warrants under such of the securities or "blue sky" laws of jurisdictions in
the United States as shall be applicable to the sale of the Preferred Shares and
the Warrants to the Buyer pursuant to this Agreement and the issuance of the
Common Shares to the Buyer on exercise of the Warrants. The Company shall
furnish copies of all filings, applications, orders and grants or confirmations
of exemptions relating to such securities or "blue sky" laws on or prior to the
Closing Date.
(h) Certain Expenses. Whether or not any closing occurs, the
Company shall pay or reimburse the Buyer for all reasonable legal fees and
expenses of counsel to the Buyer for the preparation and negotiation of, and
closing under, this Agreement up to an amount of $10,000. The obligations of the
Company under the provisions of this Section 4(h) shall be in addition to the
obligation of the Company for expenses under the Registration Rights Agreement.
(i) Certain Issuances of Securities. The Company will not
issue any shares of Common Stock or shares of any series of preferred stock or
other securities convertible into Common Stock of the Company for less than the
greater of the book or market value of such Common Stock, if such issuance would
be integrated as a transaction with the offer and sale of the Preferred Shares
and the Warrants to the Buyer and the conversion or exercise thereof for
purposes of the requirement for Stockholder Approval (as defined in the
Certificate of Designations) under the rules of the AMEX and require Stockholder
Approval or a waiver thereof from the AMEX, unless the Company obtains
Stockholder Approval or such waiver thereof from the AMEX, as and to the extent
required under of the rules of the AMEX.
(j) Certain Future Financings. The Company shall not issue any
equity securities or securities convertible into, exchangeable for or otherwise
entitling the holder to acquire, any equity securities of the Company for
consideration less than the greater of the book or market value of such equity
securities at the time of issuance (the "New Equity Securities") (i) from and
after the date that this Agreement is executed and delivered by the parties
hereto to and including the 90th day after the Closing Date, without the prior
written consent of the Buyer and (ii) during the period commencing on the 91st
day after the Closing Date to and including the 180th day after the Closing
Date, without giving the Buyer the first right to acquire the New Equity
Securities on substantially the same terms at which the New Equity Securities
are to be offered to other investors; provided, however, that nothing in this
paragraph shall prohibit the Company from issuing securities (x) as part of a
transaction involving a strategic alliance, collaboration, joint venture or
partnership arrangement of the Company, (y) pursuant to compensation plans for
employees, directors, officers, advisers or consultants of the Company or (z)
upon exercise of conversion, exchange, purchase or similar rights issued,
granted or given by the Company and outstanding as of the date of this
Agreement.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(a) Transfer Agent Instructions. Promptly following the
delivery by the Buyer of the aggregate purchase price for the Preferred Shares
in accordance with Section 1(c) hereof, and in any event prior to the Closing
Date, the Company will: (1) irrevocably instruct American Stock Transfer & Trust
Company, as transfer agent and registrar (the "Transfer Agent"), by letter in
the form attached hereto as Annex V (the "Transfer Agent Instruction"), to issue
certificates for the Common Shares from time to time upon conversion of the
Preferred Shares in such amounts as specified from time to time to the Transfer
Agent in the Notices of Conversion surrendered in connection with such
conversions and referred to in Section 5(b) of this Agreement, (2) irrevocably
instruct the Transfer Agent pursuant to the Transfer Agent Instruction to issue
certificates for the Common Shares from time to time upon exercise of the
Warrants in such amounts as specified from time to time to the Transfer Agent in
the Form of Subscription, in the form attached to the Warrants, surrendered in
connection with such exercises and (3) appoint the Transfer Agent the conversion
agent for the Preferred Stock and the exercise
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<PAGE>
agent for the Warrants. The Company agrees to deliver the Transfer Agent
Instruction substantially in the form attached hereto as Annex V on or prior to
the Closing Date. The certificates for the Common Shares may bear the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the resale of the Common Shares under the 1933 Act and shall be
registered in the name of the Buyer or its nominee and in such denominations to
be specified by the Buyer in connection with each conversion of Preferred Shares
or exercise of the Warrants, as the case may be. The Company warrants that no
instruction other than (x) such instructions referred to in this Section 5(a),
(y) stop transfer instructions to give effect to Section 4(a) hereof prior to
registration of the resale of the Common Shares under the 1933 Act and (z) the
instructions required by Section 3(n) of the Registration Rights Agreement will
be given by the Company to the Transfer Agent and that the Common Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. Nothing in this Section 5(a) shall
limit in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If the Buyer provides
the Company with an opinion of counsel reasonably satisfactory in form, scope
and substance to the Company that registration of a resale by the Buyer of any
of the Preferred Shares or the Warrants in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act, the Company
shall permit the transfer of such Preferred Shares or Warrants. Nothing in this
Section 5(a) shall limit the obligations of the Company under Section 3(n) of
the Registration Rights Agreement.
(b) Conversion Procedure. In connection with the exercise of
conversion rights relating to the Preferred Shares, the Buyer or any subsequent
holder of the Preferred Shares shall complete, sign and furnish to the Transfer
Agent, with a copy to the Company, a Notice of Conversion in the form attached
hereto as Annex VI, which shall be deemed to satisfy all requirements of the
Certificate of Designations (a "Conversion Notice"). As set forth in Section
9(c)(2) of the Certificate of Designations, the number of Common Shares to be
issued in connection with a particular conversion of Preferred Shares is, absent
manifest error, conclusively the number of Common Shares stated in the
applicable Conversion Notice. If in connection with a particular conversion of
Preferred Shares the Company determines that manifest error has been made by
virtue of the conversion price or other information set forth in the applicable
Conversion Notice, the Company shall have the right immediately to notify the
Transfer Agent of such error (with a copy of such notice given to the Buyer by
telephone line facsimile transmission), which notice shall state the number of
Common Shares in dispute, and,
notwithstanding such notice from the Company, shall direct the Transfer Agent to
issue and deliver the number of Common Shares not in dispute as and when
required by the Certificate of Designations. If the Company shall have notified
the Transfer Agent of any such error, the Company shall, on the date such notice
is given, submit the dispute to the Company's independent auditors (the
"Auditors") for determination and shall instruct the Auditors to resolve such
dispute and to notify the Company, the Transfer Agent, and the converting holder
of Preferred Shares within (i) one business day after such dispute is submitted
to the Auditors or (ii) if the Company shall have notified the Transfer Agent of
such alleged error on the same day it received the Conversion Notice, within two
business days after such dispute is submitted to the Auditors. Immediately after
receipt of timely notice of the Auditors' determination, the Company shall
instruct the Transfer Agent to issue to the converting holder any additional
Common Shares to which such holder is entitled based on the determination of the
Auditors. If the Auditors shall fail to notify the Transfer Agent within three
business days after the applicable Conversion Notice is given to the Company and
the Transfer Agent, then the Company shall instruct the Transfer Agent to issue,
within three business days after the receipt of the applicable Conversion
Notice, to the converting holder any additional Common Shares to which such
holder is entitled based on the applicable Conversion Notice. Such immediate
action shall be taken by the Company to assure that there shall be full
compliance with the Company's unqualified obligation that all Common Shares
issuable on such conversion be issued by the due date therefor as provided in
the Certificate of Designations.
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<PAGE>
6. STOCK DELIVERY INSTRUCTIONS.
The Preferred Shares and the Warrants shall be delivered by
the Company to the Escrow Agent pursuant to Section 1(b) hereof on a delivery
against payment basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Preferred
Shares and the issuance of the Warrants (the "Closing Date") shall be 12:00
noon, New York City time, on the date which is three New York Stock Exchange
trading days after the date on which the Buyer has deposited the purchase price
for the Preferred Shares with the Escrow Agent in accordance with Section 1(c)
hereof, or such other mutually agreed to time. The closing shall occur on the
Closing Date at the offices of the Escrow Agent.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
AND ISSUE.
The Buyer understands that the Company's obligation to issue
the Preferred Shares and the Warrants to the Buyer pursuant to this Agreement is
conditioned upon:
(a) The receipt and acceptance by the Company of this
Agreement as evidenced by execution of this Agreement by the Company and
delivery of an executed counterpart of this Agreement to the Buyer or its legal
counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Preferred
Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations
and warranties of the Buyer contained in this Agreement and in the Questionnaire
as if made on the Closing Date and the performance by the Buyer on or before the
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares and the Warrants on the Closing Date is conditioned upon:
(a) Delivery by the Company to the Escrow Agent of the
Preferred Shares and the Warrants in accordance with this Agreement;
(b) The accuracy on the Closing Date of the representations
and warranties of the Company contained in this Agreement as if made on the
Closing Date and the performance by the Company on or before the Closing Date of
all covenants and agreements of the Company required to be performed on or
before such Closing Date;
(c) Receipt by the Buyer on the Closing Date of an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in Annex VII
attached hereto;
(d) The Common Shares shall have been approved for listing,
subject to official notice of issuance, by the AMEX; and
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(e) The Transfer Agent shall have acknowledged receipt of
the Transfer Agent Instruction.
10. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Virginia.
(b) This Agreement may be executed in counterparts and by the
parties hereto on separate counterparts, all of which together shall constitute
one and the same instrument. A facsimile transmission of this Agreement bearing
a signature on behalf of a party hereto shall be legal and binding on such
party.
(c) The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) No failure or delay by any party in exercising any right
or remedy under this Agreement or otherwise, and no course of dealing between
the parties, shall operate as a waiver thereof or amendment of this Agreement,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or exercise of any other right or
power.
(f) Neither this Agreement nor any term thereof (including
this paragraph) may be amended, changed, waived, discharged or terminated unless
such amendment, change, waiver, discharge or termination is in a writing signed
by the party to be charged with enforcement.
(g) Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail or delivered personally (which
shall include telephone line facsimile transmission) or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier, in each case addressed to a party at such
party's address shown in the introductory paragraph or on the signature page of
this Agreement, as the case may be (facsimile number 703-273-3405, in the case
of the Company, and as set forth on the signature page hereof, in the case of
the Buyer), or such other address as a party shall have provided by notice to
the other party in accordance with this provision. The Buyer hereby designates
as its address and telephone line facsimile transmission number for any notice
required or permitted to be given to the Buyer pursuant to the Certificate of
Designations or the Registration Rights Agreement the address and telephone line
facsimile transmission number set forth on the signature page hereof, until the
Buyer shall by notice to the Company designate another address or telephone line
facsimile transmission number for such purpose.
(h) The Buyer shall have the right to assign its rights and
obligations under this Agreement with respect to the purchase of all or any
portion of the Preferred Shares and the receipt of the Warrants to another
investment fund, provided such assignee, by written instrument duly executed by
such assignee, assumes all obligations of the Buyer hereunder with respect to
the purchase of the portion of the Preferred Shares and the Warrants so assigned
and makes the same representations and warranties with respect thereto as the
Buyer makes in this Agreement, whereupon the Buyer shall be relieved of any
further obligations, responsibilities and liabilities with respect to the
purchase of all or the portion of the Preferred Shares and the
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Warrants the obligation for the purchase of which has been so assigned. In the
case of any such assignment, the Company shall agree in writing with such
assignee to make available to such assignee the benefits of the Registration
Rights Agreement with respect to the Common Shares issuable upon conversion of
the Preferred Shares and on exercise of the Warrants with respect to which the
purchase under this Agreement has been so assigned.
(i) The respective representations, warranties, covenants and
agreements of the Buyer and the Company contained in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement shall survive the
delivery of payment for the Preferred Shares and shall remain in full force and
effect regardless of any investigation made by or on behalf of them or any
person controlling or advising any of them.
(j) This Agreement and its Annexes set forth the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, whether written or oral,
with respect thereto.
(k) The Buyer shall have the right to terminate this Agreement
by giving notice at any time at or prior to the Closing Date if:
(1) the Company shall have failed, refused, or been unable at
or prior to the date of such termination of this Agreement to perform
any of its obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder
is not fulfilled; or
(3) the closing shall not have occurred on a Closing Date on
or before March 31, 1997, other than solely by reason of a breach of
this Agreement by the Buyer.
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
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IN WITNESS WHEREOF, this Agreement has been duly executed by
the Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF PREFERRED SHARES: 2,502
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $2,502,000.00
NAME OF BUYER: PANGAEA FUND LIMITED
SIGNATURE ____________________________
Title: ____________________________
Date: ____________________________
Address: Windermere House
#404 East Bay Street
Nassau, Bahamas
Facsimile Number: (242) 394-3284
This Agreement has been accepted as of the date set forth
below.
GLOBALINK, INC.
By: _______________________________
Title: ______________________________
Date: ______________________________
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