SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11,
1998
THE PANDA PROJECT, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 0-24030 65-0323354
- ------- ------- ----------
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification
Number)
901 Yamato Road
Boca Raton, Florida 33431
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(561) 994-2300
--------------------------------
(Former name or former address, if changed since last report)
Item 5. Other Events.
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On February 11, 1998, the Company issued 600 shares of
its Series A Convertible Preferred Stock ("Series A Preferred")
for an aggregate purchase price of $6,000,000. In connection
with this transaction, the Company also issued Common Stock
Purchase Warrants ("Warrants") to purchase an aggregate of
150,000 shares of Common Stock.
Holders of Series A Preferred are entitled to a
dividend of 5% per annum of the purchase price for the shares,
payable either in cash or as an accrual to the number of shares
of Common Stock issuable upon conversion. No conversion of
Series A Preferred into shares of Common Stock may occur during
the period prior to 120 days after issuance except at $6.10,
subject to adjustment in the event of certain dilutive issuances
of securities by the Company or for stock splits or similar
events (the "Fixed Conversion Price"). Thereafter, shares of
Series A Preferred are convertible into shares of Common Stock
pursuant to a formula whereby the purchase price of the shares to
be converted plus any dividends is divided by a conversion price
defined as the lower of (i) the Fixed Conversion Price or (ii) a
percentage of the average closing bid price of the Common Stock
for the five days immediately preceding conversion equal to 92%,
if conversion occurs in the period beginning 120 days and ending
180 days after issuance of the Series A Preferred, or 90%, if
conversion occurs after 180 days from issuance of the Series A
Preferred.
The Company may require that all unconverted shares of
Series A Preferred be converted at any time if the closing bid
price of Common Stock is equal to or greater than $12.00 per
share for a period of twenty consecutive trading days.
The Warrants have a term of five years and an exercise
price, subject to adjustment for stock splits and similar events,
of $6.10 per share.
In the event certain conditions specified in the
Subscription Agreement are met, the Company has the right to
cause the issuance of an additional 400 shares of Series A
Preferred for an aggregate purchase price of $4,000,000. In such
event, the Company would be required to issue the purchasers of
Series A Preferred Warrants to purchase an additional 100,000
shares of Common Stock.
The Series A Preferred and Warrants were issued
pursuant to an exemption from registration under Regulation D
under the Securities Act of 1933. In connection with this
transaction, the Company has agreed to file a Registration
Statement on Form S-3 with the Securities and Exchange Commission
to effect the registration for resale of the Common Stock
issuable upon conversion of the Series A Preferred and upon
exercise of the Warrants.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits
4.1 Fourth Articles of Amendment of Amended and Restated
Articles of Incorporation.
4.2 Form of Common Stock Purchase Warrant.
99.1 Subscription Agreement dated February 11, 1998 with
purchasers of Series A Preferred.
99.2 Registration Rights Agreement dated February 11, 1998.
<PAGE>
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.
THE PANDA PROJECT, INC.
By: /s/ C. Daryl Hollis
----------------------
C. Daryl Hollis
Dated: February 23,1998 Chief Financial Officer
EXHIBIT 4.1
FOURTH ARTICLES OF AMENDMENT OF AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF THE PANDA PROJECT, INC.
Pursuant to the provisions of Section 507.1006 of the Florida
Business Corporation Act, The Panda Project, Inc. (the "Company"),
adopts the following Articles of Amendment to its Amended and Restated
Articles of Incorporation.
FIRST: The name of the Company is The Panda Project, Inc.
SECOND: Article III of the Amended and Restated Articles of
Incorporation of the Company is hereby amended by deleting therefrom
Section B.3 set forth in the Third Articles of Amendment to Amended
and Restated Articles of Incorporation of the Company filed with the
Secretary of State on February 6, 1998, and inserting in lieu thereof
the following Section B.3, which reads as follows:
3. SERIES A CONVERTIBLE PREFERRED STOCK
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One Thousand (1,000) shares of Preferred Stock of the Company are
hereby designated as "Series A Convertible Preferred Stock" (the
"Series A Preferred Shares"), par value $.01 per share, which shall
have the following preferences, limitations and relative rights:
1. DIVIDENDS. (a) The holders of the Series A Preferred Shares
(each a "Holder" and, collectively, the "Holders"), in preference to
the holders of Junior Shares, shall be entitled to receive cash
dividends on each Series A Preferred Share at the rate of 5% per annum
of the Purchase Price (as defined in the Subscription Agreement
hereafter referred to), due and payable quarterly in arrears on the
last day of March, June, September and December of each year (each a
"Dividend Payment Date"), with the first such payment due on March 31,
1998. Accrual of dividends shall commence on the first business day
to occur after the date hereof and shall continue until all of the
Series A Preferred Shares have been converted in full. The dividends
so payable will be paid to the person in whose name the Series A
Preferred Shares (or one of more predecessor Series A Preferred
Shares) are registered on the records of the Company regarding
registration and transfers of the Series A Preferred Shares (the
"Series A Preferred Shares Register"); provided, however, that the
Company's obligation to a transferee of the Series A Preferred Shares
shall arise only if such transfer, sale or other disposition is made
in accordance with the terms and conditions of the Subscription
Agreement dated as of February 11, 1998 between the Company and the
Subscribers thereto (the "Subscription Agreement"). The dividends are
payable in such coin or currency of the United States of America, to
each Holder, at the address last appearing on the Series A Preferred
Shares Register as designated in writing by such Holder of Series A
Preferred Shares from time to time; provided, however, that in lieu of
paying such dividends in coin or currency, the Company may, at its
option, pay dividends on the Series A Preferred Shares for any
Dividend Payment Date by adding the amount of such dividend to the
Purchase Price ("PIK Dividend") pursuant to a statement in the form of
Exhibit 2 hereto ("PIK Statement") delivered by the Company to each of
the Holders on or prior to the applicable Dividend Payment Date. If
neither the cash dividend due hereunder is paid, nor the PIK Statement
is delivered, to the Holders within 10 calendar days of the applicable
Dividend Payment Date, the Company shall no longer have the right to
choose the PIK Dividend option with respect to the dividend payable on
such Dividend Payment Date and each Holder may elect either cash
dividend or the PIK Dividend hereunder at its option with respect to
the dividend payable on such Dividend Payment Date. Any PIK Dividend
when so added to the Purchase Price shall, for all purposes of this
Certificate of Designations, be deemed to be part of the Purchase
Price for purposes of determining dividends thereafter payable
hereunder and amounts thereafter convertible into Common Stock
hereunder. The Company will pay all accrued and unpaid dividends due
to the person that is the holder of the Series A Preferred Shares on
the records of the Company as of the tenth (10th) day prior to the
applicable payment date and addressed to such Holder at the last
address appearing on the Series A Preferred Shares Register. Except
as otherwise provided herein, dividends due hereunder shall bear
interest, from and after the occurrence and during the continuance of
a failure to declare or pay a dividend hereunder, at the rate equal to
the lower of twenty percent (20%) per annum and the highest rate
permitted by law.
(b) If the stated dividends on the Series A Preferred
Shares are not paid in full, Series A Preferred Shares and all Pari
Passu Shares, if any, shall share ratably in the payment of dividends
on such shares in accordance with the sums which would be payable on
such shares if all dividends were paid in full. So long as any
Preferred Share is outstanding, no dividends whatever shall be paid or
declared, nor shall any distribution be made, on any Junior Shares,
unless all cash dividends or PIK Dividends on Series A Preferred
Shares for all past quarterly dividend periods shall have been paid or
declared and a sum of cash or amount of Shares sufficient for the
payment thereof set apart.
2. TRANSFERS. The Series A Preferred Shares have been issued
subject to investment representations of the original purchaser
thereof and may be transferred or exchanged in the United States only
in compliance with the registration requirements of the Securities Act
of 1933, as amended (the "Act"), and applicable state securities laws
as an exemption therefrom. Prior to due presentment for transfer of
the Series A Preferred Shares, the Company may treat the person in
whose name the Series A Preferred Shares are duly registered on the
Series A Preferred Shares Register as the owner thereof for the
purpose of receiving payment as herein provided and all other
purposes, and the Company shall not be affected by notice to the
contrary.
3. DEFINITIONS. For purposes hereof the following definitions
shall apply:
"Certificate of Designations" shall mean Section B.3 of
Article III of the Company's Amended and Restated Articles of
Incorporation as set forth in these Fourth Articles of Amendment of
Amended and Restated Articles of Incorporation of the Company.
"Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company.
"Conversion Date Market Price" shall mean, as of any Holder
Conversion Date or other date of designation, an amount that is equal
to the lesser of, subject to adjustment as provided herein, (a) the
Fixed Conversion Price and (b) that percentage of the average Market
Price for Shares of Common Stock during the five (5) trading days
immediately preceding the Holder Conversion Date equal to (i) 92% if
converted during the period beginning 120 days from the applicable
Issuance Date and ending 180 days from the applicable Issuance Date,
or (ii) 90% if converted at any time after 180 days from the
applicable Issuance Date.
"Conversion Notice" shall have the meaning set forth in
Paragraph 6(c).
"Conversion Rate" shall have the meaning set forth in
Paragraph 6(b).
"Fixed Conversion Price" shall mean an amount equal to 115%
of the average of the closing bid price per share of Common Stock for
the five (5) trading days immediately preceding the applicable
Issuance Date; provided, however, that in the event that the Company
offers, sells, contracts to sell or otherwise issues or agrees to
issue any securities of the Company, convertible or otherwise, in a
private placement transaction (other than pursuant to any existing
stock or option or similar equity-based compensation plans for
employees, officers, directors or consultants, as hereinafter
amended), with a maximum conversion price per share of Common Stock
of, or in the case of a Common Stock offering a purchase price per
share equal to, an amount less than 115% of the average of the closing
bid price per share of Common Stock for the five (5) trading days
immediately preceding the applicable Issuance Date, then the "Fixed
Conversion Price" shall mean, for any Series A Preferred Shares not
yet converted, such lower conversion price or offer price per share;
and provided, further, that in the event of any stock split,
subdivision, combination, reorganization, exchange, substitution or
reclassification, the Fixed Conversion Price shall be equitably and
appropriately adjusted to reflect such change.
"Holder Conversion Date" shall have the meaning set forth in
Paragraph 6(c).
"Issuance Date" shall mean with respect to each Preferred
Share, the date of issuance of the applicable Preferred Share pursuant
to the Subscription Agreement.
"Junior Shares" shall have the meaning set forth in
Paragraph 13.
"Liquidation Value" shall have the meaning set forth in
Paragraph 13.
"Mandatory Conversion Date" shall have the meaning set forth
in Paragraph 7(a).
"Market Price for Shares of Common Stock" shall mean the
price of one share of Common Stock determined as follows:
(i) If the Common Stock is listed on NASDAQ, the
closing bid price as reported by the Bloomberg Service on the date of
valuation;
(ii) If the Common Stock is listed on a national
securities exchange, the lowest reported bid price on such exchange on
the date of valuation;
(iii) If neither clause (i) nor (ii) above applies but
the Common Stock is quoted in the over-the-counter market on the pink
sheets or bulletin board, the lesser of (A) the lowest sales price or
(B) the lowest reported "bid" price thereof on the date of valuation;
and
(iv) If neither clause (i), (ii) or (iii) above
applies, the market value as determined by a nationally recognized
investment banking firm or other nationally recognized financial
advisor retained by the Company for such purpose, taking into
consideration, among other factors, the earnings history, book value
and prospects for the Company, and the prices at which shares of
Common Stock recently have been traded. Such determination shall be
conclusive and binding on all persons.
"Paragraph 4 Transaction" shall mean a merger,
consolidation or other transaction referred to in Paragraph 4.
"Pari Passu Shares" shall have the meaning set forth in
Paragraph 13.
"Preferred Funds" shall have the meaning set forth in
Paragraph 13.
"Registration Rights Agreement" shall have the meaning
set forth in the Subscription Agreement.
"Subscription Agreement" shall have the meaning set
forth on page 1 of this Certificate of Designations.
"Underlying Shares" the Common Stock issuable upon
conversion of the Series A Preferred Shares.
4. PARAGRAPH 4 TRANSACTIONS. (a) If at any time (i) there
occurs any consolidation or merger of the Company with or into any
other corporation or other entity or person (whether or not the
Company is the surviving corporation) or there occurs any other
corporate reorganization or transaction or series of related
transactions, and as a result thereof the shareholders of the Company
pursuant to such merger, consolidation, reorganization or other
transaction own in the aggregate less than 50% of the voting power or
common equity of the ultimate parent corporation or other entity
surviving or resulting from such merger, consolidation, reorganization
or other transaction, (ii) the Company transfers all or substantially
all of the Company's assets to another corporation or other entity or
person or (iii) the Company shall fix a record date for the
declaration of a distribution or dividend, whether payable in cash,
securities or assets (other than shares of Common Stock) (a "Paragraph
4 Transaction"), then each Holder of Series A Preferred Shares, at
such Holder's option, (a) may participate in any such Paragraph 4
Transaction as a class with common shareholders on the same basis as
if the Series A Preferred Shares had been converted one day prior to
the announcement of such transaction (or record date for such
distribution or dividend), or (b) may require that the Company redeem
such Holder's Series A Preferred Shares at a redemption price per
Preferred Share equal to 120% of such Holder's Purchase Price of such
Preferred Share, plus accrued but unpaid dividends to the date of
redemption. Notice of the Holder's election under this Paragraph 4
shall be given not less than five (5) days prior to the consummation
of such Paragraph 4 Transaction.
5. CONVERSION AT THE OPTION OF THE COMPANY. (a) If, at any time
after the Issuance Date, the closing bid price of the Common Stock is
equal to or greater than $12.00 per share for the twenty (20)
consecutive trading days immediately preceding the date of the
Company's notice of conversion delivered pursuant to Paragraph 5(b)
hereof, the Company may require the Holders to convert the Series A
Preferred Shares, in whole but not in part, provided that: the notice
provisions set forth in Paragraph 5(b) hereof have been complied with;
the Registration Statement for the Common Stock issuable upon
conversion of the Series A Preferred Shares is effective on each day
during the period beginning 20 days prior to the date of the Company's
notice of conversion and ending on and including the date of
conversion; the Common Stock is designated for quotation on the Nasdaq
National Market, The New York Stock Exchange, Inc. or The American
Stock Exchange, Inc. and is not suspended from trading thereon; during
the period beginning on the Initial Issuance Date (as defined in the
Subscription Agreement) and ending on and including the date of
conversion, the Company shall have delivered shares of Common Stock
upon conversion of the Series A Preferred Shares on a timely basis as
set forth in Paragraph 6(c) of this Certificate of Designations; and
the Company otherwise has satisfied its obligations and is not in
default under this Certificate of Designations, the Subscription
Agreement and the Registration Rights Agreement.
(b) Notice of the Company's intention to require conversion
shall be given to each Holder of Series A Preferred Shares subsequent
to the twenty (20) consecutive trading day period referred to in
Paragraph 5(a) and not less than sixty (60) days prior to the date of
conversion of the Series A Preferred Shares, by first class mail,
postage prepaid, to such Holder of Series A Preferred Shares at the
address of such Holder; provided, that such 60-day period shall be
extended by the number of days in such period, if any, during which
trading of Common Stock is suspended or otherwise restricted. Each
such notice shall state: (i) a conversion date, which shall be not
less than 60 days following the date of mailing of the notice, (ii)
each Holder's pro rata share of outstanding Series A Preferred Shares
and (iii) the number of the Series A Preferred Shares to be converted.
(c) Notice having been mailed as aforesaid, the Holder
shall convert, on the date specified in the Company's notice, the
maximum of (i) the number of Series A Preferred Shares specified in
the Company's notice and (ii) the number of outstanding Series A
Preferred Shares on such date, in each case at the Conversion Rate
determined in accordance with Paragraph 6(b).
6. CONVERSION OF THE OPTION OF THE HOLDER. A Holder of Series A
Preferred Shares shall have the following conversion rights:
(a) HOLDER'S RIGHTS TO CONVERT. Such Holder's Series A
Preferred Shares shall be convertible at any time after the applicable
Issuance Date, in whole or in part, but at a minimum number of five
Series A Preferred Shares, at the option of such Holder, into fully
paid, validly issued and nonassessable shares of Common Stock. If the
Series A Preferred Shares are converted in part, the remaining portion
of the Series A Preferred Shares not so converted shall remain
entitled to the conversion rights provided herein. Prior to 120 days
subsequent to the applicable Issuance Date, the Holder may so convert
only at the Fixed Conversion Price.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. Series A
Preferred Shares shall be convertible into the number of shares of
Common Stock which results from application of the following formula:
(P*N) + D
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Conversion Date Market Price
P = Purchase Price
N = Number of Series A Preferred Shares submitted for conversion
D = accrued but unpaid dividends (not previously added to the
Purchase Price on a PIK Statement) on P as of the Holder
Conversion Date
The number of shares of Common Stock into which each $1,000
aggregate Liquidation Value (as hereinafter defined) of the Series A
Preferred Shares hereto may be converted pursuant to this Paragraph
6(b) is hereafter referred to as the "Conversion Rate."
(c) MECHANICS OF CONVERSION. In order to convert Series A
Preferred Shares (in whole or in part) into full shares of Common
Stock, the Holder thereof shall surrender the certificates
representing the Series A Preferred Shares (the "Preferred Share
Certificates"), duly endorsed, by either overnight courier or 2-day
courier, to the office of the transfer agent for the Series A
Preferred Shares (or to the principal office of the Company if the
Company serves as its own transfer agent), and shall give written
notice in the form of Exhibit 1 hereto (the "Conversion Notice") by
facsimile (with the original of such Notice forwarded with the
foregoing courier) to the office of the designated transfer agent or
the principal office of the Company, as the case may be, that the
Holder elects to convert a number of Series A Preferred Shares (plus
accrued but unpaid dividends) specified therein, which Conversion
Notice shall be irrevocable by the Holder; provided, however, that the
Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless either the
Preferred Share Certificates are delivered to the Company or its
designated transfer agent as provided above, or the Holder notifies
the Company or its designated transfer agent that such Series A
Preferred Shares have been lost, stolen or destroyed and promptly
executes an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with
such Series A Preferred Shares.
The Company shall use its best efforts to issue and deliver,
by either overnight courier or two-day courier, within three business
days after delivery to the Company of such Preferred Share
Certificate, or after receipt of such agreement and indemnification,
to such Holder of Series A Preferred Shares at the address of the
Holder, or to its designee (and registered in the name of the Holder
or its designee), a certificate or certificates for the number of
shares of Common Stock to which the Holder shall be entitled as
aforesaid, together with a calculation of the Conversion Rate and the
number of Series A Preferred Shares of such Holder not submitted for
conversion. The effective date of conversion (the "Holder Conversion
Date") shall be deemed to be the date on which the Company receives by
facsimile the Conversion Notice, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date. If the number of Series A
Preferred Shares represented by the Preferred Share Certificate(s)
submitted for conversion is greater than the number of Series A
Preferred Shares being converted, then the Company shall, as soon as
practicable and in no event later than three business days after
receipt of the Preferred Share Certificate(s) and at its own expense,
issue and deliver to the Holder a new Preferred Share Certificate
representing the number of Series A Preferred Shares not converted.
7. MANDATORY CONVERSION DATE. (a) On the date which is the
fifth anniversary of the applicable Issuance Date (the "Mandatory
Conversion Date"), the Company may, at its option, (i) require the
Holders to convert the Series A Preferred Shares which remain
outstanding on such date (plus accrued and unpaid dividends), in whole
but not in part, at the Conversion Rate determined in accordance with
Paragraph 6(b) or (ii) redeem such shares of Preferred Stock (together
with accrued and unpaid dividends) at a price in cash equal to the
aggregate Liquidation Value thereof. Notice of the Company's election
under this Paragraph 7(a) shall be given not less than 30 days prior
to the Mandatory Conversion Date and, in the case of a redemption
pursuant to clause (ii), shall include a representation by the Company
that the Company possesses, and will possess, legally available funds
sufficient to consummate such redemption.
(b) If the Company elects to require conversion of the
Series A Preferred Shares on the Mandatory Conversion Date pursuant to
Paragraph 7(a)(i), the Series A Preferred Shares outstanding at such
time shall be automatically converted into Common Stock on the
Mandatory Conversion Date in accordance with the terms of this
Certificate of Designations without notice. The Company shall use its
best efforts to issue and deliver to a Holder within three business
days after delivery to the Company by such Holder of such Holder's
Preferred Share Certificates, or after receipt of the agreement and
indemnification described in Paragraph 6(c) above, at the address of
such Holder, or to its designee (and registered in the name of such
Holder or its designee), a certificate or certificates for the number
of shares of Common Stock which such Holder shall be entitled to
receive hereunder, together with a calculation of the Conversion Rate.
The person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the
Mandatory Conversion Date. The Mandatory Conversion Date shall be a
"Holder Conversion Date" for purposes of this Certificate of
Designations.
8. STOCK SPLITS; DIVIDENDS; ADJUSTMENTS; REORGANIZATIONS.
(a) STOCK SPLITS AND COMBINATIONS. The Company shall not
effect any stock split, subdivision or combination with an effective
date within five (5) trading days of the Mandatory Conversion Date.
(b) ADJUSTMENT OF FIXED CONVERSION PRICE UPON SUBDIVISION
OR COMBINATION OF COMMON STOCK. If the Company at any time subdivides
(by way of stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Fixed Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced.
If the Company at any time combines (by way of combination, reverse
stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Fixed
Conversion Price in effect immediately prior to such combination will
be proportionately increased.
(c) CERTAIN DIVIDENDS AND DISTRIBUTIONS. The Company shall
not make, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, with an effective date
within five (5) trading days of the Mandatory Conversion Date.
(d) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In
the event the Company at any time or from time to time after the
Issuance Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Company other than shares of
Common Stock, then and in each such event provision shall be made so
that the Holders of Series A Preferred Shares shall receive upon
conversion thereof pursuant to Paragraph 6 hereof, in addition to the
number of shares of Common Stock receivable thereupon, the amount of
such other securities of the Company to which a Holder on the relevant
record or payment date, as applicable, of the number of shares of
Common Stock so receivable upon conversion would have been entitled,
plus any dividends or other distributions which would have been
received with respect to such securities had such Holder thereafter,
during the period from the date of such event to and including the
Holder Conversion Date, retained such securities, subject to all other
adjustments called for during such period under this Paragraph 8 with
respect to the rights of the Holders of the Series A Preferred Shares.
For purposes of this Paragraph 8(d), the number of shares of Common
Stock so receivable upon conversion by the Holder shall be deemed to
be that number which the Holder would have received upon conversion of
all Series A Preferred Shares held by such Holder if the Holder
Conversion Date had been the day preceding the date upon which the
Company announced the making of such dividend or other distribution.
(e) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. In the event that at any time or from time to time
after the Issuance Date, the Common Stock issuable upon the conversion
of the Series A Preferred Shares is changed into the same or a
different number of shares of any class or classes of stock or other
securities or property, whether by recapitalization, reclassification
or otherwise (other than a subdivision or combination of shares or
stock dividend or reorganization provided for elsewhere in this
Paragraph 8 or a merger or consolidation provided for in Paragraph 4),
then and in each such event each Holder of Series A Preferred Shares
shall have the right thereafter to convert such Series A Preferred
Shares into the kind and amount of shares of stock or other securities
or property receivable upon such recapitalization, reclassification or
other change by holders of shares of Common Stock, all subject to
further adjustment as provided herein. In such event, the formulae
set forth herein for conversion and redemption shall be equitably
adjusted to reflect such change in number of shares or, if shares of a
new class of stock are issued, to reflect the market price of the
class or classes of stock (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in
connection with the above described transaction.
(f) REORGANIZATIONS. If at any time or from time to time
after the applicable Issuance Date there is a capital reorganization
of the Common Stock (other than a recapitalization, subdivision,
combination, reclassification or exchange of shares provided for
elsewhere in this Paragraph 8) then, as a part of such reorganization,
effective provision shall be made so that the Holders of the Series A
Preferred Shares shall thereafter be entitled with respect to receive
upon conversion of the Series A Preferred Shares the number of shares
of stock or other securities or property to which a holder of the
number of shares of Common Stock deliverable upon such conversion
would have been entitled with respect to such capital reorganization.
In any such case, appropriate adjustment shall be made in the
application of the provisions of this Paragraph 8 with respect to the
rights of the Holders of the Series A Preferred Shares after the
reorganization to the end that the provisions of this Paragraph 8
shall be applicable after that event and be as nearly equivalent as
may be practicable, including, by way of illustration and not
limitation, by equitable adjustment of the formulae set forth herein
for conversion and redemption to reflect the market price of the
securities or property (applying the same factors used in determining
the Market Price for Shares of Common Stock) issued in connection with
the above described transaction.
(g) DISPUTE RESOLUTION. In the event of a dispute between
a Holder of Series A Preferred Shares and the Company with respect to
any of the adjustments required pursuant to the provisions of this
Paragraph 8, then the Series A Preferred Shares shall be converted in
a manner consistent with the Schedule of Computations delivered as set
forth in paragraph (h) below, and the Company shall immediately
deliver to the Holder that number of Series A Preferred Shares
consistent with such Schedule of Computations. Such Holder of Series
A Preferred Shares shall then be entitled, within 60 days of receipt
of the Schedule of Computations, to submit such dispute to the
American Arbitration Association for resolution according to then
applicable rules thereof, which determination shall be final and
binding. If it shall be determined that a Holder of Series A
Preferred Shares should have received additional shares of Common
Stock upon such conversion (the "Undelivered Shares") then, within
three trading days of receipt of written notice of such determination,
the Company shall issue to such Holder that number of additional
shares of Common Stock as shall have a value, based upon the then
Market Price for Shares of Common Stock, as shall equal the
Undelivered Shares times the Market Price for Shares of Common Stock
on the date of conversion. The cost of such proceeding shall be
shared 50% by the Holder or Holders of Series A Preferred Shares
involved in such dispute and 50% by the Company, except that the
prevailing party, as determined by the arbitrator presiding over the
arbitration, shall be entitled to recover reasonable attorney's fees,
in addition to other costs and expenses and any other available
remedy.
(h) SCHEDULE OF COMPUTATIONS. All adjustments pursuant to
this Paragraph 8 shall be notified in writing to the Holders of Series
A Preferred Shares within three (3) trading days of the occurrence
thereof and such notice shall be accompanied by a schedule of
computations setting forth in detail the calculations used to
determine such adjustments ("Schedule of Computations"). If so
requested by a Holder of Series A Preferred Shares, the Company shall
provide to such Holder within ten (10) trading days of its request
therefor a certification of concurrence to the Schedule of
Computations by the independent public accountants of the Company.
9. FRACTIONAL SHARES. No fractional shares of Common Stock
or scrip representing fractional shares of Common Stock shall be
issuable hereunder. The number of shares of Common Stock that are
issuable upon any conversion shall be rounded up or down to the
nearest whole share.
10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall reserve and keep available at all times out of its
authorized and unissued Common Stock, free of preemptive rights, such
number of shares of Common Stock as shall be sufficient to enable the
Company to satisfy any obligation to issue shares of Common Stock upon
conversion of all of the Series A Preferred Shares pursuant hereto.
11. TAXES. The Company shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of
Common Stock upon conversion of the Series A Preferred Shares.
12. VOTING RIGHTS. Holders of Series A Preferred Shares
shall have no voting rights, except as required by law, including but
not limited to the General Corporation Act of the State of Florida,
and as expressly provided in this Certificate of Designations.
13. LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of
any voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of the Series A Preferred Shares shall be
entitled to receive in cash out of the assets of the Company, whether
from capital or from earnings available for distribution to its
shareholders (the "Preferred Funds"), before any amount shall be paid
to the holders of any of the capital stock of the Company of any class
junior in rank to the Series A Preferred Shares (the "Junior Shares")
in respect of the preferences as to the distributions and payments on
the liquidation, dissolution and winding up of the Company, an amount
per Preferred Share equal to the sum of (i) the Purchase Price and
(ii) any accrued but unpaid dividends (such sum being referred to as
the "Liquidation Value"); provided that, if the Preferred Funds are
insufficient to pay the full amount due to the holders of Series A
Preferred Shares and holders of shares of other classes or series of
preferred stock of the Company that are of equal rank with the Series
A Preferred Shares as to payments of Preferred Funds (the "Pari Passu
Shares"), then each holder of Series A Preferred Shares and Pari Passu
Shares shall receive a percentage of the Preferred Funds equal to the
full amount of Preferred Funds payable to such holder as a liquidation
preference, in accordance with their respective Certificate of
Designations, Preferences and Rights, as a percentage of the full
amount of Preferred Funds payable to all holders of Series A Preferred
Shares and Pari Passu Shares. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall
not, for the purposes hereof, be regarded as a liquidation,
dissolution or winding up of the Company. Neither the consolidation
or merger of the Company with or into any other person, nor the sale
or transfer by the Company of substantially all or less than
substantially all of its assets, shall, for the purposes hereof, be
deemed to be a liquidation, dissolution or winding up of the Company.
No holder of Series A Preferred Shares shall be entitled to receive
any amounts with respect thereto upon any liquidation, dissolution or
winding up of the Company other than the amounts provided for herein.
14. PREFERRED RANK. All shares of Common Stock shall be of
junior rank to all Series A Preferred Shares in respect to the
preferences as to distributions and payments upon the liquidation,
dissolution and winding up of the Company. The rights of the shares
of Common Stock shall be subject to the preferences and relative
rights of the Series A Preferred Shares. Without the prior express
written consent of the Holders of not less than two-thirds (2/3) of
the then outstanding Preferred Shares, the Company shall not hereafter
authorize or issue additional or other capital stock that is of senior
rank to the Preferred Shares in respect of the preferences as to
distributions and payments upon the liquidation, dissolution and
winding up of the Company. Without the prior express written consent
of the Holders of not less than two-thirds (2/3) of the then
outstanding Preferred Shares, the Company shall not hereafter
authorize or make any amendment to the Company's Articles of
Incorporation or by-laws, or file any resolution of the board of
directors of the Company with the Secretary of State of the State of
Florida, containing any provisions which would adversely affect or
otherwise impair the rights or relative priority of the holders of the
Preferred Shares relative to the holders of the Common Stock or the
holders of any other class of capital stock. Unless the Company shall
comply with Paragraph 4 above, in the event of the merger or
consolidation of the Company with or into another corporation, the
Series A Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein.
15. RESTRICTION ON REDEMPTION AND CASH DIVIDENDS WITH
RESPECT TO OTHER CAPITAL STOCK. Until all of the Series A Preferred
Shares have been converted or redeemed as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash
dividend or distribution on, its Common Stock without the prior
express written consent of the Holders of not less than two-thirds
(2/3) of the then outstanding Series A Preferred Shares.
16. LIMITATION ON NUMBER OF CONVERSION SHARES. The Company
shall not be obligated to issue upon conversion of the Series A
Preferred Shares, in the aggregate, more than a number of shares of
Common Stock which, when added to the number of shares issuable upon
exercise of the warrants to purchase up to 250,000 shares of Common
Stock issued in connection with the Series A Preferred Shares, shall
equal 19.99% (such percentage to be appropriately adjusted in the
event of any change in the regulations of the Nasdaq National Market
or other principal securities exchange or market upon which the Common
Stock is or becomes traded) of the number of shares of Common Stock
outstanding on the Issuance Date (such amount to be proportionately
and equitably adjusted from time to time in the event of stock splits,
stock dividends, combinations, reverse stock splits,
reclassifications, capital reorganizations and similar events relating
to the Common Stock) (the "EXCHANGE CAP"), if issuance of a greater
number of shares of Common Stock would constitute a breach of the
Company's obligations under the rules or regulations of The Nasdaq
Stock Market, Inc. or any other principal securities exchange or
market upon which the Common Stock is or becomes traded. The Exchange
Cap shall be allocated among the Series A Preferred Shares pro rata
based on the total number of authorized Series A Preferred Shares. In
the event that the Company does not issue Common Stock to a Holder of
Series A Preferred Shares pursuant to this Section 16, such Holder may
then make an election pursuant to Paragraph 26.
17. VOTE TO CHANGE THE TERMS OF OR ISSUE SERIES A PREFERRED
SHARES. The affirmative vote at a meeting duly called for such
purpose or the written consent without a meeting, of the Holders of
not less than two-thirds (2/3) of the then outstanding Series A
Preferred Shares, shall be required for the following actions to be
taken by the Company: (1) any change to this Certificate of
Designations or the Company's Articles of Incorporation which would
amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Series A Preferred Shares or otherwise
impair the rights or relative priority of the Holders of the Series A
Preferred Shares relative to the holders of the common stock or the
holders of any class of capital stock, or (2) any issuance of Series A
Preferred Shares other than pursuant to the Subscription Agreement.
18. NO REISSUANCE OF SERIES A PREFERRED SHARES. No Series
A Preferred Shares acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such
Series A Preferred Shares shall be retired. No additional shares of
Series A Convertible Preferred Stock shall be authorized or issued in
addition to the Preferred Shares without the consent of at least 66
2/3% in interest of the Holders of Series A Preferred Shares
outstanding immediately prior thereto.
19. NO IMPAIRMENT. The Company shall not intentionally
take any action which would impair the rights and privileges of the
Series A Preferred Shares set forth herein or the Holders thereof.
20. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
Notwithstanding anything to the contrary contained herein, each
Conversion Notice shall contain a representation that, after giving
effect to the shares of Common Stock to be issued pursuant to such
conversion notice, the total number of shares of Common Stock deemed
beneficially owned by the Holder (excluding shares that might
otherwise be deemed beneficially owned by reason of the conversion
right in the Series A Preferred Shares owned by the Holder), together
with all shares of the Common Stock deemed beneficially owned by the
Holder's "affiliates" as defined in Rule 144 of the Act, will not
exceed 4.9% of the total issued and outstanding shares of Common
Stock.
21. REGISTRATION SUSPENSION. In the event that at any time
or from time to time the effectiveness of any registration statement
with respect to the Common Stock issuable upon conversion of the
Series A Preferred Shares is suspended or trading in the Common stock
on the New York Stock Exchange or the NASDAQ National Market System is
suspended for a period of time ("Blackout Period"), the Mandatory
Conversion Date hereunder shall be extended for a period equal to 1.5
times the number of days in such Blackout Period. Furthermore,
additional provisions pertaining to the suspension of effectiveness of
such registration statement set forth in Section 6 of the Registration
Rights Agreement shall be applicable in the event of a Blackout Period
and are specifically incorporated by reference herein.
22. WAIVERS OF DEMAND, ETC. The Company hereby expressly
waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration
or intent to accelerate, bringing of suit and diligence in taking any
action to collect amounts called for hereunder and will be directly
and primarily liable for the payment of all sums owing and to be owing
hereunder, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
23. REPLACEMENT SERIES A PREFERRED SHARES. In the event
that any Holder notifies the Company that its Series A Preferred
Shares have been lost, stolen or destroyed, a replacement certificate
identical in all respects to the original certificate (except for
registration number and Purchase Price, if different than that shown
on the original certificate) shall be promptly issued by the Company
to such Holder, provided that the Holder executes and delivers to the
Company an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with
such Series A Preferred Shares.
24. PAYMENT OF EXPENSES. The Company agrees to pay all
reasonable debts and expenses, including reasonable attorneys' fees,
which may be incurred by the Holder in enforcing the provisions of
this Certificate of Designations, the Subscription Agreement, the
Warrants (as defined in the Subscription Agreement) or the
Registration Rights Agreement.
25. ADDITIONAL RIGHTS OF REDEMPTION AT OPTION OF HOLDERS.
(a) REDEMPTION OPTION UPON TRIGGERING EVENT. In
addition to all other rights of the Holders of Series A Preferred
Shares contained herein, after a Triggering Event (as defined below),
each Holder of Series A Preferred Shares shall have the right, at such
Holder's option, to require the Company to redeem all or a portion of
such Holder's Series A Preferred Shares at a price per Preferred Share
equal to the greater of (i) the sum of (A) 125% of the Purchase Price
of the Series A Preferred Shares and (B) any accrued but unpaid
dividends, and (ii) the product of (A) the Conversion Rate at such
time and (B) the closing bid price of the Common Stock calculated as
of the date immediately preceding such Triggering Event on which the
exchange or market on which the Common Stock is traded is open
("Redemption Price").
(b) "TRIGGERING EVENT". A "Triggering Event" shall be
deemed to have occurred at such time as any of the following events:
(i) while a Registration Statement is required to be
maintained effective pursuant to the terms of the
Registration Rights Agreement, the effectiveness of such
Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is
unavailable to the Holder of the Series A Preferred Shares
for sale of the Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms
of the Registration Rights Agreement, and such lapse or
unavailability continues for a period of thirty consecutive
trading days;
(ii) the failure of the Common Stock to be listed or
the suspension of trading of the Common Stock on the Nasdaq
National Market, The Nasdaq SmallCap Market, The New York
Stock Exchange, Inc. or The American Stock Exchange, Inc.
for a period of five consecutive days;
(iii) the Company's notice to any Holder of Series A
Preferred Shares, including by way of public announcement,
at any time, of its intention not to comply with proper
requests for conversion of any Series A Preferred Shares
into shares of Common Stock, including due to any of the
reasons set forth in Paragraph 26(a) below.
(c) MECHANICS OF REDEMPTION AT OPTION OF BUYER UPON
TRIGGERING EVENT. Within one (1) day after the occurrence of a
Triggering Event, the Company shall deliver written notice thereof via
facsimile and overnight courier ("Notice of Triggering Event") to each
Holder of Series A Preferred Shares. At any time after receipt of a
Notice of Triggering Event, any Holder of the Series A Preferred
Shares then outstanding may, subject to Section 26 below, require the
Company to redeem all or any portion of the Series A Preferred Shares
held by such Holder by delivering written notice thereof via facsimile
and overnight courier ("Notice of Redemption at Option of Buyer Upon
Triggering Event") to the Company, which Notice of Redemption at
Option of Buyer Upon Triggering Event shall indicate (i) the number of
Series A Preferred Shares that such Holder is submitting for
redemption and (ii) the applicable Triggering Event Redemption Price,
as calculated pursuant to Paragraph 25(a) above. Notwithstanding the
foregoing, if (A) the Triggering Event is one described in Paragraph
25(b)(i) above, and (B) such lapse discontinues and a Holder of Series
A Preferred Shares receives notice from the Company that the lapse in
the effectiveness of the Registration Statement no longer continues
prior to such Holder's delivery to the Company of the Holder's Notice
of Redemption at Option of Buyer Upon Triggering Event, then the
Holder shall no longer have the right to deliver a Notice of
Redemption at Option of Buyer Upon Triggering Event to the Company
with respect to such lapse.
26. INABILITY TO FULLY CONVERT.
(a) HOLDER'S OPTION IF COMPANY CANNOT FULLY CONVERT.
If, upon the Company's receipt of a Conversion Notice, the Company
does not issue shares of Common Stock registered for resale under the
Registration Statement for any reason, including, without limitation,
because the Company (x) does not have a sufficient number of shares of
Common Stock authorized and available, (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or its securities, including
without limitation the Exchange Cap (as defined herein), from issuing
all of the Common Stock which is to be issued to a Holder of Series A
Preferred Shares pursuant to a Conversion Notice or (z) fails to have
a sufficient number of shares of Common Stock registered for resale
under the Registration Statement, then the Company shall issue as many
shares of Common Stock as it is able to issue in accordance with such
Holder's Conversion Notice and, if such condition remains unremedied
for a period of thirty days after the Company's receipt of a
Conversion Notice with respect to the unconverted Series A Preferred
Shares, the Holder, solely at such Holder's option, can elect to: (i)
require the Company to redeem from such Holder those Series A
Preferred Shares for which the Company is unable to issue Common Stock
in accordance with such Holder's Conversion Notice ("Mandatory
Redemption") at a price per Preferred Share (the "Mandatory Redemption
Price") equal to the Redemption Price calculated as of such Conversion
Date (as opposed to the date referred to in Paragraph 25(a) above);
(ii) if the Company's inability to fully convert Series A Preferred
Shares is pursuant to Paragraph 26(a)(z) above, require the Company to
issue restricted shares of Common Stock in accordance with such
Holder's Conversion Notice; OR (iii) void its Conversion Notice and
retain or have returned, as the case may be, the nonconverted Series A
Preferred Shares that were to be converted pursuant to such Holder's
Conversion Notice; provided, that, prior to the fourth anniversary of
the Initial Closing Date (as defined in the Subscription Agreement),
the Holder shall not have the right to elect to require the Company to
redeem Series A Preferred Shares pursuant to subsection (i) of this
Paragraph 26(a) in the event the Company is prohibited by the Exchange
Cap from issuing all of the Common Stock which is to be issued to a
Holder of Series A Preferred Shares pursuant to a Conversion Notice
pursuant to subsection (y) of this Paragraph 26(a) and, on and after
such fourth anniversary, the Holder shall have such right of
redemption only if the Company shall have failed to satisfy its
obligations under the rules or regulations of The Nasdaq Stock Market,
Inc. or any other principal securities exchange or market upon which
the Common Stock is or becomes traded for a period of 120 days after
the Holders and their respective "affiliates" shall have acquired a
number of shares of Common Stock equal to the Exchange Cap, which 120-
day period shall begin no earlier than such fourth anniversary. The
Company agrees to use its best efforts to satisfy the foregoing
obligations in order to issue a number of shares of Common Stock in
excess of the Exchange Cap in the event that the Conversion Rate shall
not exceed $2.50 for thirty (30) consecutive trading days subsequent
to the aforementioned 120-day period. In addition to the foregoing,
the rate of dividend on all of the Series A Preferred Shares
(including Series A Preferred Shares for which a Conversion Notice has
not yet been sent), shall, to the maximum extent permitted by law, be
permanently increased by two percent (2%) (i.e., from 5% to 7%)
commencing on the first day of the thirty (30) day period (or part
thereof) following the receipt of a Conversion Notice; an additional
two percent (2%) commencing on the first day of each of the second and
third such thirty (30) day periods (or part thereof); and an
additional one percent (1%) on the first day of each consecutive
thirty (30) day period (or part thereof) thereafter until such
securities have been duly converted or redeemed as herein provided;
provided that in no event shall the rate of dividend exceed the lower
of 20% and the highest rate permitted by applicable law. Any such
dividend which is not paid when due shall, to the maximum extent
permitted by law, accrue dividends until paid at the rate from time to
time CURRENTLY equal to the dividend rate on the Series A Preferred
Shares.
(b) MECHANICS OF FULFILLING HOLDERS ELECTION. The
Company shall immediately send via facsimile to a Holder of Series A
Preferred Shares, upon receipt of a facsimile copy of a Conversion
Notice from such Holder which cannot be fully satisfied as described
in Paragraph 26(a) above, a notice of the Company's inability to fully
satisfy such Holder's Conversion Notice (the "Inability to Fully
Convert Notice"). Such Inability to Fully Convert Notice shall
indicate (i) the reason why the Company is unable to fully satisfy
such Holder's Conversion Notice, (ii) the number of Series A Preferred
Shares which cannot be converted, and (iii) the applicable Mandatory
Redemption Price. Such Holder must within ten (10) business days of
receipt of such Inability to Fully Convert Notice deliver written
notice via facsimile to the Company ("Notice in Response to Inability
to Convert") of its election pursuant to Paragraph 26(a) above.
(c) PRO-RATA CONVERSION AND REDEMPTION. In the event
the Company receives a Conversion Notice from more than one Holder of
Series A Preferred Shares on the same day and the Company can convert
and redeem some, but not all, of the Series A Preferred Shares
pursuant to this Paragraph 26, the Company shall convert and redeem
from each Holder of Series A Preferred Shares electing to have Series
A Preferred Shares converted and redeemed at such time an amount equal
to such Holder's pro-rata amount (based on the number of Series A
Preferred Shares held by such Holder relative to the number of Series
A Preferred Shares outstanding) of all Series A Preferred Shares being
converted and redeemed at such time.
27. PAYMENT OF REDEMPTION PRICE. Upon the Company's
receipt of a Notice(s) of Redemption at Option of Buyer Upon
Triggering Event from any Holder of Series A Preferred Shares, the
Company shall immediately notify each Holder of Series A Preferred
Shares by facsimile of the Company's receipt of such Notice(s) of
Redemption at Option of Buyer Upon Triggering Event and each Holder
which has sent such a Notice shall promptly submit to the Company or
its designated transfer agent such Holder's Preferred Share
Certificates which such Holder has elected to have redeemed. The
Company shall deliver the applicable Redemption Price to such Holder
within ten business days after the Company's receipt of the requisite
notices required to effect a redemption; provided that a Holder's
Preferred Share certificates shall have been so delivered to the
Company or its designated transfer agent; provided further that if the
Company is unable to redeem all of the Series A Preferred Shares to be
redeemed, the Company shall redeem an amount from each Holder of
Series A Preferred Shares being redeemed equal to such Holder's pro-
rata amount (based on the number of Series A Preferred Shares held by
such Holder relative to the number of Series A Preferred Shares
outstanding) of all Series A Preferred Shares being redeemed. If the
Company shall fail to redeem all of the Series A Preferred Shares
submitted for redemption (other than pursuant to a dispute as to the
arithmetic calculation of the Redemption Price), in addition to any
remedy such Holder of Series A Preferred Shares may have under this
Certificate of Designations and the Subscription Agreement, the
applicable Redemption Price payable in respect of such unredeemed
Series A Preferred Shares shall bear interest at the lesser of the
highest rate permitted by law and the rate of 2.0% per month (prorated
for partial months) until paid in full. Until the Company pays such
unpaid applicable Redemption Price in full to a Holder of Series A
Preferred Shares submitted for redemption, such Holder shall have the
option (the "Void Optional Redemption Option") to, in lieu of
redemption, require the Company to promptly return to such Holder(s)
all of the Series A Preferred Shares that were submitted for
redemption by such Holder(s) under this Paragraph 25 and for which the
applicable Redemption Price has not been paid, by sending written
notice thereof to the Company via facsimile (the "Void Optional
Redemption Notice"). Upon the Company's receipt of such Void Optional
Redemption Notice(s) and prior to payment of the full applicable
Redemption Price to such Holder, (i) the Notice(s) of Redemption at
Option of Buyer Upon Triggering Event shall be null and void with
respect to those Series A Preferred Shares submitted for redemption
and for which the applicable Redemption Price has not been paid, (ii)
the Company shall immediately return any Series A Preferred Shares
submitted to the Company by each Holder for redemption under this
Paragraph 27 and for which the applicable Redemption Price has not
been paid, (iii) the Fixed Conversion Price of such returned Series A
Preferred Shares shall be adjusted to the lesser of (A) the Fixed
Conversion Price as in effect on the date on which the Void Optional
Redemption Notice(s) is delivered to the Company and (B) the lowest
closing bid price of the Common Stock during the period beginning on
the date on which the Notice(s) of Redemption at Option of Buyer Upon
Triggering Event is delivered to the Company and ending on the date on
which the Void Optional Redemption Notice(s) is delivered to the
Company; provided that no adjustment shall be made if such adjustment
would result in an increase of the Fixed Conversion Price then in
effect.
28. SAVINGS CLAUSE. In case any provision of this
Certificate of Designations is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible,
and the validity and enforceability of the remaining provisions of
this Certificate of Designations will not in any way be affected or
impaired thereby.
29. ENTIRE AGREEMENT. This Certificate of Designations,
the Subscription Agreement, the Warrant, the Registration Rights
Agreement and the agreements referred to in this Certificate of
Designations constitute the full and entire understanding and
agreement between the Company and the Holder with respect to the
subject hereof. Neither this Certificate of Designations nor any term
hereof may be amended, waived, discharged or terminated other than by
a written instrument signed by the Company and the Holder.
30. ASSIGNMENT, ETC. The Holder may, subject to compliance
with the Subscription Agreement and to applicable Federal and state
securities laws, transfer or assign the Series A Preferred Shares or
any interest therein and may mortgage, encumber or transfer any of its
rights or interest in and to the Series A Preferred Shares or any part
hereof and, without limitation, each assignee, transferee and
mortgagee (which may include any affiliate of the Holder) shall have
the right to transfer or assign its interest. Each such assignment
shall be of a minimum of ten (10) Series A Preferred Shares, or shall
be all of the Holder's Series A Preferred Shares. Each such assignee,
transferee and mortgagee shall have all of the rights of the Holder
under this Certificate of Designations. The Company agrees that,
subject to compliance with the Subscription Agreement, after receipt
by the Company of written notice of assignment from the Holder or from
the Holder's assignee, all amounts which then and thereafter become
due under this Certificate of Designations shall be paid to such
assignee at the place of payment designed in such notice. This
Certificate of Designations shall be binding upon the Company and its
successors and shall insure to the benefit of the Holder and its
successors and assigns.
31. NO WAIVER. No failure on the part of the Holder to
exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by the Holder of any right, remedy or power hereunder
preclude any other or future exercise of any other right, remedy or
power. Each and every right, remedy or power hereby granted to the
Holder or allowed it by law or other agreement shall be cumulative and
not exclusive of any other, and may be exercised by the Holder from
time to time.
32. MISCELLANEOUS. Unless otherwise provided herein, any
notice or other communication to a party hereunder shall be
sufficiently given if in writing and personally delivered or mailed to
said party by certified mail, return receipt requested, at its address
set forth herein or such other address as either may designate for
itself in such notice to the other and communications shall be deemed
to have been received when delivered personally or, if sent by mail or
facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Fourth Articles of Amendment
requires, words in the singular shall be deemed to include the plural
and words in the plural shall be deemed to include the singular. If
more than one Company is named herein, the liability of each shall be
joint and several. Paragraph headings are for convenience only and
shall not affect the meaning of this document.
THIRD: The amendment was duly adopted by the directors of
the Company on February 5, 1998, without shareholder action, which was
not required for effectiveness pursuant to Section 607.0602 of the
Florida Business Corporation Act.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: February 11, 1998
THE PANDA PROJECT, INC.
By:/s/ Stanford W. Crane, Jr.
Print Name: Stanford W. Crane, Jr.
Print Title: President and CEO
Print Address: 901 Yamato Road
Boca Raton, FL 33484
ATTEST
/s/ C. Daryl Hollis
- --------------------
C. Daryl Hollis, Secretary
<PAGE>
EXHIBIT 1
(To be Executed by Registered Holder
in order to Convert Series A Preferred Shares)
CONVERSION NOTICE
-----------------
FOR
---
SERIES A CONVERTIBLE PREFERRED STOCK
------------------------------------
The undersigned, as Holder of ----- shares of Series A Convertible
Preferred Stock of The Panda Project, Inc. (the "Company"), Nos. -----
- - (the "Series A Preferred Shares"), hereby irrevocably elects to
convert the Series A Preferred Shares into shares of Common Stock, par
value $.01 per share (the "Common Stock"), of the Company according to
the conditions of the Certificate of Designations, Preferences and
Rights of the Series A Preferred Shares, as of the date written below.
The undersigned hereby requests that share certificates for the Common
Stock to be issued to the undersigned pursuant to this Conversion
Notice be issued in the name of, and delivered to, the undersigned or
its designee as indicated below. If shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto. No fee will be
charged to the Holder for any conversion, except for transfer taxes,
if any.
The undersigned represents that, after giving effect to the shares of
the Common Stock to be issued pursuant to such conversion notice, the
total number of shares of Common Stock deemed beneficially owned by
the undersigned, together with all shares of Common Stock deemed
beneficially owned by the undersigned's "affiliates" as defined in
Rule 144 of the Act, will not exceed 4.9% of the total issued and
outstanding shares of Common Stock.
Conversion Information: NAME OF HOLDER:
By:
------------------------
Print Name:
Print Title:
Print Address of Holder:
--------------------------
--------------------------
Issue Common Stock to:
at:
Date of Conversion
--------------------------
Applicable Conversion Rate
EXHIBIT 2
---------
PIK STATEMENT
-------------
Date:
------------
To: [Name of Holder of Series A Preferred Shares]("Holder")
Re: Series A Convertible Preferred Stock ("Series A Preferred
Shares") of The Panda Project, Inc. (the "Company") Nos.
__________.
In lieu of paying dividends on the above-referenced Series A
Preferred Shares in coin or currency, the Company hereby elects to pay
dividends on the Series A Preferred Shares, for the Dividend Payment
Date indicated below, by having the amount of such dividends added to
the Purchase Price of the Series A Preferred Shares. The Company
hereby certifies to the Holder, its successors and assigns, that the
Purchase Price of the Series A Preferred Shares after delivery of this
PIK Statement equals the amount indicated below. Capitalized terms
used in this PIK Statement and not otherwise defined shall have the
meaning ascribed thereto in the Certificate of Designations for the
Series A Preferred Shares.
Dividend Payment Date: _______________
Purchase Price prior to issuance
of this PIK Statement: US$____________
PIK Dividend: US$____________
Purchase Price After
issuance of this PIK Statement: US$____________
IN WITNESS WHEREOF, this PIK Statement has been duly
executed and delivered on the date first written above.
THE PANDA PROJECT, INC.
By: __________________________
Print Name:
Print Title:
Exhibit 4.2
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT") OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
Right to Purchase Shares of Common Stock of The Panda Project, Inc.
_______________________________________
Common Stock Purchase Warrant
The Panda Project, Inc., a Florida corporation having an
address at 901 Yamato Road, Boca Raton, Florida 33431 (the "Company"),
hereby certifies that for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, ---------
having an address at ------------- ("Purchaser"), or any other Warrant
Holder is entitled, on the terms and conditions set forth below, to
purchase from the Company at any time after the date hereof (subject
to the provisions of Section 2 hereof) and ending on the date which is
sixty (60) months after the date hereof (the "Exercise Period") up to
- ---------- fully paid and nonassessable shares of Common Stock, par
value $0.01, of the Company (the "Common Stock") at the Purchase Price
(hereinafter defined), as the same may be adjusted pursuant to Section
5 herein.
This Warrant is one of the warrants (collectively, including
any warrants issued upon the exercise or transfer of any such warrants
in whole or in part, the "Warrants") issued pursuant to the
Subscription Agreement (the "Agreement") by and among the Company and
the purchasers (the "Subscribers") of the original issue of the
Warrants, pursuant to which the Company has agreed to issue and sell
its Series A Convertible Preferred Stock (the "Preferred Shares") and,
in connection with such sale, such Subscribers shall receive warrants
to purchase shares of Common Stock. As used herein the term "this
Warrant" shall mean and include this Warrant and any Warrant or
Warrants hereafter issued as a consequence of the exercise or transfer
of this Warrant in whole or in part.
1. DEFINITIONS.
(a) the term "Warrant Holder" shall mean the Purchaser or
any assignee of all or any portion of this Warrant at any
given time who, at the time of assignment, acquired the
right to purchase at least 1000 Warrant Shares (such number
being subject to adjustment after the date hereof pursuant
to Section 5 hereof).
(b) the term "Warrant Shares" shall mean the shares of
Common Stock or other securities issuable upon exercise of
this Warrant.
(c) the term "Purchase Price" shall mean 115% of the
average of the closing bid price per share of Common Stock
for the five (5) trading days immediately preceding the
applicable issuance date of this Warrant.
(d) other terms used herein which are defined in the
Agreement or the Registration Rights Agreement, dated as of
February __, 1998 (the "Registration Rights Agreement"),
shall have the same meanings herein as therein.
2. EXERCISE OF WARRANT.
This Warrant may be exercised by Warrant Holder, in whole or
in part, at any time and from time to time during the Exercise Period,
by surrender of this Warrant, together with the Purchase Price (as
defined in Section 1) for each share of Common Stock as to which the
Warrant is exercised, and the form of warrant exercise attached hereto
as Exhibit A duly executed by Warrant Holder, to the Company at its
principal office. In the event that this Warrant is not exercised in
full, the number of Warrant Shares shall be reduced by the number of
such Warrant Shares for which this Warrant is exercised, and the
Company, at its expense, shall forthwith issue and deliver to or upon
the order of the Warrant Holder a new Warrant of like tenor in the
name of the Warrant Holder or as the Warrant Holder (upon payment by
the Warrant Holder of any applicable transfer taxes) may request,
reflecting such adjusted Warrant Shares.
3. DELIVERY OF STOCK CERTIFICATES.
(a) Subject to the terms and conditions of this Warrant,
as soon as practicable after the exercise of this Warrant in
full or in part, and in any event within three (3) trading
days thereafter, the Company at its expense (including,
without limitation, the payment by it of any applicable
issue taxes) will cause to be issued in the name of and
delivered to the Warrant Holder, or as the Warrant Holder
(upon payment by the Warrant Holder of any applicable
transfer taxes) may lawfully direct, a certificate or
certificates (registered in the name of the Warrant Holder
or its designee) for the number of fully paid and non-
assessable shares of Common Stock to which the Warrant
Holder shall be entitled on such exercise, together with any
other stock or other securities or property (including cash,
where applicable) to which the Warrant Holder is entitled
upon such exercise.
(b) This Warrant may not be exercised as to fractional
shares of Common Stock. In the event that the exercise of
this Warrant, in full or in part, would result in the
issuance of any fractional share of Common Stock, then in
such event the Warrant Holder shall be entitled to cash
equal to the Fair Market Value of such fractional share.
For purposes of this Warrant, Fair Market Value equals the
closing sale price of the Common Stock on the Principal
Market on the date of determination or, if the Common Stock
is not listed or admitted to trading on any national
securities exchange or quoted in the Nasdaq National Market,
the average of the closing bid and asked prices on the over-
the-counter market as furnished by any New York Stock
Exchange member firm that makes a market in the Common Stock
reasonably selected from time to time by the Company for
that purpose, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or
quoted on the Nasdaq National Market or traded over-the-
counter and the average price cannot be determined as
contemplated above, the Fair Market Value of the Common
Stock shall be as reasonably determined in good faith by the
Company's Board of Directors.
(c) Notwithstanding any provision of this Section 3, as
of any date prior to the date of exercise of this Warrant,
or any portion thereof, the aggregate number of shares of
Common Stock into which this Warrant, all other warrants and
all other securities convertible into or exchangeable for
Common Stock held by the Warrant Holder and its affiliates
shall be convertible or exchangeable, together with the
shares of Common Stock then beneficially owned (as such term
is defined in the 1934 Act) by such Warrant Holder and its
affiliates, shall not exceed 4.9% of the total outstanding
shares of Common Stock as of such date. This Warrant shall
not be exercisable on any date to the extent that such
exercise would limit the ability of the Investor to purchase
shares of Common Stock as a result of a Put Share Notice (as
such terms are defined in the Agreement) pursuant to Section
1(c) of the Agreement.
4. COVENANTS OF THE COMPANY.
(a) The Company shall use its reasonable best efforts to
insure that a Registration Statement under the Securities
Act covering the resale or other disposition thereof of the
Warrant Shares by the Warrant Holder is effective to the
extent provided in the Registration Rights Agreement.
(b) The Company shall take all necessary actions and
proceedings as may be required and permitted by applicable
law, rule and regulation, including, without limitation, the
notification and approval of the Principal Market, for the
legal and valid issuance of this Warrant and the Warrant
Shares to the Warrant Holder under this Warrant.
(c) During the Exercise Period, the Company shall take
all steps reasonably necessary and within its control to
insure that the Common Stock remains listed on the Principal
Market and shall not amend its Articles of Incorporation or
By-laws so as to constitute a breach of the Company's
obligations hereunder or so as to adversely affect any
rights of the Warrant Holder under this Warrant.
(d) The Company shall at all times reserve and keep
available out of its authorized and unissued Common Stock,
solely for issuance and delivery as Warrant Shares
hereunder, such shares of Common Stock as shall from time to
time be issuable as Warrant Shares.
(e) The Warrant Shares, when issued in accordance with
the terms hereof, will be duly authorized and, when paid for
or issued in accordance with the terms hereof, shall be
validly issued, fully paid, non-assessable and free of
preemptive rights. The Company has authorized and reserved
for issuance to the Warrant Holder the requisite number of
shares of Common Stock to be issued pursuant to this
Warrant.
(f) With a view to making available to the Warrant Holder
the benefits of Rule 144 promulgated under the 1933 Act, any
other rule or regulation of the SEC that may at any time
permit the Warrant Holder to sell securities of the Company
to the public without registration, the Company agrees to
use its reasonable best efforts to:
(i) make and keep public information available, as
those terms are understood and defined in Rule 144, at
all times;
(ii) file with the SEC in a timely manner all
reports and other documents required of the Company
under the 1933 Act and 1934 Act; and
(iii) furnish to any Warrant Holder forthwith upon
request a written statement by the Company that it has
complied with the reporting requirements of Rule 144
and of the 1934 Act, a copy of the most recent annual
or quarterly report of the Company, and such other
reports and documents so filed by the Company as may be
reasonably requested to permit any such Warrant Holder
to take advantage of any rule or regulation of the SEC
permitting the selling of any such securities without
registration.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES.
The number of, and kind of, securities purchasable upon
exercise of this Warrant and the Purchase Price shall be subject to
adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES.
If the Company shall at any time during the Exercise
Period subdivide its outstanding securities as to which
purchase rights under this Warrant exist, by split-up,
spin-off or otherwise, or combine its outstanding
securities as to which purchase rights under this Warrant
exist, the number of Warrant Shares as to which this
Warrant is exercisable as of the date of such subdivision,
split-up, spin-off or combination shall forthwith be
proportionately increased in the case of a subdivision, or
proportionately decreased in the case of a combination.
Appropriate adjustments shall also be made to the Purchase
Price payable per share, but the aggregate purchase price
payable for the total number of Warrant Shares purchasable
under this Warrant as of such date shall remain the same.
Such adjustments shall be made successively whenever any
event listed above shall occur.
(b) STOCK DIVIDEND. If at any time during the Exercise
Period the Company declares a dividend or other
distribution on Common Stock payable in Common Stock or
other securities or rights convertible into Common Stock
("Common Stock Equivalents") without payment of any
consideration by holders of Common Stock for the additional
shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable
upon exercise or conversion thereof), then the number of
shares of Common Stock for which this Warrant may be
exercised shall be increased as of the record date (or the
date of such dividend distribution if no record date is
set) for determining which holders of Common Stock shall be
entitled to receive such dividends, in proportion to the
increase in the number of outstanding shares (and shares of
Common Stock issuable upon conversion of all such
securities convertible into Common Stock) of Common Stock
as a result of such dividend, and the Purchase Price per
share shall be adjusted so that the aggregate amount
payable for the purchase of all the Warrant Shares issuable
hereunder immediately after the record date (or on the date
of such distribution, if applicable), for such dividend
shall equal the aggregate amount so payable immediately
before such record date (or on the date of such
distribution, if applicable).
(c) OTHER DISTRIBUTIONS. If at any time during the
Exercise Period the Company distributes to holders of its
Common Stock, other than as part of its dissolution,
liquidation or the winding up of its affairs, any shares of
its capital stock, any evidence of indebtedness or any of
its assets (other than cash, Common Stock or securities
convertible into or exchangeable for Common Stock), then
the Company shall decrease the per share Purchase Price of
this Warrant by an appropriate amount based upon the value
distributed on each share of Common Stock as determined in
good faith by the Company's Board of Directors.
(d) MERGER, ETC. If at any time during the Exercise
Period there shall be a merger or consolidation of the
Company with or into, or a transfer of all or substantially
all of the assets of the Company to, another entity, then
the Warrant Holder shall be entitled to receive upon
payment of the aggregate Purchase Price then in effect, the
number of shares or other securities or property of the
Company or of the successor corporation resulting from such
merger or consolidation which would have been received by
Warrant Holder for the shares of stock subject to this
Warrant had this Warrant been exercised immediately prior
to such transfer, merger or consolidation becoming
effective or to the applicable record date thereof, as the
case may be. The provisions of this Section 5(d) shall
similarly apply to successive mergers or consolidations.
(e) RECLASSIFICATION, ETC. If at any time during the
Exercise Period there shall be a reorganization or
reclassification of the securities as to which purchase
rights under this Warrant exist into the same or a
different number of securities of any other class or
classes, then the Warrant Holder shall thereafter be
entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the
Purchase Price then in effect, the number of shares or
other securities or property resulting from such
reorganization or reclassification which would have been
received by the Warrant Holder for the shares of stock
subject to this Warrant had this Warrant at such time been
exercised. The provisions of this Section 5(e) shall
similarly apply to successive reorganizations and
reclassifications.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR
ASSETS. In the event that at any time, as a result of an
adjustment made pursuant to this Section 5, the Warrant
Holder shall, upon exercise of this Warrant, become
entitled to receive shares and/or other securities (other
than Common Stock) then, wherever appropriate, all
references herein to shares of Common Stock shall be deemed
to refer to and include such shares and/or other securities
or assets; and thereafter the number of such shares and/or
other securities or assets shall be subject to adjustment
from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section
5.
6. NO IMPAIRMENT.
The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Warrant Holder against impairment.
Without limiting the generality of the foregoing, the Company (a) will
not increase the par value of any Warrant Share above the amount
payable therefor on such exercise, and (b) will take all such action
as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable
Warrant Shares on the exercise of this Warrant. By acceptance hereof,
the Warrant Holder acknowledges and agrees that the transactions
specified in Section 2(i) and (ii) hereof shall not constitute an
impairment of the rights of the Warrant Holder hereunder.
7. NOTICE OF ADJUSTMENTS.
Whenever the Purchase Price or number of Warrant Shares
purchasable hereunder shall be adjusted pursuant to Section 5 hereof,
the Company shall execute and deliver to the Warrant Holder a
certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated and the Purchase Price and number of shares
purchasable hereunder after giving effect to such adjustment, and
shall cause a copy of such certificate to be mailed (by first class
mail, postage prepaid) to the Warrant Holder.
8. RIGHTS AS STOCKHOLDER.
Prior to exercise of this Warrant, the Warrant Holder shall
not be entitled to any rights as a stockholder of the Company with
respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions
thereon or be notified of stockholder meetings. However, in the event
of any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Company shall mail to
each Warrant Holder, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution
or right, the date on which such dividend, distribution or right shall
become effective and the amount and character of such dividend,
distribution or right.
9. REPLACEMENT OF WARRANT.
Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of such Warrant, the
Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor to the registered owner in lieu of the
Warrant so lost, stolen, destroyed or mutilated.
10. TAXES.
The issuance of any shares of Common Stock or other
securities upon the exercise of this Warrant, and the delivery of
certificates or other securities, shall be made without charge to the
Warrant Holder for any tax or other charge in respect of such
issuance.
11. SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL.
(a) The Company and the Warrant Holder acknowledge and
agree that irreparable damage would occur in the event that
any of the provisions of this Warrant were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Warrant and to
enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which either of
them may be entitled by law or equity.
(b) Each of the Company and the Warrant Holder hereby (i)
agree that all actions or proceedings arising directly or
indirectly from or in connection with this Warrant shall be
litigated only in the Supreme Court of the Sate of New York
or the United States District Court for the Southern
District of New York located in New York County, New York
and (ii) to the extent permitted by applicable law, consent
to the jurisdiction and venue of the foregoing courts and
consent that any process or notice of motion or other
application to either of said courts or a judge thereof may
be served inside or outside the State of New York or the
Southern District of New York by registered mail, return
receipt requested, directed to the such party at its
address, set forth in this Warrant (and service so made
shall be deemed complete five (5) days after the same has
been posted as aforesaid) or by personal service or in such
other manner as may be permissible under the rules of said
courts. The parties hereby waive any right to a jury trial
in connection with any litigation pursuant to this Warrant.
12. ENTIRE AGREEMENT; AMENDMENTS.
This Warrant, the Exhibits hereto and the provisions
contained in the Agreement or the Registration Rights Agreement and
incorporated into this Warrant and the Warrant Shares contain the
entire understanding of the parties with respect to the matters
covered hereby and thereby except as specifically set forth herein and
therein. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge
or termination is sought.
12. RESTRICTED SECURITIES.
Section 5 of the Agreement is incorporated herein by
reference and hereby made a part hereof, to the extent relating to the
Warrant Shares.
13. NOTICES.
Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon
hand delivery or delivery by telex (with correction answer back
received), telecopy or facsimile at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or
(b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company:
The Panda Project, Inc.
901 Yamato Road
Boca Raton, Florida 33431
Telephone: (561) 994-2300
Facsimile: (561) 944-2436
Attention: Stanford W. Crane, Jr.
With a copy to:
Hale and Dorr LLP
1455 Pennsylvania Avenue NW
Washington, D.C. 20004
Telephone: (202) 942-8400
Facsimile: (202) 942-8484
Attention: Gilbert B. Kaplan, Esq.
to the Warrant Holder:
___________________
___________________
___________________
___________________
with copies to:
___________________
___________________
___________________
___________________
Each of the Company and the Warrant Holder may from time to time
change its address for notices under this Section 13 by giving at
least 10 days' prior written notice of such changed address to the
other.
14. MISCELLANEOUS.
This Warrant shall be construed and enforced in accordance
with and governed by the laws of the State of New York without
reference to principles of conflict of laws. The headings in this
Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the
validity or enforceability of any other provisions.
15. EXPIRATION.
The right to exercise this Warrant shall expire sixty (60)
months after the date of original issuance.
Dated: February __, 1998
THE PANDA PROJECT, INC.
By:___________________________
Title:
(CORPORATE SEAL)
Attest:
By:_______________________
Title:
EXHIBIT A
FORM OF WARRANT EXERCISE
TO:_______________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise this Warrant for, and to purchase
thereunder, ______________ shares of Common Stock of The Panda
Project, Inc., a Florida corporation (the "Company"), and herewith
makes payment of $___________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered
to ______________________________________, whose address is
__________________________________________________.
Dated:
____________________________
(Signature must conform to
name of holder as specified on
the face of the Warrant)
______________________________
(Address)
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT
--------------------
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns
and transfers unto ____________________________ the right represented
by the within Warrant to purchase __________ shares of Common Stock of
The Panda Project, Inc., a Florida corporation (the "Company"), to
which the within Warrant relates, and appoints __________________,
Attorney, to transfer such right on the books of the Company, with
full power of substitution the premises.
Dated:
______________________________
(Signature must conform to name
of holder as specified on the
face of the Warrant)
______________________________
(Address)
Signed in the presence of:
_________________________
EXHIBIT 99.1
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (the "AGREEMENT"), dated as of
February 11, 1998, by and among The Panda Project, Inc., a Florida
corporation (the "COMPANY"), and the investors listed on the Schedule
of Subscribers attached hereto (individually, a "SUBSCRIBER" and
collectively, the "SUBSCRIBERS").
WHEREAS:
A. The Company and the Subscribers are executing and
delivering this Agreement in reliance upon the exemption from
securities registration afforded by Rule 506 of Regulation D
("REGULATION D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "1933 Act");
B. The Company has authorized the following new series of
its Preferred Stock, par value $.01 per share (the "PREFERRED STOCK"):
the Company's Series A Convertible Preferred Stock (the "SERIES A
PREFERRED SHARES"), which shall be convertible into shares of the
Company's Common Stock, par value $.01 per share (the "COMMON STOCK")
(as converted, the "CONVERSION SHARES"), in accordance with the terms
of the Fourth Articles of Amendment and Restated Articles of
Incorporation of the Company, substantially in the form attached
hereto as Exhibit A (the "CERTIFICATE OF DESIGNATIONS");
C. The Subscribers wish to purchase, upon the terms and
conditions stated in this Agreement, initially an aggregate of 600 of
the Series A Preferred Shares (the "INITIAL PREFERRED SHARES") and, in
connection with such purchase, shall receive warrants (the
"WARRANTS"), in the form attached hereto as Exhibit B, to purchase an
aggregate of 150,000 shares of Common Stock (the "INITIAL WARRANT
SHARES");
D. Subject to the terms and conditions set forth in this
Agreement, the Company shall on one occasion have the right to cause
the Subscribers to purchase an aggregate of 400 Series A Preferred
Shares (pro rata based on the number of Initial Preferred Shares each
Subscriber purchased in relation to the aggregate number of Initial
Preferred Shares purchased by all of the Subscribers) (the "PUT
PREFERRED SHARES") (the Initial Preferred Shares and the Put Preferred
Shares collectively are referred to in this Agreement as the
"PREFERRED SHARES") and, in connection with such purchase, the
Subscribers shall receive WARRANTS to purchase an aggregate of 100,000
shares of Common Stock (pro rata based on the number of Put Preferred
Shares each Subscriber purchased in relation to the aggregate number
of Put Preferred Shares purchased by all of the Subscribers) (the "PUT
WARRANT SHARES") (the Initial Warrant Shares and the Put Warrant
Shares collectively are referred to in this Agreement as the "WARRANT
SHARES"); and
E. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement substantially in the form attached
hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT") pursuant to
which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Subscribers hereby agree
as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. Subject to
satisfaction (or waiver) of the conditions set forth in Sections 6(a)
and 7(a) below, (i) the Company shall issue and sell to the
Subscribers and the Subscribers severally shall purchase from the
Company an aggregate of 600 Initial Preferred Shares, and (ii) the
Company shall deliver to the Subscribers Warrants to purchase the
Initial Warrant Shares, each in the respective amounts set forth
opposite each Subscriber's name on the Schedule of Subscribers (the
"INITIAL CLOSING"). Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 1(d), 1(e), 6(b) and 7(b) below, the
Company may require that each Subscriber purchase its pro rata portion
of the Put Preferred Shares (based on the number of Initial Preferred
Shares each Subscriber purchased in relation to the aggregate number
of Initial Preferred Shares purchased by all of the Subscribers) (the
"PUT CLOSING"). The Initial Closing and the Put Closing collectively
are referred to in this Agreement as the "CLOSINGS." The purchase
price (the "PURCHASE PRICE") of each Preferred Share at each of the
Closings shall be $10,000.00.
b. The Initial Closing Date. The date and time of the
Initial Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m.
Eastern Standard Time, within two (2) business days following the date
hereof, subject to satisfaction (or waiver) of the conditions to the
Initial Closing set forth in Sections 6(a) and 7(a) below (or such
later date as is mutually agreed to by the Company and the
Subscribers). The Initial Closing shall occur on the Initial Closing
Date at the offices of Willkie Farr & Gallagher, One Citicorp Center,
153 East 53rd Street, New York, New York 10022-4677.
c. The Put Closing Date. The date and time of the Put
Closing (the "PUT CLOSING DATE") shall be 10:00 a.m. Eastern Standard
Time, on the date specified in the Company's Put Share Notice (as
defined below), subject to satisfaction (or waiver) of the conditions
to the Put Closing set forth in Sections 6(b) and 7(b) and the
conditions set forth in Section 1(d) (or such later date as is
mutually agreed to by the Company and the Subscribers). During the
period beginning on and including the date on which the first
Registration Statement (as defined in the Registration Rights
Agreement) becomes effective and ending on the date which is one year
subsequent to such date (the "PUT NOTICE PERIOD"), but subject to the
requirements of Sections 6(b) and 7(b) and satisfaction of the Put
Notice Conditions (as defined in Section 1(d) below), the Company on
only one occasion may require each Subscriber to purchase Put
Preferred Shares by delivering written notice to each of the
Subscribers (a "PUT SHARE NOTICE") during the Put Notice Period at
least 45 days (the "PUT SHARE NOTICE DATE") prior to the Put Closing
Date set forth in the Company's Put Share Notice. The Company's Put
Share Notice shall set forth (i) each Subscriber's pro rata portion
(based on the number of Initial Preferred Shares each Subscriber
purchased in relation to the aggregate number of Initial Preferred
Shares purchased by all of the Subscribers) of the aggregate number of
Put Preferred Shares, which aggregate number shall not exceed 400
Preferred Shares, (ii) the aggregate Purchase Price for each such
Subscriber's Put Preferred Shares and (iii) the date selected by the
Company for the Put Closing Date. The Put Closing shall occur on the
Put Closing Date at the offices set forth in Section 1(b). The
Initial Closing Date and the Put Closing Date collectively are
referred to in this Agreement as the "CLOSING DATES."
d. The Put Notice Conditions. Notwithstanding anything
in this Agreement to the contrary, the Company shall not be entitled
to deliver a Put Share Notice and require the Subscribers to purchase
the Put Preferred Shares unless, in addition to the satisfaction of
the requirements of Sections 6(b) and 7(b), all of the following
conditions (the "PUT NOTICE CONDITIONS") are satisfied:
(i) The Company's stockholders shall have approved the
issuance of the Securities (as defined below) on or prior to the Put
Share Notice Date, unless the Company shall have been advised in
writing by The Nasdaq Stock Market, Inc. (or The New York Stock
Exchange, Inc. ("NYSE") or The American Stock Exchange, Inc. ("AMEX"),
if the Common Stock is then listed on such exchange) that the rules of
such exchange would not require the approval of the stockholders of
the Company for the issuance of a number of Conversion Shares equal to
at least 19.99% of the number of shares of Common Stock issued and
outstanding on the Initial Closing Date.
(ii) During the period beginning 60 days prior to the Put
Closing Date and ending on and including the Put Closing Date, a
Registration Statement (as defined in the Registration Rights
Agreement) at all times shall be effective and available for the sale
of no less than 150% of the sum of (A) the number of Conversion Shares
that would be issuable upon the conversion of all outstanding Initial
Preferred Shares at a conversion price of $6.00 (subject to
appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such
shares) and (B) the Initial Warrant Shares.
(iii) During the period beginning 90 days prior to the Put
Closing Date and ending on and including the Put Closing Date, the
Common Stock is designated for quotation on the Nasdaq National
Market, NYSE or AMEX and is not suspended from trading on such market
or such exchange.
(iv) No event constituting a Paragraph 4 Transaction or a
Triggering Event (each as defined in the Certificate of Designations),
including an agreement to consummate a Paragraph 4 Transaction, or a
Triggering Event shall have occurred during the period beginning on
the Initial Closing Date and ending on and including the Put Closing
Date.
(v) On each day during the period beginning 20 days prior
to the Put Notice Date and ending on and including the Put Closing
Date, the Market Price for shares of Common Stock (as defined in the
Certificate of Designations) shall not be less than $6.00 (subject to
appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such
Shares).
(vi) During the period beginning on the Initial Closing
Date and ending on and including the Put Closing Date, the Company
shall have at all times delivered Conversion Shares upon conversion of
the Preferred Shares on a timely basis as set forth in the Certificate
of Designations and otherwise shall have been in compliance with and
shall not have breached the provisions of the Transaction Documents
(as defined below) and the Certificate of Designations.
(vii) The Company shall not have previously delivered a Put
Share Notice.
(viii) The Company will be in compliance with Section 5
below with respect to transfers of the Conversion Shares and Warrant
Shares and all restrictions on trading of Conversion Shares issued or
issuable upon conversion of such Preferred Shares shall have been
lifted prior to delivery by the Company of the applicable Put Share
Notice to the Subscribers.
(ix) There is no action, suit, claim, investigation,
occurrence or proceeding pending, or to the knowledge of the Company,
threatened which, if adversely determined would have a Material
Adverse Effect, as defined below.
e. Form of Payment. On each of the Closing Dates, (i)
each Subscriber shall pay the aggregate Purchase Price to the Company
for the Preferred Shares to be issued and sold to such Subscriber at
the respective Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Subscriber, stock certificates
(in the denominations as such Subscriber shall request) (the "STOCK
CERTIFICATES") representing such number of the Preferred Shares which
such Subscriber is then purchasing (as indicated opposite such
Subscriber's name on the Schedule of Subscribers), duly executed on
behalf of the Company and registered in the name of such Subscriber or
its designee, together with Warrants to purchase 25,000 Warrant Shares
for each $1,000,000 of Purchase Price paid by the Subscribers to the
Company on such Closing Date.
2. SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES.
Each Subscriber represents and warrants with respect to only
itself that:
a. Investment Purpose. Such Subscriber (i) is acquiring
the Preferred Shares and the Warrants and (ii) upon conversion of the
Preferred Shares or the Warrants, will acquire the Conversion Shares
or Warrant Shares, as the case may be, then issuable (the Preferred
Shares, the Conversion Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the "SECURITIES"), for its own
account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Subscriber
does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act.
b. Accredited Investor Status. Such Subscriber is an
"accredited investor" as that term is defined in Rule 501(a)(3) of
Regulation D and has delivered an Investor Questionnaire to the
Company in the form set forth as Exhibit F hereto.
c. Reliance on Exemptions. Such Subscriber understands
that the Securities are being offered and sold 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 in part upon the truth and accuracy of, and such Subscriber's
compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Subscriber set forth herein
in order to determine the availability of such exemptions and the
eligibility of such Subscriber to acquire such Securities.
d. Information. Such Subscriber and its advisors, if any,
have been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to the
offer and sale of the Securities which have been requested by such
Subscriber, including all SEC Documents (as defined below). Such
Subscriber and its advisors, if any, have been afforded the
opportunity to review materials and to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations
conducted by such Subscriber or its advisors, if any, or its
representatives shall modify, amend or affect such Subscriber's right
to rely on the Company's representations and warranties contained in
Section 3 below. Such Subscriber understands that its investment in
the Securities involves a high degree of risk and such Subscriber has
sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
e. No Governmental Review. Such Subscriber 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 or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.
f. Transfer or Resale. Such Subscriber understands that
except as provided in the Registration Rights Agreement: (i) the
Securities have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) such Subscriber shall have delivered to the Company an
opinion of counsel, in a form reasonably acceptable to the Company, to
the effect that such Securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Subscriber provides the Company with
reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the 1933 Act (or a
successor rule thereto)("Rule 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of the Securities under circumstances in which the seller (or
the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules
and regulations of the SEC thereunder; and (iii) neither the Company
nor any other person is under any obligation to register such
Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
g. Legends. Such Subscriber understands that the
certificates or other instruments representing the Preferred Shares
and the Warrants and, until such time as the sale of the Conversion
Shares and the Warrant Shares have been registered under the 1933 Act
as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant
Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL,
IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend to the holder of the
Securities upon which it is stamped, if, unless otherwise required by
state securities laws, (i) such Securities are sold pursuant to
registration under the 1933 Act, (ii) in connection with a sale
transaction, such holder provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of such Securities may be made without
registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that such Securities can be sold
pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be
immediately sold. Each Subscriber acknowledges, covenants and agrees
to sell the Securities represented by a certificate(s) from which the
legend has been removed, only pursuant to (i) a registration statement
effective under the 1933 Act, or (ii) advice of counsel that such sale
is exempt from registration required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of such
Subscriber and is a valid and binding agreement of such Subscriber
enforceable in accordance with its terms, subject as to enforceability
to general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. Residency. Such Subscriber is a resident of that
country specified in the Schedule of Subscribers.
j. Section 9 of the Securities Exchange Act. So long as a
Subscriber holds any Preferred Shares, such Subscriber will comply at
all times with the provisions of Section 9 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the rules and
regulations promulgated thereunder with respect to transactions
involving the securities of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the
Subscribers that:
a. Organization and Qualification. The Company and its
subsidiaries (a complete list of which is set forth in Schedule 3(a))
are corporations duly organized and validly existing in good standing
under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to
carry on their business as now being conducted. Each of the Company
and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or
be in good standing would not have a Material Adverse Effect. As used
in this Agreement, "MATERIAL ADVERSE EFFECT" means any material
adverse effect on the business, properties, assets, operations,
results of operations, financial condition or prospects of the Company
and its subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be entered
into in connection herewith. The corporate status of the Company's
sole subsidiary listed on Schedule 3(a) is inactive and such
corporation is immaterial to the business of the Company.
b. Authorization; Enforcement; Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as
defined in Section 7(a)(x)) and each of the other agreements entered
into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue, sell and deliver the Securities in
accordance with the terms hereof and thereof, (ii) the execution and
delivery of the Transaction Documents and the Certificate of
Designations by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without
limitation the issuance of the Preferred Shares and the Warrants and
the reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion thereof and the Warrant Shares issuable upon
exercise of the Warrants, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the
Company, (iv) the Transaction Documents constitute the valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors'
rights and remedies, and (v) prior to each of the Closing Dates, the
Certificate of Designations has been filed with the Secretary of State
of the State of Florida and will be in full force and effect,
enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, of which 12,215,522 shares are issued and
outstanding, 3,613,103 shares are reserved and available for issuance
pursuant to the Company's stock option and purchase plans and
outstanding warrants to purchase Common Stock, and no shares are
reserved for issuance pursuant to any other securities (other than the
Preferred Shares and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 2,000,000 shares of
Preferred Stock, of which, as of the date hereof, none are issued and
outstanding. All of such outstanding shares have been, or upon
issuance will be, validly issued and outstanding and fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of
Common Stock or Preferred Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed in Schedule 3(c), as of
the date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible
into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable
for, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities, (iii)
there are no agreements or arrangements under which the Company or any
of its subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights
Agreement) and (iv) there are no outstanding securities of the Company
or any of its subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may
become bound to redeem or purchase a security of the Company or any of
its subsidiaries. Except as disclosed in Schedule 3(c), there are no
securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities as
described in this Agreement. The Company has furnished to the
Subscribers true and correct copies of the Company's Articles of
Incorporation, as amended and as in effect on the date hereof (the
"ARTICLES OF INCORPORATION"), and the Company's By-laws, as in effect
on the date hereof (the "BY-LAWS"), and the terms of all securities
convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect thereto. The Company owns
all of the outstanding stock of each of its subsidiaries. There are
no securities of the Company or any of its subsidiaries which have
been issued in violation of federal or state securities laws.
d. Issuance of Securities. The Preferred Shares and the
Warrants are duly authorized and, upon issuance in accordance with the
terms hereof, shall be (i) validly issued, fully paid and non-
assessable, (ii) free from all taxes, liens and charges with respect
to the issue thereof and (iii) entitled to the rights and preferences
set forth in the Certificate of Designations and the Warrants,
respectively. 2,775,000 shares of Common Stock (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(f) below)
have been duly authorized and reserved for issuance upon conversion of
the Preferred Shares and 225,000 shares of Common Stock have been duly
authorized and reserved for issuance upon exercise of the Warrants.
Upon conversion in accordance with the Certificate of Designations,
the Conversion Shares and, upon exercise in accordance with the terms
of the Warrants, the Warrant Shares, will be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all
rights accorded to a holder of Common Stock. The issuance by the
Company of the Securities is exempt from registration under the 1933
Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated thereby (including, without limitation, the reservation
for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Articles of
Incorporation, any Certificate of Designations, Preferences and Rights
of any outstanding series of Preferred Stock of the Company or the By-
laws, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company or any of its subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the
rules and regulations of the principal market or exchange on which the
Common Stock is traded or listed) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries is bound or affected, except to the extent
that matters within clauses (ii) and (iii) immediately above would not
have a Material Adverse Effect. Except as disclosed in Schedule 3(e),
neither the Company nor any of its subsidiaries is in violation of any
term of or in default under (i) the Articles of Incorporation, any
Certificate of Designation, Preferences and Rights of any outstanding
series of Preferred Stock or the By-laws or their organizational
charter or by-laws, respectively, or (ii) any contract, agreement,
mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or
its subsidiaries, except to the extent that such violation (with
respect to clause (ii) only) or default would not have a Material
Adverse Effect. The business of the Company and its subsidiaries is
not being conducted, and shall not be conducted, in violation of any
law, ordinance, rule or regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under
the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under or contemplated by the
Transaction Documents, the Certificate of Designations or the Warrants
in accordance with the terms hereof or thereof. Except as disclosed
in Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to each
of the Closing Dates hereof and are in full force and effect. The
Company and its subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company is not in
violation of the listing requirements of the Nasdaq National Market as
in effect on each of the Closing Dates and is not aware of any facts
which would reasonably lead to delisting of the Common Stock by the
Nasdaq National Market in the foreseeable future, including, without
limitation, the issuance of the Initial Preferred Shares, the
Conversion Shares, the Warrants and the Initial Warrant Shares.
f. SEC Documents; Financial Statements. Since December 31,
1995, the Company has filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing
filed prior to each of the Closing Dates and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the
"SEC DOCUMENTS"). The Company has made available to each Subscriber
or its respective representatives true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material
respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments). No other information provided by or on behalf
of the Company to the Subscribers which is not included in the SEC
Documents, including, without limitation, information referred to in
Section 2(d) of this Agreement, contains any untrue statement of a
material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading. Neither the Company nor
any of its subsidiaries or any of their officers, directors, employees
or agents have provided the Subscribers with any material, nonpublic
information.
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g), since December 31, 1995 there has been no material
adverse change and no material adverse development in the business,
properties, assets, operations, results of operations, financial
condition or prospects of the Company or its subsidiaries. The
Company has not taken any steps, and does not currently expect to take
any steps, to seek protection pursuant to any bankruptcy law for
itself or any of its subsidiaries nor does the Company or any of its
subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, the Common Stock or any
of the Company's subsidiaries or any of the Company's or the Company's
subsidiaries' officers or directors in their capacities as such,
except as expressly set forth in Schedule 3(h).
i. Acknowledgment Regarding Subscribers' Purchase of
Preferred Shares. The Company acknowledges and agrees that each of
the Subscribers is acting solely in the capacity of arm's length
purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Company further acknowledges
that each Subscriber is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any of the Subscribers or any of their respective
representatives or agents in connection with the Transaction Documents
and the transactions contemplated thereby is merely incidental to such
Subscriber's purchase of the Securities. The Company further
represents to each Subscriber that the Company's decision to enter
into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. No material event, liability, development or
circumstance has occurred or exists, with respect to the Company or
its subsidiaries or their respective business, properties, prospects,
operations or financial condition, that would be required to be
disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by
reference) filed with the SEC relating to an issuance and sale by the
Company of its Common Stock and which has not been publicly announced.
k. No General Solicitation. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection
with the offer or sale of the Securities.
l. No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act
or cause this offering of Securities to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Nasdaq National
Market, nor will the Company or any of its subsidiaries take any
action or steps that would require registration of the Securities
under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any union labor dispute nor, to the
knowledge of the Company or any of its subsidiaries, is any such
dispute threatened. Neither the Company nor any of its subsidiaries
is a party to a collective bargaining agreement, and the Company and
its subsidiaries believe that relations with their employees are good.
Each of the Company and its subsidiaries is in compliance in all
material respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the
rules and regulations thereunder ("ERISA"); all "employee benefit
plans" (as defined in ERISA) under which the Company or any of its
subsidiaries has or could have any liability have been administered in
accordance with their terms in all material respects; no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension
plan" (as defined in ERISA) for which the Company or any of its
subsidiaries has or could have any liability; neither the Company nor
any of its subsidiaries (i) has incurred or expects (or should expect)
to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any "pension plan" or (ii) is in
default in the timely payment of all amounts required to be paid under
Section 412 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder
(the "Code"); and each "pension plan" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
n. Intellectual Property Rights. To the knowledge of the
Company, the Company and its subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights to conduct their respective
businesses as now conducted, except to the extent that the failure to
possess such rights or licenses would not have a Material Adverse
Effect, and except further to the extent that the Company or its
subsidiaries lack such rights or licenses, they are using or shall use
commercially reasonable efforts to secure such rights or licenses.
The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or any of its subsidiaries of any
trademark, trade name, right, patent, patent right, copyright,
invention, license, service name, service mark, service mark
registration, trade secret or other similar rights of others, or of
any such development of similar or identical trade secrets or
technical information by others and, except as set forth on Schedule
3(n), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the
Company or any of its subsidiaries regarding any trademark, trade
name, right, patent, patent right, copyright, invention, license,
service name, service mark, service mark registration, trade secret or
other infringement; and the Company and its subsidiaries are unaware
of any facts or circumstances which might give rise to any of the
foregoing, except for such facts and circumstances which would not
have a Material Adverse Effect.
o. Environmental Laws. The Company and its subsidiaries
(i) are in compliance with any and all applicable foreign, federal,
state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except to the
extent that the matters within clauses (i), (ii) and (iii) above would
not have a Material Adverse Effect.
p. Title. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, except to the
extent that the failure to have good and marketable title would not
have a Material Adverse Effect, in each case free and clear of all
liens, encumbrances and defects, except such as are described in
Schedule 3(p) or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries. Any
real property and facilities held under lease by the Company or any of
its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries. The security
interest granted to Helix (PEI) Inc. ("Helix") described in Schedule
3(p) will be released upon repayment of the loans made by Helix to the
Company referred to in Schedule 3(p).
q. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any
of its subsidiaries has any reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a
Material Adverse Effect.
r. Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations, approvals, licenses and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, except
to the extent that the failure to possess such certificates,
authorizations, approvals, licenses and permits would not have a
Material Adverse Effect; and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization,
approval, license or permit.
s. Internal Accounting Controls. The Company and each of
its subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.
t. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has
or is expected in the future to have a Material Adverse Effect.
u. Tax Status. Except as set forth on Schedule 3(u), the
Company and each of its subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only
to the extent that the Company and each of its subsidiaries has set
aside on its books provisions reasonably adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount,
shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set
aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. 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 each Subscriber promptly after such filing.
The Company shall, on or before each of the Closing Dates, take such
action as the Company shall reasonably determine is necessary to
qualify the Securities for, or obtain exemption for the Securities
for, sale to the Subscribers at each of the Closings pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so
taken to the Subscribers on or prior to the Closing Date.
c. Reporting Status. Until the date as of which no
Warrants are exercisable and the Investors (as that term is defined in
the Registration Rights Agreement) shall have sold all the Conversion
Shares and none of the Preferred Shares is outstanding (the
"REGISTRATION PERIOD"), the Company shall file all reports required to
be filed with the SEC pursuant to the 1934 Act, and, unless as a
result of a merger, sale of assets or other reorganization
transaction, 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 otherwise permit such
termination.
d. Use of Proceeds. The Company will use the proceeds from
the sale of the Preferred Shares for substantially the same purposes
and in substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following during the Registration Period to each of Ramius Capital
Group, L.L.C., 757 Third Avenue, 27th Floor, New York, New York
10017, Attention: Jeffrey Solomon, and Angelo, Gordon & Co., L.P., 245
Park Avenue, 26th Floor, New York, New York 10167, Attention: Gary
Wolf (together, the "Subscriber Representatives") or at such other
addresses as such parties shall inform the Company in writing: (i)
within two (2) days after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q,
any Current Reports on Form 8-K and any registration statements or
amendments filed pursuant to the 1933 Act; (ii) on the same day as the
release thereof, facsimile copies of all press releases issued by the
Company or any of its subsidiaries and (iii) copies of any notices and
other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or
giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all
action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than 175% of the aggregate number of
shares of Common Stock needed to provide for the issuance of the
Conversion Shares and the Warrant Shares.
g. Right of First Refusal. In the event that at any time or
from time to time during the six (6) month period immediately
following the Initial Closing Date, the Company proposes to issue or
sell (a "FUTURE OFFERING") any shares of Common Stock or any of its
securities which are convertible into or exchangeable for Common Stock
or any convertible security, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of Common
Stock (other than the Conversion Shares, the Warrant Shares, shares or
options issued or which may be issued pursuant to the Company's
employee, officer, director or consultant stock or option or similar
equity-based compensation plans or shares issued upon exercise of
options, warrants or rights outstanding on the Closing Date consisting
of options and warrants to purchase 3,613,103 shares of Common Stock
which are currently issued and outstanding or available for grant,
securities issued pursuant to any future stock option or equity plan
or arrangement for compensating employees, officers, directors or
consultants, and securities issued in a registered public offering or
as part of an investment by any licensee, prospective licensee,
director, officer, or employee of the Company or members of their
immediate families, or options or warrants which are not issued in
connection with the raising of capital , securities issued to a
corporate partner or other strategic investor or securities issued in
a merger, acquisition or other reorganization transaction), whether
singly or together with other securities at purchase price per share
of Common Stock which is at a discount to the lowest reported sales
price per share of Common Stock on the date of valuation, then the
Company shall give written notice (the "FUTURE OFFERING NOTICE") to
each Subscriber Representative, at the address provided in Section
4(e) of this Agreement, of such proposed Future Offering, specifying
the terms and conditions thereof in reasonable detail, and each
Subscriber shall have the right, exercisable by written notice
delivered within seven (7) business days of the date of receipt by
such Subscriber Representative of the Future Offering Notice, to
subscribe for and purchase all (or such lesser portion as such
Subscriber shall specify in writing) of the Common Stock or other
securities proposed to be issued (pro rata based on the number of
Initial Preferred Shares each Subscriber purchased in relation to the
aggregate number of Initial Preferred Shares purchased by all of the
Subscribers), on terms and conditions no less favorable to the
Subscriber than those specified in the Future Offering Notice.
h. Listing. The Company shall promptly secure the listing
of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon the Nasdaq National Market, NYSE or the AMEX,
upon which shares of Common Stock are then listed (subject to official
notice of issuance) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq National Market, NYSE or
AMEX. Neither the Company nor any of its subsidiaries shall take any
action which may result in the delisting or suspension of the Common
Stock on the Nasdaq National Market, NYSE or AMEX. The Company shall
promptly provide to each Subscriber copies of any notices it receives
from the Nasdaq National Market, NYSE or AMEX regarding the continued
eligibility of the Common Stock for listing on such automated
quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under
this Section 4(h).
i. Expenses. Subject to Section 9(l) below, the Company
shall pay Subscribers' reasonable expenses (including attorneys fees
and expenses) in connection with negotiating and preparing the
Transaction Documents and consummating the transactions contemplated
thereby up to an aggregate of $25,000.
j. Filing of Form 8-K. On or before the tenth (10th) day
following each of the Closing Dates, the Company shall file a Form 8-K
with the SEC describing the terms of the transaction contemplated by
the Transaction Documents and consummated at such Closing, in each
case in the form required by the 1934 Act.
k. Filing of Certificate of Designations. On or before the
Closing Date, the Company shall file with the Secretary of the State
of the State of Florida the Certificate of Designations, in the form
attached hereto as Exhibit A.
5. TRANSFER AGENT INSTRUCTIONS.
In connection with any sales pursuant to the Registration
Statement, the Company will promptly instruct its transfer agent, upon
surrender of the Warrants or Common Stock issuable upon conversion of
the Preferred Shares or exercise of the Warrants, to remove the
restrictive legend from such shares of Common Stock. In addition, and
if applicable, the Company shall reissue certificates representing the
Securities without the legend set forth above at such time as (i) the
Holder thereof is permitted to dispose of such Securities pursuant to
Rule 144(k) under the 1933 Act or (ii) the Securities are sold to a
purchaser or purchasers in a transaction exempt from registration
under the 1933 Act, as evidenced by an opinion of counsel to the
transferor delivered to and reasonably satisfactory to the Company.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Subscribers by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and
agrees, in the event of a breach or threatened breach by the Company
of the provisions of this Section 5, that the Subscribers shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without
any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company
hereunder to issue and sell the Initial Preferred Shares and deliver
the Warrants to purchase the Initial Warrant Shares to each Subscriber
at the Initial Closing is subject to the satisfaction, at or before
the Initial Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion by
providing each Subscriber with prior written notice thereof:
(i) Such Subscriber shall have executed each of the
Transaction Documents and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Florida.
(iii) Such Subscriber shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by such
Subscriber at the Initial Closing by wire transfer of immediately
available funds pursuant to wire transfer instructions provided by the
Company.
(iv) The representations and warranties of such Subscriber
contained in this Agreement shall be true and correct in all material
respects as of the date when made and as of the Initial Closing Date
as though made at that time (except for representations and warranties
that speak as of a specific date), and such Subscriber shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Subscriber at or prior
to the Initial Closing Date.
b. Put Closing Date. The obligation of the Company
hereunder to issue and sell the Put Preferred Shares to each
Subscriber at the Put Closing and to deliver the Warrants to purchase
the Put Warrant Shares is subject to the satisfaction, at or before
the Put Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing
each Subscriber with prior written notice thereof:
(i) Such Subscriber shall have delivered to the Company the
Purchase Price for the Put Preferred Shares being purchased by such
Subscriber at the Put Closing by wire transfer of immediately
available funds pursuant to wire transfer instructions provided by the
Company.
(ii) The representations and warranties of such Subscriber
contained in this Agreement shall be true and correct in all material
respects as of the date when made and as of the Put Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date), and such Subscriber shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Subscriber at or prior
to the Put Closing Date.
7. CONDITIONS TO EACH SUBSCRIBER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Subscriber
hereunder to purchase the Initial Preferred Shares at the Initial
Closing is subject to the satisfaction, at or before the Initial
Closing Date, of each of the following conditions, provided that these
conditions are for each Subscriber's sole benefit and may be waived by
such Subscriber at any time in its sole discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Subscriber.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of the State of Florida, and a copy
thereof certified by such Secretary of State shall have been delivered
to counsel for such Subscriber.
(iii) The Common Stock shall be authorized for quotation on
the Nasdaq National Market, NYSE or AMEX, trading in the Common Stock
shall not have been suspended by the SEC, The Nasdaq Stock Market,
Inc., NYSE or AMEX and all of the Conversion Shares issuable upon
conversion of the Initial Preferred Shares and all of the Initial
Warrant Shares shall be listed upon the Nasdaq National Market, NYSE
or AMEX and the Subscribers shall have received evidence of such
listing in a form acceptable to the Subscribers.
(iv) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above,
in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as
of the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to
the Initial Closing Date. Such Subscriber shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of the Initial Closing Date, to the foregoing effect and as
to such other matters as may be reasonably requested by such
Subscriber including, without limitation, an update as of the Initial
Closing Date regarding the representations contained in Sections 3(c)
and 3(g) above.
(v) Such Subscriber shall have received the opinion of the
Company's counsel dated as of the Initial Closing Date, in form, scope
and substance reasonably satisfactory to such Subscriber and in
substantially the form of Exhibit D attached hereto.
(vi) Such Subscriber shall have received the certificate of
an officer of the Company in the form set forth as Exhibit E hereto.
(vii) The Company shall have executed and delivered to such
Subscriber the Stock Certificates (in such denominations as such
Subscriber shall request) for the Initial Preferred Shares being
purchased by such Subscriber at the Initial Closing and the Warrants
to be issued to such Subscriber at the Initial Closing.
(viii) The Board of Directors of the Company shall have
adopted resolutions consistent with Section 3(b)(ii) above and in a
form reasonably acceptable to such Subscriber (the "RESOLUTIONS").
(ix) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares and
the issuance of the Initial Warrant Shares, at least 3,000,000 shares
of Common Stock.
(x) The Company shall have delivered to such Subscriber a
certificate evidencing the incorporation and good standing of the
Company in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within
10 days of the Initial Closing.
(xi) The Company shall have delivered to such Subscriber a
secretary's certificate certifying as to (a) the Resolutions, (b) the
Articles of Incorporation and (c) By-laws, each as in effect at the
Initial Closing.
(xii) The Company shall have delivered to such Subscriber
such other documents relating to the transactions contemplated by the
Transaction Documents as such Subscriber or its counsel may reasonably
request.
b. Put Closing Date. The obligation of each Subscriber
hereunder to purchase the Put Preferred Shares at the Put Closing is
subject to the satisfaction, at or before the Put Closing Date, of
each of the following conditions, provided that these conditions are
for each Subscriber's sole benefit and may be waived by such
Subscriber at any time in its sole discretion:
(i) The Company shall have complied with the requirements of
Section l(c) and all of the Put Notice Conditions set forth in Section
l(d) shall have been satisfied.
(ii) The Certificate of Designations shall be in full force
and effect and shall not have been amended since the Initial Closing
Date, and a copy thereof certified by the Secretary of State of the
State of Florida shall have been delivered to such Subscriber.
(iii) The Common Stock shall be authorized for quotation on
the Nasdaq National Market, NYSE or AMEX, trading in the Common Stock
shall not have been suspended by the SEC, The Nasdaq Stock Market,
Inc., NYSE or AMEX and all of the Conversion Shares issuable upon
conversion of the Put Preferred Shares and all of the Put Warrant
Shares shall be listed upon the Nasdaq National Market, NYSE or AMEX
and the Subscribers shall have received evidence of such listing in a
form acceptable to the Subscribers.
(iv) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above,
in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as
of the Put Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to
the Put Closing Date. Such Subscriber shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of the Put Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Subscriber
including, without limitation, an update as of the Put Closing Date
regarding the representations contained in Sections 3(c) and 3(g)
above.
(v) Such Subscriber shall have received the opinion of the
Company's counsel dated as of the Put Closing Date, in form, scope and
substance reasonably satisfactory to such Subscriber and in
substantially the form of Exhibit D attached hereto.
(vi) The Company shall have executed and delivered to such
Subscriber the Stock Certificates (in such denominations as such
Subscriber shall request) for the Put Preferred Shares being purchased
by such Subscriber at the Put Closing and the Warrants to be issued to
such subscriber at the Put Closing.
(vii) The Board of Directors of the Company shall have
adopted, and shall not have amended, the Resolutions in a form
reasonably acceptable to such Subscriber.
(viii) As of the Put Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Preferred Shares and
exercise of the Warrants, a number of shares of Common Stock equal to
at least 150% of the number of shares of Common Stock which would be
issuable upon conversion of the then outstanding Preferred Shares and
upon exercise of the then outstanding Warrants, including for such
purposes any Preferred Shares and Warrants to be issued at such Put
Closing.
(ix) During the period beginning on and including the Put
Share Notice Date and ending on and including the Put Closing Date,
the Market Price of the Common Stock shall not be less than the
greater of (A) $6.00 or (B) 75% of the Market Price on the Put Share
Notice Date;
(x) The Company shall have delivered to such Subscriber a
certificate evidencing the incorporation and good standing of the
Company and each subsidiary in such corporation's state of
incorporation issued by the Secretary of State of such state of
incorporation as of a date within 10 days of the Put Closing.
(xi) The Company shall have delivered to such Subscriber a
secretary's certificate certifying as to (a) the Resolutions, (b) the
Articles of Incorporation and (c) By-laws, each as in effect at the
Put Closing.
(xii) The Registration Statement with respect to the Common
Stock issuable upon conversion of the Initial Preferred Shares and the
Initial Warrant Shares shall have been declared effective under the
1933 Act by the SEC for at least sixty (60) trading days prior to the
Put Closing Date and including the Put Closing Date.
(xiii) The trading in securities generally shall not have
been suspended by the National Association of Securities Dealers, Inc.
(the "NASD") and trading in the Common Stock shall not have been
suspended by the SEC or the NASD.
(xiv) The representations of the Company set forth in Section
3(h) hereof shall be true and correct as of the Put Closing Date.
(xv) The Company shall have delivered to such Subscriber such
other documents relating to the transactions contemplated by this
Agreement as such Subscriber or its counsel may reasonably request.
(xvi) During the period beginning on the Initial Closing Date
and ending on and including the Put Closing Date, the Company shall
have at all times delivered Conversion Shares upon conversion of the
Preferred Shares on a timely basis as set forth in the Certificate of
Designations and otherwise shall have been in compliance with and
shall not have breached the provisions of the Transaction Documents
and the Certificate of Designations.
8. INDEMNIFICATION.
The Company, on the one hand, and each Subscriber (severally
and not jointly), on the other hand, shall indemnify the other against
any loss, cost or damages (including reasonable attorney's fees and
expenses) suffered or incurred as a result of such party's breach of
any representation, warranty, covenant or agreement in this Agreement.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing
a copy thereof to such party at the address for such notices to it
under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law.
b. Counterparts. This Agreement may be executed in two or
more identical counterparts, each or all of which shall be considered
one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other
jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Subscribers,
the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and any other instruments referenced herein
contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor any Subscriber makes
any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the holders
of at least two-thirds (2/3) of the Preferred Shares then outstanding,
and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement of such waiver is
sought. No such amendment shall be effective to the extent that it
applies to less than all of the holders of the Preferred Shares then
outstanding.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission
is mechanically generated and kept on file by the sending party);
(iii) three (3) days after being sent by U.S. certified mail, return
receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed
to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
The Panda Project, Inc.
901 Yamato Road
Boca Raton, Florida 33431
Telephone: (561) 994-2300
Facsimile: (561) 944-2436
Attention: Stanford W. Crane, Jr.
With a copy to:
Hale and Dorr LLP
1455 Pennsylvania Avenue NW
Washington, D.C. 20004
Telephone: (202) 942-8400
Facsimile: (202) 942-8484
Attention: Gilbert B. Kaplan, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone: (718) 921-8247
Facsimile: (718) 921-8323
Attention: Wilbert Miles
If to a Subscriber, to its address and facsimile number on
the Schedule of Subscribers, with copies to such Subscriber's
representatives as set forth on the Schedule of Subscribers.
Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred
Shares or Warrant Shares. The Company shall not assign this Agreement
or any rights or obligations hereunder without the prior written
consent of the holders of two-thirds (2/3) of the Preferred Shares
then outstanding, including by merger or consolidation, except
pursuant to a Paragraph 4 Transaction (as defined in the Certificate
of Designations) in compliance with the Certificate of Designations.
A Subscriber may assign some or all of its rights hereunder to
affiliates or associates of such Subscriber, without the consent of
the Company, and to others, with the consent of the Company; provided,
however, that any such assignment shall not release such Subscriber
from its obligations hereunder unless such obligations are assumed by
such assignee and the Company has consented to such assignment and
assumption.
h. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
i. Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and
the Subscribers contained in Sections 2 and 3, the agreements and
covenants set forth in Sections 4, 5 and 9, and the indemnification
provisions set forth in Section 8, shall survive each of the Closings
notwithstanding any investigation made by any party hereto. Each
Subscriber shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and the Subscribers shall have
the right to approve before issuance any press releases or any other
public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without
the prior approval of any Subscriber, to make any press release or
other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Subscriber
shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
l. Termination. In the event that the Initial Closing
shall not have occurred with respect to a Subscriber on or before
three (3) business days from the date hereof due to the Company's or
such Subscriber's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the nonbreaching party's failure to waive
such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any
party to any other party; provided, however, that if this Agreement is
terminated pursuant to this Section 9(l) pursuant to such a breach by
the Company, the Company shall remain obligated to pay the expenses of
the Subscriber described in Section 4(i) above.
m. Placement Agent. Each of the Company and the
Subscribers, on their own behalf, acknowledges that, except for the
retention of Shipley Raidy Capital Partners, LP by the Subscribers, it
has not engaged a placement agent in connection with the sale of the
Preferred Shares.
IN WITNESS WHEREOF, the Subscribers and the Company have
caused this Securities Purchase Agreement to be duly executed as of
the date first written above.
COMPANY: SUBSCRIBERS:
THE PANDA PROJECT, INC. AGR HALIFAX FUND, LTD.
By:/s/ Stanford W. Crane, Jr. By: AG Ramius Partners, LLC
Name: Stanford W. Crane, Jr. Investment Advisor
Title: President and CEO
By:
--------------------------
Name:
Title: Managing Officer
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
--------------------------
Name: Michael L. Gordon
Title: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Investment Advisor
By:
--------------------------
Name: Michael L. Gordon
Title: Chief Operating Officer
AG SUPER FUND INTERNATIONAL PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
--------------------------
Name: Michael L. Gordon
Title: Chief Operating Officer
RAPHAEL, L.P.
By:
--------------------------
Name: Michael L. Gordon
Title: Chief Operating Officer
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Investment Advisor
By:
--------------------------
Name: Michael L. Gordon
Title: Managing Officer
PINE STREET ASSET MANAGEMENT, L.P.
By:
--------------------------
Name:
Title:
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights
Agreement"), entered into as of February 11, 1998, between the
entities listed below (each, a "Purchaser" and collectively, the
"Purchasers"), and THE PANDA PROJECT, INC., a Florida corporation with
offices at 901 Yamato Road, Boca Raton, Florida 33431 (the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, in connection with the Subscription Agreement of
even date herewith by and among the parties hereto (the "Subscription
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Subscription Agreement, to issue and sell to the
Purchasers shares of the Company's Series A Convertible Preferred
Stock (the "Preferred Shares"), which will be convertible into shares
of the Company's common stock, par value $0.01 per share (the "Common
Stock") (as converted, the "Conversion Shares"), in accordance with
the terms of the Company's Fourth Articles of Amendment of Amended and
Restated Articles of Incorporation (the "Certificate of
Designations"), and deliver warrants to purchase Common Stock (the
"Warrants") pursuant to the terms of the Subscription Agreement (as
exercised, the "Warrant Shares");
WHEREAS, pursuant to the terms of, and in partial
consideration for, Purchasers, purchase of the Preferred Shares and
receipt of the Warrants, the Company has agreed to provide the
Purchasers with certain registration rights with respect to the
Conversion Shares and the Warrant Shares as set forth in this
Registration Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Subscription Agreement and this Registration Rights Agreement, the
Company and each of the Purchasers agrees as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"Holder" shall include each Purchaser and any
transferee of Preferred Shares, Warrants or Registrable Securities
which have not been sold to the public to whom the registration rights
conferred by this Agreement have been transferred in compliance with
Section 11 of this Agreement.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or
ordering of the effectiveness of such registration statement.
"Registrable Securities" shall mean the (i) Conversion
Shares issued or issuable upon conversion of the Preferred Shares
(including those received pursuant to a PIK Dividend (as defined in
the Certificate of Designations)), (ii) Warrant Shares issued or
issuable upon exercise of the Warrants, and (iii) shares of Common
Stock issued pursuant to Section 6 of this Agreement and (iv) any
shares of capital stock issued or issuable with respect to the
Conversion Shares, the Preferred Shares, or the Warrant Shares or the
shares of Common Stock issued pursuant to Section 6 of this Agreement
as a result of any stock split, stock dividend, recapitalization,
exchange, combination, merger, consolidation, or similar event or
otherwise.
"Registration Expenses" shall mean all expenses to be
incurred by the Company in connection with a Holder's exercise of its
registration rights under this Agreement, including, without
limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, blue sky fees and
expenses, reasonable fees and disbursements of counsel to the Holder
for a "due diligence" examination of the Company and review of the
Registration Statement and related documents and the expense of any
special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which
shall be paid in any event by the Company). With respect to the "due
diligence" examination of the Company, the Registration Expenses shall
include only fees and disbursements for one (1) designated counsel for
all the Holders.
"Registration Statement" shall have the meaning set
forth in Section 2(a) herein.
"Regulation D" shall mean Regulation D as promulgated
pursuant to the Securities Act, and as amended from time to time.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and all fees and disbursements of counsel for
Holders not included within the definition of "Registration Expenses".
Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the
Subscription Agreement.
2. REGISTRATION REQUIREMENTS. The Company shall use its
diligent best efforts to effect the registration of the Registrable
Securities contemplated by this Registration Rights Agreement
(including, without limitation, the execution of an undertaking to
file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all the
Registrable Securities in the manner (including manner of sale) and in
all states reasonably requested by the Holder for purposes of
maximizing the proceeds realizable by the Holder for such sale or
distribution. Such best efforts by the Company shall include without
limitation the following:
(a) The Company shall, as soon as practicable after each
date of issuance of Preferred Shares and Warrants under the
Subscription Agreement, but in no event later than thirty (30) days
after the date of each such issuance, prepare and file (i) a
registration statement with the Commission pursuant to Rule 415 under
the Securities Act on Form S-3 under the Securities Act (or in the
event that the Company is ineligible to use such form, such other form
as the Company is eligible to use under the Securities Act, subject to
the consent of the Holders holding a majority of the Registrable
Securities, which consent will not be unreasonably withheld) covering
the Registrable Securities to be registered by the Holder
("Registration Statement"); (ii) such blue sky filings as shall have
been requested by the Holder; and (iii) any required filings with the
National Association of Securities Dealers, Inc. or exchange or market
where the Common Stock is traded. Thereafter, the Company shall use
its best efforts to have such Registration Statement and other filings
declared effective as promptly as practicable, but in no event later
than 120 days after the issuance of the relevant Preferred Shares and
Warrants.
(b)(i) The Company shall file a Registration Statement
complying with the requirements of this Registration Rights Agreement
within 30 days from the date specified in subsection (a) above. If
such Registration Statement has not become effective within 120 days
from the applicable Closing Date referred to in the Subscription
Agreement, the Holder shall have, in addition to and without limiting
any other rights it may have at law, in equity or under the
Subscription Agreement, the Certificate of Designations, the Warrants
or this Registration Rights Agreement (including the right to specific
performance), the right to receive, as liquidated damages, the
payments as provided in subparagraph (ii) of this Section 2(b).
(ii) If after 120 days from the applicable Closing
Date, the Registration Statement has not been declared
effective by the SEC, then the Company shall pay to the
Holders an amount equal to 2% of the Purchase Price (as
defined in the Certificate of Designations), in cash, for
each 30-day period after such 120-day period that such
Registration Statement is not effective (which payment shall
be pro rated for any period less than 30 days) (the
"Additional Dividend"). In addition to the foregoing, if
after 270 days from the applicable Closing Date the
Registration Statement has not been declared effective by
the SEC, then (i) at the Company's election, the Company
may, and (ii) if Company has not used its best efforts to
have the Registration Statement declared effective by the
SEC, upon demand of such Holder the Company shall, redeem
all the Preferred Shares and Warrants held by such Holder at
a redemption price equal to the greater of 115% of the
Purchase Price and the value of the underlying Common Stock;
and further, if subsequent to the aforementioned 270-day
period no such redemption occurs, the rate of the Additional
Dividend shall be increased from 2% to 5%.
(c) The Company shall enter into such customary agreements
and take all such other reasonable actions in connection therewith in
order to expedite or facilitate the disposition of such Registrable
Securities and, in such connection:
(i) make such representations and warranties to the
Holder as the Holder may reasonably request;
(ii) cause to be delivered to the sellers of
Registrable Securities opinions of counsel to the Company,
dated the effective date of the Registration Statement
(which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the appointed
representative or counsel of the Holders), addressed to the
Holders covering the matters customarily covered in opinions
requested in secondary underwritten offerings; and
(iii) the Company shall deliver such documents and
certificates as may be reasonably requested by the Holders
to evidence compliance with clause (i) above and with any
customary conditions contained in any agreement entered into
by the Company in connection herewith;
the foregoing in this paragraph 2(c) shall be done at each closing as
and to the extent required thereunder.
(d) The Company shall make available for inspection by a
representative or representatives of each Holder and any attorney or
accountant retained by such Holder, all financial and other records
customary for such purposes, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such representative, attorney or accountant in connection with such
Registration Statement. The Holder will agree to keep all non-public
information supplied to it confidential until such information is
included in the Registration Statement, unless (a) the disclosure of
such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under
the Securities Act, (b) the release of such information is ordered
pursuant to a final non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) such information has
been made generally available to the public other than by disclosure
in violation of this or any other agreement of which the Holder has
knowledge.
3. EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or
compliance with registration pursuant to this Agreement shall be borne
by the Company, and all Selling Expenses shall be borne by the Holder.
4. REGISTRATION ON FORM S-3. The Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable
or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to
use under the Securities Act covering the resale of all of the
Registrable Securities. The foregoing is not intended to require the
Company to pay dividends in order to use Form S-3.
5. REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to this Agreement, the
Company will keep the Holder advised in writing as to the initiation
of each registration and as to the completion thereof. At its
expense, the Company will use its best efforts to:
(a) Keep such registration effective for the period ending
sixty (60) months, as extended pursuant to Section 6 hereof, after the
applicable Closing Date or until the Holder has sold all the
Registrable Securities and none of the Warrants and Preferred Shares
is outstanding (the "Registration Period").
(b) Furnish to each Holder whose Registrable Securities
are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with
the Commission at least one copy of such Registration Statement and
any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference and all
exhibits, the prospectus included in such Registration Statement
(including each preliminary prospectus) and, with regard to such
Registration Statement(s), any correspondence by or on behalf of the
Company to the Commission or the staff of the Commission and any
correspondence from the Commission or the staff of the Commission to
the Company or its representatives, and such additional copies of each
of the foregoing and such other documents incident thereto, as such
Holder from time to time may reasonably request;
(c) Prepare and file with the Commission such amendments
and post-effective amendments to a Registration Statement as may be
necessary to keep such Registration Statement effective for the
Registration Period; cause the related prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act; and comply with
the provisions of the Securities Act and the rules and regulations
thereunder applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement during
the Registration Period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration
Statement or supplement to such Prospectus and, in the event the
number of shares available under a Registration Statement filed
pursuant to this Registration Rights Agreement is insufficient to
cover all of the Registrable Securities, amend such Registration
Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in
any event within fifteen (15) business days after the necessity
therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to
rely), and use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as reasonably
practicable following the filing thereof;
(d) As promptly as practicable after becoming aware of
such event, notify each Holder of Registrable Securities included in
the Registration Statement and their counsel and (if requested by any
such person) confirm such notice (a "Notice") in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (2) of
any request by the Commission for amendments or supplements to a
Registration Statement or related prospectus or for additional
information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for such purposes, (4) if at any time
the representations and warranties of the Company contained in
agreements contemplated by Section 2(c) cease to be true and correct,
(5) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (6) of the happening
of any event as a result of which the prospectus included in the
Registration Statement (as then in effect) contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not
misleading and (7) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate or that there exist circumstances not yet disclosed to the
public which make further sales under such Registration Statement
inadvisable pending such disclosure and post-effective amendment;
(e) Upon the occurrence of any event contemplated by
Section 5(d)(2)-(7) and immediately upon the expiration of any
Blocking Period (as defined in Section 6), prepare, if the occurrence
of such event or period requires such preparation, a supplement or
post-effective amendment to the Registration Statement or related
prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein not misleading;
(f) Use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration
Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an
order or suspension is issued, make every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of the
Registration Statement, or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction, at the earliest possible moment;
(g) Insure that all Registrable Securities subject to the
Registration Statement shall at all times be registered or qualified
for offer and sale under the securities or "blue sky" laws of such
jurisdictions as any Holder reasonably requests in writing; use its
best efforts to keep each such registration or qualification
effective, including through new filings or amendments or renewals,
during the Registration Period and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the Registrable Securities covered by the applicable Registration
Statement; provided, however, that the Company will not be required to
qualify to do business or take any action that would subject it to
taxation or general service of process in any jurisdiction where it is
not then so qualified or subject;
(h) Use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities in accordance with the
chosen method or methods of distribution; and
(i) Cause all Registrable Securities included in such
Registration Statement to be listed, by the date of first sale of
Registrable Securities pursuant to such Registration Statement, on the
principal securities exchange or automated interdealer system on which
the same type of securities of the Company are then listed or traded.
(j) The Company shall permit the Holders and their counsel
to review and comment upon a Registration Statement and all amendments
and supplements thereto at least seven business days prior to their
filing with the Commission.
(k) The Company shall provide a transfer agent and
registrar for all such Registrable Securities not later than the
effective date of such Registration Statement.
6. SUSPENSION OF EFFECTIVENESS. The Company may suspend
dispositions under the Registration Statement and notify each Holder
that it may not sell the Registrable Securities pursuant to any
Registration Statement or Prospectus (a "Blocking Notice") if the
Company's management determines in its reasonable good faith judgment
that the Company's obligation to ensure that such Registration
Statement and Prospectus are current and complete would require the
Company to take actions that might reasonably be expected to have a
materially adverse detrimental effect on the Company and its
stockholders; provided that such suspension pursuant to a Blocking
Notice or the Notice described below or as a result of the
circumstances described in 5(d)(2)-(7) may not exceed thirty (30) days
(whether or not consecutive) in any twelve (12) month period. Each
Holder agrees by acquisition of the Registrable Securities that, upon
receipt of a Blocking Notice or "Notice" from the Company of the
existence of any fact of the kind described in the following sentence,
such Holder shall not dispose of, sell or offer for sale the
Registrable Securities pursuant to the Registration Statement until
such Holder receives (i) copies of the supplemented or amended
prospectus, or until counsel for the Company shall have determined
that such disclosure is not required due to subsequent events, (ii)
notice in writing (the "Advice") from the Company that the use of the
prospectus may be resumed and (iii) copies of any additional or
supplemental filings that are incorporated by reference in the
Prospectus. Pursuant to the immediately preceding sentence, the
Company may provide such Notice to the Holders upon the determination
by the Company of the existence of any fact or the happening of any
event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue in
any material respect, or that requires the making of any additions to
or changes in the Registration Statement or the Prospectus, in order
to make the statements therein not misleading in any material respect.
If so directed by the Company in connection with any such Notice, each
Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities
that was current immediately prior to the time of receipt of such
notice. In the event the Company shall give any such Blocking Notice
or Notice, the time regarding the effectiveness of such Registration
Statement set forth in Section 5(a), the final conversion date of the
Preferred Shares and the final exercise date of the Warrants shall be
extended by one and one-half (1-1/2) times the number of days during
the period from and including the date of the giving of such Blocking
Notice or Notice to and including the date when the Holder shall have
received the copies of the supplemented or amended Prospectus, the
Advice and any additional or supplemental filings that are
incorporated by reference in the Prospectus. Delivery of a Blocking
Notice or Notice and the related suspension of any Registration
Statement shall not constitute a default under this Agreement and
shall not create any obligation to pay liquidated damages under
Section 2 hereof. However, if the Holder's ability to sell under the
Registration Statement is suspended for more than the 30-day periods
described above (an "Excess Blocking Period"), then the Company shall
pay to the Holder two percent (2%) of the Purchase Price of the
Preferred Shares for each 30 day period commencing on the first day of
the thirty (30) day period (or part thereof) following the beginning
of an Excess Blocking Period until the Excess Blocking Period
terminates. Such payment will be payable either, at the option of the
Company as evidenced by irrevocable notice to the Holder to be
delivered not later than the first day following the beginning of a
Excess Blocking Period, in cash or in shares of Common Stock valued at
the average of the high and low trading prices of the Common Stock on
the Primary Market for each of the five trading days immediately
preceding the first day following the beginning of the Excess Blocking
Period, in each case within five (5) business days of the end of each
30 day period. In addition, if the Excess Blocking Period continues
for more than an aggregate of 180 days in any 360-day period, or the
payment is not made within 5 business days of the end of each 30 day
period, then at each Holder's option upon written notice from such
Holder following such 180th day or fifth business day, as the case may
be, the Company shall redeem Holder's Preferred Shares at a redemption
price equal to the greater of 125% of the Purchase Price and the
underlying value of the Common Stock, together with all payments due
under this paragraph and under the Certificate of Designations and the
Subscription Agreement. The Company shall deliver the applicable
redemption price to such Holder within ten days of receipt of such
notice by the Holder.
7. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify each
Holder, each of its officers, directors, employees, agents and
partners, and each person controlling such Holder, within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant
to this Agreement, against all claims, losses, damages, liabilities,
judgments, penalties, fines, charges, costs, attorneys' fees, amounts
paid in settlement and expenses (or actions in respect thereof)
(collectively, "Claims") arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any
related registration statement (or any post-effective amendment
thereto), notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which the statements therein were made, not
misleading, or any violation by the Company of the Securities Act, the
Exchange Act or any state securities law or, in either case, any rule
or regulation thereunder applicable to the Company, and will reimburse
such Holder, each of its officers, directors, employees, agents and
partners, and each person controlling such Holder, for any legal and
any other costs and expenses reasonably incurred in connection with
investigating and defending any Claim, provided that the Company will
not be liable in any such case to the extent that any such Claim
arises out of or is based on any untrue statement or omission (or
alleged untrue statement or omission) that is made in reliance upon
and in conformity with written information furnished to the Company by
such Holder and stated to be specifically for use therein. In
addition to any other information furnished in writing to the Company
by the Holder, the information in the Registration Statement
concerning such Holder under the captions "Selling Shareholders" (or
any similarly captioned section containing the information required
pursuant to Item 507 of Regulation S-K promulgated pursuant to the
Securities Act) and "Plan of Distribution" (or any similarly captioned
section containing information required pursuant to Item 508 of
Regulation S-K) shall be deemed information furnished in writing to
the Company by such Holder to the extent it conforms to information
actually supplied in writing by such Holder. The indemnity agreement
contained in this Section 7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the consent of the Company (which
consent will not be unreasonably withheld).
(b) HOLDER INDEMNITY. Each Holder will, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, severally
and not jointly indemnify the Company, each of its directors, each of
the officers of the Company who shall have signed the Registration
Statement and each person who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act and the rules and regulations thereunder, against any Claim
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration
statement (or any post-effective amendment thereto), prospectus or
other document, or any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which the
statements therein were made, not misleading, and will reimburse the
Company and its directors, officers, or control persons for any legal
or any other expenses reasonably incurred in connection with
investigating and defending any such Claim, in each case to the
extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus or other document in reliance upon
and in conformity with written information furnished to the Company by
such Holder and stated to be specifically for use therein, and
provided that no Holder shall be liable under this indemnity for an
amount in excess of the proceeds received by such Holder from the sale
of the Registrable Securities pursuant to such registration statement.
In addition to any other information furnished in writing to the
Company by the Holder, the information in the Registration Statement
concerning such Holder under the captions "Selling Shareholders" (or
any similarly captioned section containing the information required
pursuant to Item 507 of Regulation S-K promulgated pursuant to the
Securities Act) and "Plan of Distribution" (or any similarly captioned
section containing information required pursuant to Item 508 of
Regulation S-K) shall be deemed information furnished in writing to
the Company by such Holder to the extent it conforms to information
actually supplied in writing by such Holder. The indemnity agreement
contained in this Section 7(b) shall not apply to amounts paid in
settlement of any such Claims if such settlement is effected without
the consent of such Holder (which consent shall not be unreasonably
withheld).
(c) PROCEDURE. Each party entitled to indemnification
under this Section 7 (the "Indemnified Party") shall give notice to
the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of
any Claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such Claim in any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such Claim shall
be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in
such defense at such party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Section 7 except to the extent that the Indemnifying Party is
materially and adversely affected by such failure to provide notice.
The Indemnifying Party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the
same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for such
Indemnified Party; provided, however, that if separate firm(s) of
attorneys are required due to a conflict of interest, then the
Indemnifying Party shall be liable for the reasonable fees and
expenses of each such separate firm. No Indemnifying Party, in the
defense of any such Claim, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such Claim. Each Indemnified
Party shall furnish such information regarding itself or the Claim in
question as an Indemnifying Party may reasonably request in writing
and as shall be reasonably required in connection with the defense of
such Claim and litigation resulting therefrom.
8. CONTRIBUTION. To the extent the indemnification
provided for in Section 7 herein is unavailable to the Indemnified
Parties in respect of any Claims referred to herein (other than by
reason of the exceptions provided therein), then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified
Party as a result of such Claims in such proportion as is appropriate
to reflect the relative fault of the Company and of each Holder in
connection with the statements or omissions which resulted in such
Claims as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one
hand and each Holder on the other shall be deemed to be in the same
proportion as the proceeds from the offering (net of discounts and
commissions but before deducting expenses) received by the Company
from the initial sale of the Registrable Securities by the Company to
such Holder pursuant to this Registration Rights Agreement bear to the
proceeds received by such Holder from the sale of Registrable
Securities pursuant to the Registration Statement. The relative fault
of the Company on the one hand and of the Holder on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by
the Company, by such Holder.
In no event shall the obligation of any Indemnifying Party
to contribute under this Section 8 exceed the amount that such
Indemnifying Party would have been obligated to pay by way of
indemnification if the indemnification provided for under Sections
7(a) or 7(b) hereof had been available under the circumstances.
The Company and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraphs. The amount paid or
payable by an Indemnified Party as a result of the Claims referred to
in the immediately preceding paragraphs shall be deemed to include,
subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder shall be
required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities offered by such Holder
and distributed to the public, or offered to the public, exceeds the
amount paid by such Holder for the Preferred Shares or Warrants
converted into such shares of Common Stock. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
9. SURVIVAL. The indemnity and contribution agreements
contained in Sections 7 and 8 and the representations and warranties
of the Company contained herein shall remain operative and in full
force and effect regardless of (i) any termination of the Subscription
Agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company and (iii) the
consummation of the sale or successive resales of the Registrable
Securities.
10. INFORMATION BY HOLDER. Each Holder shall promptly
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement. All information provided to the Company by such Holder
shall be accurate and complete in all material respects and such
Holder shall promptly notify the Company if any such information
becomes incorrect or incomplete. If such Holder does not timely
provide all such reasonably requested information, such Holder shall
not be entitled to the liquidated damages contemplated by paragraph
2(b)(ii) to the extent that such delay in the Registration Statement
becoming effective is caused by such failure to timely provide
information unless such Holder shall be able to demonstrate to the
Company's reasonable satisfaction that such failure to timely provide
did not proportionately contribute to the event giving rise to the
indemnity obligation. The Company shall hold in confidence and not
make any disclosure of information concerning a Holder provided to the
Company unless (i) disclosure of such information is necessary to
comply with any federal or state securities law, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final, non-
appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this
Registration Rights Agreement or any other agreement. The Company
agrees that it shall, upon learning that disclosure of such
information concerning a Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means,
give prompt written notice to such Holder and allow such Holder, at
the Holder's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
11. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The
rights granted to the Purchaser by the Company under this Registration
Rights Agreement to cause the Company to register Registrable
Securities may be transferred or assigned to any permitted transferee
or assignee of the Warrants, Preferred Shares, Warrant Shares and
Conversion Shares or any permitted transferee or assignee of the
Warrants, provided that the Company is given written notice by the
Holder at the time of or within a reasonable time after said transfer
or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned; and provided
that the transferee or assignee of such rights agrees to be bound by
this Registration Rights Agreement.
12. MISCELLANEOUS.
(a) SECTION 9 OF THE SECURITIES EXCHANGE ACT. So long as
a Holder holds any Preferred Shares, such Subscriber will comply at
all times with the provisions of Section 9 of the 1934 Act, and the
rules and regulations promulgated thereunder with respect to
transactions involving the securities of the Company.
(b) ENTIRE AGREEMENT. This Registration Rights Agreement
and the Subscription Agreement contain the entire understanding and
agreement of the parties with respect to the subject matter hereof and
thereof. This Registration Rights Agreement and the Subscription
Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(c) NOTICES. Any notice or other communication given or
permitted under this Agreement shall be in writing and shall be deemed
to have been duly given if personally delivered or sent by registered
or certified mail, return receipt requested, postage prepaid or by air
courier, (a) if to Purchaser, at its address set forth in the
Warrants, (b) if to the Company, to The Panda Project, Inc., at its
address hereinabove set forth, and (c) if to a Holder other than
Purchaser, at the address thereof furnished by like notice to the
Company, or (d) to any such addresses at such other address or
addresses as shall be so furnished to the other parties by like
notice.
(d) GENDER OF TERMS. All terms used herein shall be
deemed to include the feminine and the neuter, and the singular and
the plural, as the context requires.
(e) GOVERNING LAW, CONSENT OF JURISDICTION; WAIVER OF TAX-
TRIAL. This Registration Rights Agreement and the validity and
performance of the terms hereof shall be governed by and construed in
accordance with the laws of the State of New York without regard to
principles of conflicts of law or choice of law, except to the extent
that the law of Florida regulates the Company's issuance of
securities. The parties hereto hereby agree that all actions or
proceedings arising directly or indirectly from or in connection with
this Registration Rights Agreement shall be litigated only in the
Supreme Court of the State of New York or the United States District
Court for the Southern District of New York located in New York
County, New York. To the extent permitted by applicable law, the
parties hereto consent to the jurisdiction and venue of the foregoing
courts and consent that any process or notice of motion or other
application to either of said courts or a judge thereof may be served
inside or outside the State of New York or the Southern District of
New York by registered mail, return receipt requested, directed to the
such party at its address set forth in this Registration Rights
Agreement (and service so made shall be deemed complete five (5) days
after the same has been posted as aforesaid) or by personal service or
in such other manner as may be permissible under the rules of said
courts. The parties hereto hereby waive any right to a jury trial in
connection with any litigation arising out of this Registration Rights
Agreement.
(f) TITLES. The titles used in this Registration Rights
Agreement are used for convenience only and are not to be considered
in construing or interpreting this Registration Rights Agreement.
(g) AMENDMENT. Provisions of this Registration Rights
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of
the Purchasers (to the extent such Purchaser still owns Registrable
Securities) and Holders who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in
accordance with this Section 12(g) shall be binding upon each Holder
and the Company.
(h) SUCCESSORS AND ASSIGNS. Subject to the requirements
of Section 11, this Agreement shall inure to the benefit of and be
binding upon the permitted successors and assigns of each of the
parties hereto and, with respect to Section 7, to the benefit of the
indemnitees named therein.
(i) COUNTERPARTS. This Registration Rights Agreement may
be executed in two or more identical counterparts, each of which shall
be deemed an original but all of which shall constitute one and the
same agreement. This Registration Rights Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Registration Rights Agreement bearing
the signature of the party so delivering this Registration Rights
Agreement.
(j) FURTHER ASSURANCES. Each party shall do and perform,
or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this
Registration Rights Agreement and the consummation of the transactions
contemplated hereby.
(k) REMEDIES. Failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first
above written.
COMPANY: PURCHASERS:
THE PANDA PROJECT, INC. AGR HALIFAX FUND, LTD.
By: AG Ramius Partners, LLC
Investment Advisor
By: /s/ Stanford W. Crane, Jr. By:
--------------------------- ---------------------
Name: Stanford W. Crane, Jr. Name:
Title: President and CEO Title: Managing Officer
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
---------------------
Name: Michael L. Gordon
Title: Chief Operating
Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Investment Advisor
By:
---------------------
Name: Michael L. Gordon
Title: Chief Operating
Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
General Partner
By:
---------------------
Name: Michael L. Gordon
Title: Chief Operating
Officer
RAPHAEL, L.P.
By:
---------------------
Name: Michael L. Gordon
Title: Chief Operating
Officer
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Investment Advisor
By:
---------------------
Name: Michael L. Gordon
Title: Chief Operating
Officer
PINE STREET ASSET MANAGEMENT, L.P.
By:
---------------------
Name:
Title:
