SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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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 16, 2000
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GLOBAL TECHNOLOGIES, LTD.
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(Exact Name of Registrant as specified in its charter)
DELAWARE 0-25668 86-0970492
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
The Belgravia, 1811 Chestnut Street, Suite 120, Philadelphia, PA 19103
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(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code (215) 972-8191
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
On February 16, 2000, Global Technologies, Ltd. ("Global") completed a
$10.0 million equity financing. Two institutional funds invested a total of
$10.0 million in Global in return for an aggregate of 1,000 shares of Global
Series C 5% Convertible Preferred Stock ("Preferred Stock") and warrants
("Warrants") exercisable for five years at a premium to market and callable
under certain circumstances.
The Preferred Stock ranks senior with respect to dividends and liquidation
payments to shares of Global Class A Common Stock ("Common Stock") and future
preferred stock. The Preferred Stock carries a 5% cumulative dividend payable in
cash or Common Stock. The Preferred Stock is convertible into shares of Common
Stock initially at a price per share equal to 120% of the average of the closing
bid prices for shares of Common Stock as reported on the Nasdaq National Market
for the five trading days beginning March 1, 2000. Nine months after funding,
and each three months thereafter while shares of Preferred Stock are
outstanding, the conversion price will reset in accordance with the formula set
forth in the Certificate of Designations, Rights, Preferences and Limitations of
Series C Convertible Preferred Stock of Global (the "Certificate"). The
conversion price is also subject to adjustment pursuant to the antidilution
provisions contained in the Certificate. Any shares of Preferred Stock
outstanding three years from the funding date automatically convert into shares
of Common Stock at the then applicable conversion price.
As long as the Common Stock is listed for trading on Nasdaq, the Company
may not issue on conversion of Preferred Stock more than 19.999% of the
outstanding Common Stock immediately prior to closing without obtaining prior
shareholder approval in order to comply with Nasdaq Listing Requirements.
The Preferred Stock and Warrants have no voting rights. The Preferred Stock
is redeemable by Global at a premium. The holders of the Preferred Stock may
require Global to redeem the Preferred Stock in the event of certain "Triggering
Events" as defined in the Certificate. In addition, in connection with the
financing, Global has granted the investors registration rights with respect to
the shares of Common Stock into which the Preferred Stock is convertible and
Warrants are exercisable.
The Warrants provide that each holder will have the right to acquire a
number of shares of Common Stock equal to 15% of such holder's purchase price
for the Preferred Stock acquired by it divided by the exercise price equal to
the greater of (i) 120% of the average of the closing bid prices for the Common
Stock for the five trading days preceding the closing date (subject to
adjustment), and (ii) 120% of the average of the closing bid prices of the
Common Stock for the five trading days starting on and including March 1, 2000.
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The foregoing is a brief summary of certain provisions of the Certificate
pertaining to the rights, preferences and limitations of the Preferred Stock and
certain provisions of the Warrants. This summary does not purport to be complete
and is qualified in its entirety by reference to the Certificate, Form of
Warrant and the Convertible Preferred Stock Purchase Agreement, which are filed
herewith as Exhibits and are incorporated herein by reference thereto.
ITEM 7. EXHIBITS
Exhibit No. Description
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4.1 Certificate of Designations, Rights, Preferences and Limitations
of Series C Convertible Preferred Stock of Global Technologies,
Ltd.
4.2 Form of Callable Warrant issued to holders of Series C
Convertible Preferred Stock of Global Technologies, Ltd.
10.1 Convertible Preferred Stock Purchase Agreement among Global
Technologies, Ltd. and the Investors Signatory thereto, dated as
of February 16, 2000.
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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.
GLOBAL TECHNOLOGIES, LTD.
Dated: February 24, 2000 By: /s/ Irwin L. Gross
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Name: Irwin L. Gross
Title: Chairman and
Chief Executive Officer
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INDEX TO EXHIBITS
Exhibit No. Description
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4.1 Certificate of Designations, Rights, Preferences and Limitations
of Series C Convertible Preferred Stock of Global Technologies,
Ltd.
4.2 Form of Callable Warrant issued to holders of Series C
Convertible Preferred Stock of Global Technologies, Ltd.
10.1 Convertible Preferred Stock Purchase Agreement among Global
Technologies, Ltd. and the Investors Signatory thereto, dated as
of February 16, 2000.
CERTIFICATE OF DESIGNATIONS, RIGHTS, PREFERENCES
AND LIMITATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
OF
GLOBAL TECHNOLOGIES, LTD.
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Pursuant to Section 151 of the General Corporation Law of the State of Delaware
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Global Technologies Ltd., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Corporation on February ___, 2000 pursuant to authority of the Board of
Directors as required by Section 151 of the General Corporation Law of the State
of Delaware:
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors" or the "Board") in
accordance with the provisions of its Amended and Restated Certificate of
Incorporation, the Board of Directors hereby designates a series of the
Corporation's previously authorized Preferred Stock, par value $0.01 per share
(the "Preferred Stock"), as its Series C Convertible Preferred Stock, and hereby
states the number of authorized shares, and the relative rights, preferences,
limitations, privileges, powers and restrictions thereof are and shall be as set
forth on the attached Annex A.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Rights, Preferences and Limitations to be signed by its duly
authorized officers on this ___ day of February, 2000.
GLOBAL TECHNOLOGIES, LTD.
By: /s/ S. Lance Silver
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Name: S. Lance Silver
Title: Vice President and General Counsel
<PAGE>
ANNEX A
Section 1. DESIGNATION, AMOUNT AND PAR VALUE. The series of preferred stock
shall be designated as its 5% Series C Convertible Preferred Stock (the
"PREFERRED STOCK") and the number of shares so designated shall be 1,000 (which
shall not be subject to increase without the consent of the holders of the
Preferred Stock (each, a "HOLDER" and collectively, the "HOLDERS")). Each share
of Preferred Stock shall have a par value of $.01 and a stated value equal to
the sum of $10,000 plus all accrued dividends to the date of determination to
the extent not previously paid in cash in accordance with the terms hereof (the
"STATED VALUE").
Section 2. DIVIDENDS.
(a) Holders shall be entitled to receive, out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) of 5% per annum, payable on each
December 31, March 31, June 30 and September 30 for so long as such share shall
be outstanding, commencing March 31, 2000 (each such quarterly date is referred
to herein as a "DIVIDEND PAYMENT DATE"), in cash or by accretion of the Stated
Value. Subject to the terms and conditions herein, the decision whether to
accrete dividends hereunder to the Stated Value or to pay for dividends in cash
shall be at the discretion of the Company. The Company shall provide the Holders
written notice of its intention to accrete dividends hereunder to the Stated
Value or pay dividends in cash not less than ten days prior to each Dividend
Payment Date for so long as shares of Preferred Stock are outstanding (the
Company may indicate in such notice that the election contained in such notice
shall continue for later periods until revised). Failure to timely provide such
written notice shall be deemed (if permitted hereunder) an election by the
Company to accrete dividends hereunder to the Stated Value. Dividends on the
Preferred Stock shall be calculated on the basis of a 365-day year, shall accrue
daily commencing on the Original Issue Date (as defined in Section 8), and shall
be deemed to accrue from such date whether or not earned or declared and whether
or not there are profits, surplus or other funds of the Company legally
available for the payment of dividends. Except as otherwise provided herein, if
at any time the Company pays less than the total amount of dividends then
accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares of Preferred Stock
held by each Holder. Any dividends to be paid in cash hereunder that are not
paid within three Trading Days (as defined in Section 8) following a Dividend
Payment Date shall continue to accrue and shall entail a late fee, which must be
paid in cash, at the rate of 18% per annum or the lesser rate permitted by
applicable law (such fees to accrue daily, from the date such dividend is due
hereunder through and including the date of payment).
(b) Notwithstanding anything to the contrary contained herein, the Company
must pay dividends in cash if:
(i) the number of shares of Common Stock (as defined in Section 8) at
the time authorized, unissued and unreserved for all purposes is insufficient to
accrete such dividends to the Stated Value to permit conversion in full of all
outstanding Stated Value;
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(ii) after the Dividend Effectiveness Date (as defined in Section 8),
Underlying Shares (as defined in Section 8) (x) are not registered for resale
pursuant to an effective Underlying Shares Registration Statement (as defined in
Section 8) and (y) may not be sold without volume restrictions pursuant to Rule
144 promulgated under the Securities Act (as defined in Section 8), as
determined by counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent in the form and substance acceptable
to the applicable Holder and such transfer agent (if the Company is permitted
and elects to pay dividends in shares of Common Stock under this clause (ii)
prior to the Dividend Effectiveness Date and thereafter an Underlying Shares
Registration Statement shall be declared effective by the Commission (as defined
in Section 8), the Company shall, within three Trading Days after the date of
such declaration of effectiveness, exchange such Underlying Shares for shares of
Common Stock that are free of restrictive legends of any kind);
(iii) the Common Stock is not then listed or quoted on the Nasdaq
National Market ("NASDAQ"), or on the New York Stock Exchange, American Stock
Exchange or Nasdaq SmallCap Market (each, a "SUBSEQUENT MARKET"); or
(iv) the accretion of such dividends to the Stated Value and
subsequent conversions of all then outstanding Stated Value would result in a
violation of Section 5(a)(iii) or the rules of the Nasdaq Stock Market or any
other rules and regulations governing any Subsequent Market on which the Common
Stock is then listed or quoted for trading.
(c) So long as any Preferred Stock shall remain outstanding, neither the
Company nor any subsidiary thereof shall redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities (as defined in Section 8), nor
shall the Company directly or indirectly pay or declare any dividend or make any
distribution (other than a dividend or distribution described in Section 5 or
dividends due and paid in the ordinary course on preferred stock of the Company
at such times when the Company is in compliance with its payment and other
obligations hereunder and except for the three-for-two stock split effected by
way of a dividend of one share for each two shares outstanding to become
effective as of February 29, 2000 (the "Stock Dividend")) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies
be set aside for or applied to the purchase or redemption (through a sinking
fund or otherwise) of any Junior Securities or shares pari passu with the
Preferred Stock. Notwithstanding the foregoing, on January 1, 2000, the Company
exercised a call option to repurchase 387,610 shares of Common Stock owned by
certain shareholders pursuant to an agreement with such shareholders (the
"Common Stock Redemption"). This repurchase is scheduled to close on February
28, 2000. A portion of the proceeds from the sale of the securities will be used
to satisfy the Company's obligation pursuant to such repurchase.
Section 3. VOTING RIGHTS. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights.
However, so long as any shares of Preferred Stock are outstanding, the Company
shall not, without the affirmative vote of the Holders of a majority of the
shares of the Preferred Stock then outstanding, (a) alter or change adversely
the powers, preferences or rights given to the Preferred Stock or alter or amend
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this Certificate of Designation, (b) authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as defined
in Section 4) senior to or otherwise pari passu with the Preferred Stock, (c)
amend its certificate or articles of incorporation or other charter documents so
as to affect adversely any rights of the Holders, (d) increase the authorized
number of shares of Preferred Stock, or (e) enter into any agreement with
respect to the foregoing.
Section 4. LIQUIDATION. Upon any liquidation, dissolution or winding-up of
the Company, whether voluntary or involuntary (a "LIQUIDATION"), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Preferred Stock an amount equal
to the Stated Value per share before any distribution or payment shall be made
to the holders of any Junior Securities, and if the assets of the Company shall
be insufficient to pay in full such amounts, then the entire assets to be
distributed to the Holders shall be distributed among the Holders ratably in
accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition
of 50% or more of the assets of the Company or the effectuation by the Company
of a transaction or series of related transactions in which more than 33% of the
voting power of the Company is disposed of, or a consolidation or merger of the
Company with or into any other company or companies into one or more companies
not wholly-owned by the Company shall not be treated as a Liquidation, but
instead shall be subject to the provisions of Section 5. The Company shall mail
written notice of any such Liquidation, not less than 45 days prior to the
payment date stated therein, to each record Holder.
Section 5. CONVERSION.
(a)(i) CONVERSIONS AT OPTION OF HOLDER. Each share of Preferred Stock shall
be convertible into shares of Common Stock (subject to the limitations set forth
in Section 5(a)(iii)), at the Conversion Ratio (as defined in Section 8), at the
option of the Holder at any time and from time to time from and after the later
to occur of (x) the Original Issue Date and (y) March 5, 2000. Holders shall
effect conversions by surrendering the certificate or certificates representing
the shares of Preferred Stock to be converted to the Company, together with the
form of conversion notice attached hereto as EXHIBIT A (a "CONVERSION NOTICE").
Each Conversion Notice shall specify the number of shares of Preferred Stock to
be converted and the date on which such conversion is to be effected, which date
may not be prior to the date the Holder delivers such Conversion Notice
(including by facsimile) (the "CONVERSION DATE"). If no Conversion Date is
specified in a Conversion Notice, the Conversion Date shall be the date that a
Conversion Notice is deemed delivered hereunder. If the Holder is converting
less than all shares of Preferred Stock represented by the certificate or
certificates tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(b)) a certificate representing the number of shares of
Preferred Stock as have not been converted.
(ii) AUTOMATIC CONVERSION. Subject to the provisions of this paragraph
and Section 5(a)(iii)(C), all outstanding shares of Preferred Stock for which
conversion notices have not previously been received or for which redemption has
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not been made or required hereunder shall be automatically converted on the
third anniversary of the Original Issue Date at the then applicable Conversion
Price (as defined herein). The conversion contemplated by this paragraph shall
not occur at such time as (a)(1) an Underlying Shares Registration Statement is
not then effective or (2) the Holder is not permitted to resell Underlying
Shares pursuant to Rule 144(k) promulgated under the Securities Act, without
volume restrictions, as evidenced by an opinion letter of counsel acceptable to
the Holder and the transfer agent for the Common Stock; (b) there are not
sufficient shares of Common Stock authorized and reserved for issuance upon such
conversion; or (c) the Company shall have defaulted in any material respect on
its covenants and obligations hereunder or under the Purchase Agreement or
Registration Rights Agreement (each as defined in Section 8). Notwithstanding
the foregoing, the three-year period for conversion under this Section shall be
extended (on a day-for-day basis) for any Trading Days after the Effective Date
(as defined in the Purchase Agreement) that a Holder is unable to resell
Underlying Shares under an Underlying Shares Registration Statement due to (a)
the Common Stock not being listed or quoted for trading on the NASDAQ or any
Subsequent Market, (b) the failure of such Underlying Shares Registration
Statement to be declared effective, or if so declared, to remain effective
during the Effectiveness Period (as defined in the Registration Rights
Agreement) as to all Underlying Shares, or (c) the suspension of the Holder's
right to resell Underlying Shares thereunder. The provisions of Sections
5(a)(iii)(A) and (B) shall not apply to any automatic conversion pursuant to
this Section 5(a)(ii). The provisions of Section 5(a)(iii)(C) shall apply to any
automatic conversion pursuant to this Section 5(a)(ii).
(iii) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert shares of Preferred Stock or receive
shares of Common Stock as payment of dividends hereunder to the extent such
conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act (as defined in Section 8) and
the rules promulgated thereunder) in excess of 4.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion
of, and payment of dividends on, the shares of Preferred Stock held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of a conversion hereunder, unless the conversion at issue would result in
the issuance of shares of Common Stock in excess of 4.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum number of shares of Preferred Stock permitted to be
converted on such Conversion Date in accordance with the periods described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
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Stock tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess shares of Preferred Stock permitted to
the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 61 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
(B) A Holder may not convert shares of Preferred Stock or receive
shares of Common Stock as payment of dividends hereunder to the extent such
conversion or receipt of such dividend payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
dividends on, the shares of Preferred Stock held by such Holder after
application of this Section. Since the Holder will not be obligated to report to
the Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the shares of Preferred Stock are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for shares of Preferred Stock that,
without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum number of shares of Preferred Stock permitted to be
converted on such Conversion Date in accordance with the periods described in
Section 5(b) and, at the option of the Holder, either retain shares of Preferred
Stock tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess shares of Preferred Stock permitted to
the Holder. The provisions of this Section may be waived by a Holder (but only
as to itself and not to any other Holder) upon not less than 61 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
(C) If the Common Stock is then listed for trading on the NASDAQ
or the Nasdaq SmallCap Market and the Company has not obtained the Shareholder
Approval (as defined below), then the Company may not issue in excess of an
aggregate of 1,439,730 shares of Common Stock (on or after February 29, 2000,
the effective date of the Stock Dividend, such number shall increase to
2,159,595) upon (i) any and all conversions of Preferred Stock and (ii) exercise
of Redemption Warrants (as defined in Section 8) at a price which is less than
the closing sales price of the Common Stock on the Trading Day immediately
preceding the Original Issue Date (such number of shares, the "ISSUABLE
MAXIMUM"). The Issuable Maximum equals 19.999% of the number of shares of Common
Stock outstanding immediately prior to the closing of transactions set forth in
the Purchase Agreement. Each Holder shall be entitled to a portion of the
Issuable Maximum equal to the quotient obtained by dividing (x) the number of
shares of Preferred Stock issued and sold to such Holder on the Original Issue
Date by (y) the number of shares of Preferred Stock issued and sold by the
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Company on the Original Issue Date. If any Holder shall no longer hold shares of
Preferred Stock or Redemption Warrants, if any, then such Holder's remaining
portion of the Issuable Maximum shall be allocated pro-rata among the remaining
Holders. If on any Conversion Date (A) the shares of Common Stock are listed for
trading on the NASDAQ or the Nasdaq SmallCap Market, (B) the Conversion Price
then in effect is such that the aggregate number of shares of Common Stock that
would then be issuable upon conversion in full of all then outstanding shares of
Preferred Stock, together with any shares of Common Stock previously issued upon
conversion of shares of Preferred Stock and exercise of the Redemption Warrants,
if any, at a price which is less than the closing sales price of the Common
Stock on the Trading Day immediately preceding the Original Issue Date, would
exceed the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders (the "SHAREHOLDER APPROVAL"), if any, as may
be required by the applicable rules and regulations of the Nasdaq Stock Market
(or any successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then the
Company shall issue to the Holder requesting a conversion a number of shares of
Common Stock equal to such Holder's pro-rata portion (which shall be calculated
pursuant to the terms hereof) of the Issuable Maximum and, with respect to the
remainder of the aggregate Stated Value of the shares of Preferred Stock then
held by such Holder for which a conversion in accordance with the Conversion
Price would result in an issuance of shares of Common Stock in excess of such
Holder's pro-rata portion (which shall be calculated pursuant to the terms
hereof) of the Issuable Maximum (the "EXCESS STATED VALUE"), the converting
Holder shall have the option to require the Company to either (1) use its best
efforts to obtain the Shareholder Approval applicable to such issuance as soon
as is possible, but in any event not later than the 75th day after such request,
or (2) pay cash to the converting Holder in an amount equal to the Mandatory
Redemption Amount (as defined in Section 8) for the Excess Stated Value. If the
converting Holder shall have elected the first option pursuant to the
immediately preceding sentence and the Company shall have failed to obtain the
Shareholder Approval on or prior to the 75th day after such request, then within
three (3) days of such 75th day, the Company shall pay cash to the converting
Holder an amount equal to the Mandatory Redemption Amount for the Excess Stated
Value. If the Company fails to pay the Mandatory Redemption Amount in full
pursuant to this Section within seven days after the date payable, the Company
will pay interest thereon at a rate of 18% per annum or such lesser maximum
amount that is permitted to be paid by applicable law, to the converting Holder,
accruing daily from the end of such seven-day period until such amount, plus all
such interest thereon, is paid in full. The Company and the Holder understand
and agree that shares of Common Stock issued to and then held by the Holder as a
result of conversions of Preferred Stock shall not be entitled to cast votes on
any resolution to obtain Shareholder Approval pursuant hereto.
(b)(i) Not later than three Trading Days after each Conversion Date, the
Company will deliver to the Holder (A) a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those
required by Section 3.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of shares of Preferred
Stock, (B) one or more certificates representing the number of shares of
Preferred Stock not converted and (C) a bank check in the amount of accrued and
unpaid dividends (if the Company has elected or is required to pay accrued
dividends in cash). Notwithstanding the foregoing or anything to the contrary
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contained herein, the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of
Preferred Stock until one Trading Day after certificates evidencing such shares
of Preferred Stock are delivered for conversion to the Company, or the Holder of
such Preferred Stock notifies the Company that such certificates have been lost,
stolen or destroyed and provides a bond (or other adequate security) reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of the Holder, if
available, use its best efforts to deliver any certificate or certificates
required to be delivered by the Company under this Section electronically
through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion
Notice such certificate or certificates are not delivered to or as directed by
the applicable Holder by the third Trading Day after the Conversion Date, the
Holder shall be entitled to elect by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
certificates representing the shares of Preferred Stock tendered for conversion.
(ii) If the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i), by the third Trading Day after the
Conversion Date, the Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, $5,000 for each Trading Day after such third
Trading Day until such certificates are delivered. Nothing herein shall limit a
Holder's right to pursue actual damages for the Company's failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to pursue all
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
(iii) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder such certificate or certificates pursuant
to Section 5(b)(i), by the third Trading Day after the Conversion Date, and if
after such third Trading Day the Holder purchases (in an open market transaction
or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder
of the Underlying Shares which the Holder was entitled to receive upon such
conversion (a "BUY-IN"), then the Company shall (A) pay in cash to the Holder
the amount by which (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Common Stock so purchased exceeds (y) the product
of (1) the aggregate number of shares of Common Stock that such Holder was
entitled to receive from the conversion at issue multiplied by (2) the market
price of the Common Stock at the time of the sale giving rise to such purchase
obligation and (B) at the option of the Holder, either return the shares of
Preferred Stock for which such conversion was not honored or deliver to such
Holder the number of shares of Common Stock that would have been issued had the
Company timely complied with its conversion and delivery obligations under
Section 5(b)(i). For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of shares of Preferred Stock with respect to which the market price
of the Underlying Shares on the date of conversion totaled $10,000, under clause
(A) of the immediately preceding sentence the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
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indicating the amounts payable to the Holder in respect of the Buy-In and
provide reasonable evidence thereof (which shall consist solely of the records
evidencing the establishment of the position at issue) which shall be reasonably
satisfactory to the Company. Nothing herein shall limit a Holder's right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon conversion of the shares
of Preferred Stock as required pursuant to the terms hereof.
(c)(i) The conversion price for each share of Preferred Stock in effect on
any Conversion Date (the "CONVERSION PRICE") shall be determined, subject to the
provisions of this Section, as follows: Initially, the Conversion Price shall
equal 120% of the average of the Per Share Market Values for the five Trading
Days starting on and including March 1, 2000 (the "FIXED CONVERSION PRICE"). On
the ninth month anniversary of the Original Issue Date and on each subsequent
third month anniversary thereof (the ninth month anniversary of the Original
Issue Date and each third month anniversary thereof, being measured as the
actual date of such anniversary and not the expiration of the month in which
such date occurred, collectively, a "RESET DATE"), the Conversion Price shall be
the lesser of the Fixed Conversion Price and the lowest Reset Conversion Price
(as defined below) calculated hereunder. A "RESET CONVERSION PRICE" shall be
determined on each Reset Date and shall equal the average of the four (4) lowest
trading prices of the Common Stock during the twenty consecutive Trading Days
immediately preceding the applicable Reset Date, PROVIDED, that such twenty
Trading Day period shall be extended for the number of Trading Days during such
period in which (A) trading in the Common Stock is suspended by the NASDAQ or a
Subsequent Market on which the Common Stock is then listed, or (B) after the
date declared effective by the Commission, the Underlying Shares Registration
Statement is not effective, or (C) after the date declared effective by the
Commission, the Prospectus included in the Underlying Shares Registration
Statement may not be used by the Holder for the resale of Underlying Shares.
(ii) If the Company, at any time while any shares of Preferred Stock
are outstanding, shall (a) pay a stock dividend or otherwise make a distribution
or distributions on shares of its Junior Securities or pari passu securities
payable in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares, (c) combine outstanding shares of Common
Stock into a smaller number of shares, or (d) issue by reclassification and
exchange of the Common Stock any shares of capital stock of the Company, then
the Fixed Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
5(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification. Notwithstanding anything herein
to the contrary: (A) if the Stock Dividend shall become effective on or prior to
March 1, 2000 then the Fixed Conversion Price shall not be adjusted pursuant to
this Section and (B) if the Stock Dividend shall become effective subsequent to
March 1, 2000 then the Fixed Conversion Price shall be adjusted pursuant to this
Section.
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(iii) If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents (as defined below), at any time while any
shares of Preferred Stock are outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that is convertible into
or exchangeable for shares of Common Stock ("COMMON STOCK EQUIVALENTS"),
entitling any Person to acquire shares of Common Stock at a price per share less
than the Conversion Price (if the holder of the Common Stock or Common Stock
Equivalent so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights issued in connection with
such issuance, be entitled to receive shares of Common Stock at a price less
than the Conversion Price, such issuance shall be deemed to have occurred for
less than the Conversion Price), then the Conversion Price shall be multiplied
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such Common Stock or such
Common Stock Equivalents plus the number of shares of Common Stock which the
offering price for such shares of Common Stock or Common Stock Equivalents would
purchase at the Conversion Price, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock so issued or issuable,
PROVIDED, that for purposes hereof, all shares of Common Stock that are issuable
upon conversion, exercise or exchange of Common Stock Equivalents shall be
deemed outstanding immediately after the issuance of such Common Stock
Equivalents. Such adjustment shall be made whenever such Common Stock or Common
Stock Equivalents are issued. However, upon the expiration of any Common Stock
Equivalents the issuance of which resulted in an adjustment in the Conversion
Price pursuant to this Section, if any such Common Stock Equivalents shall
expire and shall not have been exercised, the Conversion Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Conversion Price made pursuant to the provisions of
this Section after the issuance of such Common Stock Equivalents) had the
adjustment of the Conversion Price made upon the issuance of such Common Stock
Equivalents been made on the basis of offering for subscription or purchase only
that number of shares of the Common Stock actually purchased upon the exercise
of such Common Stock Equivalents actually exercised. The foregoing shall not
apply to any transaction involving (i) issuances of securities as consideration
in a merger, consolidation or acquisition of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is not to
raise equity capital), or as consideration for the acquisition of a business,
product or license by the Company, (ii) the issuance of securities pursuant to
an underwritten public offering, (iii) the issuance of securities upon the
exercise or conversion of the Company's options, warrants or other convertible
securities outstanding as of the date hereof, or (iv) the grant of additional
options or warrants, or the issuance of additional securities, under any duly
authorized Company stock option or restricted stock plan for the benefit of the
Company's employees or directors.
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(iv) If the Company, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
5(c)(ii)-(iii) above), then in each such case the Conversion Price at which each
share of Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Per Share Market Value
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of Common Stock
as determined by the Board of Directors, in its sole discretion, in good faith.
In either case the adjustments shall be described in a statement provided to the
Holders of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. The number of shares
of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
(vi) Whenever the Conversion Price is adjusted pursuant to Section
5(c)(ii),(iii) or (iv) the Company shall promptly mail to each Holder, a notice
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
(vii) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than compulsory share exchanges which
constitute Change of Control Transactions), the Holders of the Preferred Stock
then outstanding shall have the right thereafter to convert such shares only
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such reclassification
or share exchange, and the Holders of the Preferred Stock shall be entitled upon
such event to receive such amount of securities, cash or property as a holder of
the number of shares of Common Stock of the Company into which such shares of
Preferred Stock could have been converted immediately prior to such
reclassification or share exchange would have been entitled. This provision
shall similarly apply to successive reclassifications or share exchanges.
(viii) In case of any merger or consolidation of the Company with or
into another Person, or sale by the Company of more than one-half of the assets
of the Company (on an as valued basis) in one or a series of related
transactions, a Holder shall have the right thereafter to (A) convert its shares
of Preferred Stock into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
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following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
shares of Preferred Stock could have been converted immediately prior to such
merger, consolidation or sales would have been entitled or (B) exercise its
rights to declare a Triggering Event (as defined in Section 7) pursuant to
Section 7.
(ix) If (a) the Company shall declare a dividend (or any other
distribution) on the Common Stock (other than the Stock Dividend), (b) the
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (c) the Company shall authorize the granting to all holders of
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (d) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share of exchange whereby the Common
Stock is converted into other securities, cash or property, or (e) the Company
shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company; then the Company shall notify the Holders at
their last addresses as they shall appear upon the stock books of the Company,
at least 20 calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange.
Holders are entitled to convert shares of Preferred Stock during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
(d) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders, not less than such number of shares of
Common Stock as shall be issuable (taking into account the provisions of Section
5(a) and Section 5(c)) upon the conversion of all outstanding shares of
Preferred Stock. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized and
issued and fully paid and nonassessable.
(e) Upon a conversion hereunder the Company shall not be required to issue
stock certificates representing fractions of shares of Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the Per Share Market Value at such time. If any fraction of an
Underlying Share would, except for the provisions of this Section, be issuable
upon a conversion hereunder, the Company shall pay an amount in cash equal to
the Conversion Ratio multiplied by such fraction.
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(f) The issuance of certificates for Common Stock on conversion of
Preferred Stock shall be made without charge to the Holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such shares of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and may not be reissued.
(h) Any and all notices or other communications or deliveries to be
provided by the Holders of the Preferred Stock hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Chief Financial Officer of the Company
addressed to 1811 Chestnut Street, Suite 120, Philadelphia, Pennsylvania 19103
or to facsimile number (215) 972-8183, or to such other address or facsimile
number as shall be specified in writing by the Company for such purpose. Any and
all notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile or sent by
a nationally recognized overnight courier service, addressed to each Holder at
the facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile and the party giving such notice has a confirmation of transmission
setting forth the date and time of transmission, which was produced by the
facsimile machine at the facsimile telephone number specified in this Section
prior to 8:00 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile and the
party giving such notice has a confirmation of transmission setting forth the
date and time of transmission, which was produced by the facsimile machine at
the facsimile telephone number specified in this Section later than 8:00 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) upon receipt, if sent by a nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
Section 6. OPTIONAL REDEMPTION.
(a) Subject to the provisions of this Section 6, from and after the
Original Issue Date, the Company shall have the right, upon thirty Trading Days'
notice (an "OPTIONAL REDEMPTION NOTICE" and the date such Optional Redemption
Notice is received by a Holder, an "OPTIONAL REDEMPTION DATE") to the Holders,
to redeem all or any portion of the shares of Preferred Stock which have not
previously been redeemed or for which Conversion Notices shall not have been
delivered, for a price equal to the Optional Redemption Price (as defined
below). Notwithstanding anything herein to the contrary, together with the
delivery of the Optional Redemption Notice, the Company shall also deliver the
Redemption Warrants to the Holders of shares of Preferred Stock to be redeemed
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and the Optional Redemption Notice shall only be valid if delivered together
with the Redemption Warrants. The Company may only deliver an Optional
Redemption Notice if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is sufficient to satisfy
the Company's conversion obligations of all shares of Preferred Stock then
outstanding and the Company's exercise obligations pursuant to the Redemption
Warrants and other common stock purchase warrants issued to the Holders on the
Original Issue Date, (ii) the Underlying Shares then outstanding are registered
for resale pursuant to an effective Underlying Shares Registration Statement
pursuant to which the Holders are permitted to utilize to sell Underlying Shares
or the Underlying Shares may be resold without volume restrictions pursuant to
Rule 144(k) promulgated under the Securities Act, and (iii) the Common Stock is
listed for trading on the NASDAQ or on a Subsequent Market. Each of clauses (i)
- - (iii) of the immediately preceding sentence must be true during the entire
thirty Trading Days between the date of delivery of an Optional Redemption
Notice and Redemption Warrants and the date of payment of the Optional
Redemption Price. A Holder may, subject to Section 5(a)(i) hereof, convert (and
the Company shall honor such conversions in accordance with the terms hereof)
any or all of the shares of Preferred Stock subject to an Optional Redemption
Notice delivered for conversion on or prior to the 30th Trading Day following an
Optional Redemption Date.
(b) Failure by the Company to pay the entire Optional Redemption Price by
the 30th Trading Day following an Optional Redemption Date shall, at the option
of the Holders subject thereto, result in the invalidation AB INITIO of the
unpaid portion of such optional redemption, and, notwithstanding anything herein
to the contrary, the Company shall thereafter have no further rights to
optionally redeem any shares of Preferred Stock. In such event, the Company
shall, at the option of the Holder, either, (i) not later than three Trading
Days from receipt of Holder's request therefor, return to the Holder all of the
shares of Preferred Stock for which such Optional Redemption Price has not been
paid in full (the "UNPAID REDEMPTION SHARES") or (ii) convert of all or any
portion of the Unpaid Redemption Shares in which event the Per Share Market
Value for such shares shall be the lower of the Per Share Market Value
calculated on the date the Optional Redemption Price was originally due and the
Per Share Market Value as of the Holder's written demand for conversion. If the
Holder elects option (ii) above, the Company shall within three Trading Days of
its receipt of such election deliver to the Holder the shares of Common Stock
issuable upon conversion of the Unpaid Redemption Shares subject to such Holder
conversion demand and otherwise perform its obligations hereunder with respect
thereto.
(c)(i) Except if the provisions of Section 6(c)(ii) apply, the "OPTIONAL
REDEMPTION PRICE" applicable for such Optional Redemption Date shall equal the
sum of (i) the greater of (A) the product of the Optional Redemption Rate (as
defined in Section 8) and the aggregate of the Stated Value of the shares of
Preferred Stock to be redeemed and (B) the product of (x) the aggregate number
of Shares to be redeemed and (y) the product of (1) the average of the Per Share
Market Values for the five Trading Days preceding the Optional Redemption Date,
and (2) the Conversion Ratio calculated on the Optional Redemption Date, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such shares of Preferred Stock.
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(ii) If the Per Share Market Value for each of the twenty Trading Days
preceding an Optional Redemption Date is equal to or greater than the Threshold
Price (as defined in Section 8), then the "OPTIONAL REDEMPTION PRICE "
applicable for such Optional Redemption Date shall equal the sum of (i) the
product of (A) the product of (x) the number of shares of Preferred Stock to be
redeemed and (y) the Conversion Ratio calculated on the Optional Redemption Date
and (B) the Threshold Price, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such shares of Preferred Stock.
Section 7. REDEMPTION UPON TRIGGERING EVENTS.
(a) Upon the occurrence of a Triggering Event, each Holder shall (in
addition to all other rights it may have hereunder or under applicable law),
have the right, exercisable at the sole option of such Holder, to require the
Company to redeem all or a portion of the Preferred Stock then held by such
Holder for a redemption price, in cash, equal to the sum of (i) the Mandatory
Redemption Amount plus (ii) the product of (A) the number of Underlying Shares
issued in respect of conversions hereunder and then held by the Holder and (B)
the Per Share Market Value on the date such redemption is demanded or the date
the redemption price hereunder is paid in full, whichever is greater (such sum,
the "REDEMPTION PRICE"). The Redemption Price shall be due and payable within
five Trading Days of the date on which the notice for the payment therefor is
provided by a Holder. If the Company fails to pay the Redemption Price hereunder
in full pursuant to this Section on the date such amount is due in accordance
with this Section, the Company will pay interest thereon at a rate of 18% per
annum (or the lesser amount permitted by applicable law), accruing daily from
such date until the Redemption Price, plus all such interest thereon, is paid in
full. For purposes of this Section, a share of Preferred Stock is outstanding
until such date as the Holder shall have received Underlying Shares upon a
conversion (or attempted conversion) thereof that meets the requirements hereof.
A "Triggering Event" means any one or more of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) the failure of an Underlying Shares Registration Statement to be
declared effective by the Commission on or prior to the 180th day after the
Original Issue Date;
(ii) if, during the Effectiveness Period, the effectiveness of the
Underlying Shares Registration Statement lapses for any reason for more than an
aggregate of ten consecutive Trading Days, or the Holder shall not be permitted
to resell Registrable Securities under the Underlying Shares Registration
Statement for more than ten consecutive Trading Days;
(iii) the failure of the Common Stock to be listed for trading on the
NASDAQ or on a Subsequent Market or the suspension of the Common Stock from
trading on the NASDAQ or on a Subsequent Market, in either case, for more than
three consecutive Trading Days;
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(iv) the Company shall fail for any reason to deliver certificates
representing Underlying Shares issuable upon a conversion hereunder that comply
with the provisions hereof prior to the tenth day after the Conversion Date or
the Company shall provide notice to any Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversion of any shares of Preferred Stock in accordance with the terms hereof;
(v) the Company shall be a party to any Change of Control Transaction,
or shall redeem more than 5% of the outstanding Common Stock or other Junior
Securities (other than redemptions of Underlying Shares and the Common Stock
Redemption);
(vi) an Event (as defined in the Registration Rights Agreement) shall
not have been cured to the satisfaction of the Holders prior to the expiration
of 60 days from the Event Date (as defined in the Registration Rights Agreement)
relating thereto (other than an Event resulting from a failure of an Underlying
Shares Registration Statement to be declared effective by the Commission on or
prior to the 180th day after the Original Issue Date, which shall be covered by
Section 7(a)(i));
(vii) the Company shall fail for any reason to pay in full the amount
of cash due pursuant to a Buy-In within seven days after notice therefor is
delivered hereunder or shall fail to pay all amounts owed on account of an Event
within seven Business Days of the date due;
(viii) the Company shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such Holder upon a
conversion hereunder; or
(ix) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of the
Transaction Documents (as defined in Section 8), and such failure or breach
shall not, if subject to the possibility of a cure by the Company, have been
remedied within ten Business Days after the date on which written notice of such
failure or breach shall have been given.
Definitions. For the purposes hereof, the following terms shall have the
following meanings:
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
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directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Class A common stock, par value $.01 per
share, and stock of any other class into which such shares may hereafter have
been reclassified or changed.
"CONVERSION RATIO" means, at any time, a fraction, the numerator of which
is Stated Value (or Excess Stated Value, as the case may be) and the denominator
of which is the Conversion Price at such time.
"DIVIDEND EFFECTIVENESS DATE" means the earlier to occur of (x) the
Effectiveness Date (as defined in the Registration Rights Agreement) and (y) the
date that an Underlying Shares Registration Statement is declared effective by
the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"JUNIOR SECURITIES" means the Common Stock and all other equity securities
of the Company other than those securities that are outstanding on the Original
Issue Date and which are explicitly senior in rights or liquidation preference
to the Preferred Stock.
"MANDATORY REDEMPTION AMOUNT" for each share of Preferred Stock means the
sum of (i) the greater of (A) 120% of the Stated Value (or Excess Stated Value,
as the case may be) and (B) the product of (a) the lesser of (I) the Per Share
Market Value on the Trading Day immediately preceding (x) the date of the
Triggering Event or the Conversion Date, as the case may be, or (y) the date of
payment in full by the Company of the applicable redemption price, whichever is
greater, and (II) the Threshold Price and (b) the Conversion Ratio calculated on
the date of the Triggering Event, or the Conversion Date, as the case may be,
and (ii) all other amounts, costs, expenses and liquidated damages due in
respect of such share of Preferred Stock.
"OPTIONAL REDEMPTION RATE" means (i) for the period from the Original Issue
Date until and including the 90th day following the Original Issue Date, 105%,
(ii) for the period from the 91st day following the Original Issue Date until
and including the 180th day following the Original Issue Date, 110%, (iii) for
the period from the 181st day following the Original Issue Date until and
including the 270th day following the Original Issue Date, 115%, and (iv) on and
after the 271st day following the Original Issue Date, 120%.
"ORIGINAL ISSUE DATE " shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.
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"PER SHARE MARKET VALUE" means on any particular date (a) the closing bid
price per share of Common Stock on such date on the NASDAQ or on the Subsequent
Market on which the Common Stock is then listed or quoted, or if there is no
such price on such date, then the closing bid price on the NASDAQ or on such
Subsequent Market on the date nearest preceding such date, or (b) if the Common
Stock is not then listed or quoted on the NASDAQ or on a Subsequent Market, the
closing bid price for a shares of Common Stock in the over-the-counter market,
as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the Common Stock are not then publicly traded the fair
market value of a share of Common Stock as determined by an Appraiser selected
in good faith by the Holders of a majority of the shares of the Preferred Stock.
"PERSON" means a corporation, an association, a partnership, organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"PURCHASE AGREEMENT" means the Convertible Preferred Stock Purchase
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"REDEMPTION WARRANTS" shall mean common stock purchase warrants issuable by
the Company together with an Optional Redemption Notice to the Holder of
Preferred Stock to be redeemed to purchase a number of shares of Common Stock
equal to 5% of the quotient obtained by dividing (x) the Stated Value of the
Preferred Stock to be redeemed pursuant to an Optional Redemption Notice by (y)
the average of the Per Share Market Values for the five Trading Days starting on
and including March 1, 2000. If the Per Share Market Value for each of the
twenty (20) Trading Days preceding an Optional Redemption Date is equal to or
greater than the Threshold Price, then the Redemption Warrants issuable in
connection with an Optional Redemption Notice shall entitle the Holder to
acquire an additional 100,000 shares of Common Stock in addition to the number
of shares of Common Stock set forth in the immediately preceding sentence. Such
warrants shall be substantially in the form attached as EXHIBIT D to the
Purchase Agreement and shall entitle the holders thereof to purchase shares of
Common Stock at any time during the five year period following the Original
Issue Date at an exercise price per share equal to the Fixed Conversion Price.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Original Issue Date, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to time in
accordance with its terms.
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"THRESHOLD PRICE" means 150% of the Fixed Conversion Price.
"TRADING DAY" means (a) a day on which the Common Stock is traded on the
NASDAQ or on the Subsequent Market on which the Common Stock is then listed or
quoted, as the case may be, or (b) if the Common Stock is not listed on the
NASDAQ or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the Purchase
Agreement.
"UNDERLYING SHARES" means, collectively, the shares of Common Stock into
which the shares of Preferred Stock are convertible in accordance with the terms
hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration statement
that meets the requirements of the Registration Rights Agreement and registers
the resale of all Underlying Shares by the Holder, who shall be named as a
"selling stockholder" thereunder.
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 5% Series A
Convertible Preferred Stock indicated below, into shares of Class A common
stock, par value $.01 per share (the "COMMON STOCK"), of Global Technologies,
Ltd., a Delaware corporation (the "COMPANY"), according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the Holder for any conversion, except for such transfer
taxes, if any.
Conversion calculations:
Date to Effect Conversion
Number of shares of Preferred Stock to be Converted
Stated Value of shares of Preferred Stock to be Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Signature
Name
Address
Check box, if applicable:
[ ] The Holder intends to sell the shares of Common Stock issuable
hereunder pursuant to Rule 144 promulgated under the Securities
Act of 1933, as amended.
20
EXHIBIT D
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
GLOBAL TECHNOLOGIES, LTD.
CALLABLE WARRANT
Warrant No. [ ] Dated: February 16, 2000
Global Technologies, Ltd., a Delaware corporation (the "Company"), hereby
certifies that, for value received, [ ], or its registered assigns ("Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company
up to a total of [ ] shares of Class A common stock, $.01 par value per share
(the "Common Stock"), of the Company (each such share, a "Warrant Share" and all
such shares, the "Warrant Shares") at an exercise price per share (as adjusted
from time to time as provided in Section 9, the "Exercise Price") equal to the
greater of (i) 120% of the average of the closing bid prices of the Common Stock
for the five (5) Trading Days preceding the date hereof (as adjusted for the
Stock Dividend (as defined herein) if effective prior to March 1, 2000, pursuant
to Section 9(a)) and (ii) 120% of the average of the closing bid prices of the
Common Stock for the five (5) Trading Days starting on and including March 1,
2000 (the "Record Price"), at any time and from time to time from and after the
date hereof and through and including February 16, 2005 (the "Expiration Date"),
and subject to the following terms and conditions:
1. REGISTRATION OF WARRANT. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
<PAGE>
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) Subject to Section 2(c), the Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at the office specified in or pursuant to
Section 3(b). Upon any such registration or transfer, a new warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new warrant, a
"New Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion of
this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance of such transferee of all of the rights and obligations of
a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the Holder
to the office of the Company specified in or pursuant to Section 3(b) for one or
more New Warrants, evidencing in the aggregate the right to purchase the number
of Warrant Shares which may then be purchased hereunder. Any such New Warrant
will be dated the date of such exchange.
(c) (i) By acceptance of this Warrant, the Holder acknowledges that it is
acquiring this Warrant and the Warrant Shares issuable upon exercise hereof for
its own account and not with a view to or for distribution or resale, without
prejudice, however to the Holder's right, subject to the provisions of the
Purchase Agreement to which the original Holder and the Company are parties, of
even date herewith, pursuant to which this Warrant was issued (the "Purchase
Agreement"), at all times, to sell or otherwise dispose of all or any part of
such securities pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and in compliance
with applicable federal and state securities laws or under an exemption from
such registration.
(ii) The Holder agrees to the imprinting, so long as is required by
the Purchase Agreement, of the following legend on the Warrant and Warrant
Shares:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
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3. DURATION, EXERCISE AND REDEMPTION OF WARRANTS.
(a) This Warrant shall be exercisable by the registered Holder on any
business day before 8:00 P.M., New York City time, at any time and from time to
time on or after the date hereof to and including the Expiration Date. At 8:00
P.M., New York City time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this Warrant,
with the Form of Election to Purchase attached hereto duly completed and signed,
to the Company at its address for notice set forth in Section 13 and upon
payment of the Exercise Price multiplied by the number of Warrant Shares that
the Holder intends to purchase hereunder, in the manner provided hereunder, all
as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act, as determined by counsel to the
Company pursuant to a written opinion letter addressed and in form and substance
acceptable to the Holder and the transfer agent for the Common Stock, or (ii) if
this Warrant shall have been issued pursuant to a written agreement between the
original Holder and the Company, as required by such agreement. Any person so
designated by the Holder to receive Warrant Shares shall be deemed to have
become holder of record of such Warrant Shares as of the Date of Exercise of
this Warrant.
A "Date of Exercise" means the date on which the Company shall have
received (i) this Warrant (or any New Warrant, as applicable), with the Form of
Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety or, from time
to time, for a portion of the number of Warrant Shares. If less than all of the
Warrant Shares which may be purchased under this Warrant are exercised at any
time, the Company shall issue or cause to be issued, at its expense, a New
Warrant evidencing the right to purchase the remaining number of Warrant Shares
for which no exercise has been evidenced by this Warrant.
(d) Commencing at any time after the date of the issuance of this Warrant,
if (i) the closing bid price of the Common Stock on the Nasdaq National Market
(or such other national securities exchange on which the Common Stock is then
listed or quoted for trading) for 20 consecutive trading days is greater than or
equal to 175% of the Exercise Price as the same may be adjusted pursuant to
Section 9 hereof (a "Trigger Period") and (ii) the Warrant Shares are either
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<PAGE>
registered for resale pursuant to an effective registration statement naming the
Holder as a selling stockholder thereunder or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, as
determined by counsel to the Company pursuant to a written opinion letter
addressed and in form and substance acceptable to the Holder and the transfer
agent for the Common Stock, then the Company shall have the right, upon 30 days'
notice to the Holder given not later than five (5) Trading Days after the
conclusion of any such Trigger Period (the "Redemption Notice"), to redeem all
of the then issuable Warrant Shares at a price of $.01 per Warrant Share (the
"Redemption Price"), on the date set forth in the Redemption Notice, but in no
event earlier than 30 days following the date of the receipt by the Holder of
the Redemption Notice (the "Redemption Date"). The Holder may exercise this
Warrant at any time prior to the Redemption Date. So long as any portion of the
condition set forth in clause (ii) of this Section is satisfied during the
entire 30 day period, any portion of this Warrant not exercised by 8:00 p.m.
(New York City time) on the Redemption Date shall no longer be exercisable and
shall be returned to the Company, and the Company, upon its receipt of the
unexercised portion of this Warrant, shall issue therefor in full and complete
satisfaction of its obligations under such remaining portion of this Warrant to
the Holder an amount equal to the number of shares of Common Stock then issuable
hereunder multiplied by the Redemption Price. The Redemption Price shall be
mailed to such Holder at its address of record, and the Warrant shall be
canceled.
4. PIGGYBACK REGISTRATION RIGHTS. During the Effectiveness Period (as
defined in the Registration Rights Agreement, of even date herewith, between the
Company and the original Holder), the Company may not file any registration
statement with the Securities and Exchange Commission (other than registration
statements of the Company filed on Form S-8 or Form S-4, each as promulgated
under the Securities Act, pursuant to which the Company is registering
securities pursuant to a Company employee benefit plan or pursuant to a merger,
acquisition or similar transaction including supplements thereto, but not
additionally filed registration statements in respect of such securities) at any
time when there is not an effective registration statement covering the resale
of the Warrant Shares and naming the Holder as a selling stockholder thereunder,
unless the Company provides the Holder with not less than 20 days notice of its
intention to file such registration statement and provides the Holder the option
to include any or all of the applicable Warrant Shares therein. The piggyback
registration rights granted to the Holder pursuant to this Section shall
continue until all of the Holder's Warrant Shares have been sold in accordance
with an effective registration statement or upon the Expiration Date. The
Company will pay all registration expenses in connection therewith, except for
brokerage fees and commissions.
5. [Left intentionally blank]
6. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
4
<PAGE>
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.
7. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and indemnity, if
requested, satisfactory to it. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. RESERVATION OF WARRANT SHARES. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
9. CERTAIN ADJUSTMENTS. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9. Upon each such adjustment of the Exercise
Price pursuant to this Section, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is outstanding shall (a)
pay a stock dividend (except scheduled dividends paid on outstanding preferred
stock as of the date hereof which contain a stated dividend rate) or otherwise
make a distribution or distributions on shares of Common Stock or any other
class of capital stock payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, or (c)
combine outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price shall be multiplied by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.
Notwithstanding anything herein to the contrary: (A) if the Stock Dividend (as
defined in the Purchase Agreement) shall become effective on or prior to March
1, 2000 then the Record Price shall not be adjusted pursuant to the terms of
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<PAGE>
this Section and (B) if the Stock Dividend shall become effective subsequent to
March 1, 2000 then the Exercise Price (including the Record Price) shall be
adjusted pursuant to the terms of this Section.
(b) In case of any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is converted into other
securities, cash or property, then the Holder shall have the right thereafter to
exercise this Warrant only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property equal
to the amount of Warrant Shares such Holder would have been entitled to had such
Holder exercised this Warrant immediately prior to such reclassification or
share exchange. The terms of any such reclassification or share exchange shall
include such terms so as to continue to give to the Holder the right to receive
the securities or property set forth in this Section 9(b) upon any exercise
following any such reclassification or share exchange.
(c) If the Company, at any time while this Warrant is outstanding, shall
distribute to all holders of Common Stock (and not to holders of this Warrant)
evidences of its indebtedness or assets or rights or warrants to subscribe for
or purchase any security (excluding those referred to in Sections 9(a), (b) and
(d)), then in each such case the Exercise Price shall be determined by
multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Exercise Price determined as of
the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
the Company's Board of Directors, in its sole discretion, in good faith. In
either case the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(d) If the Company or any subsidiary thereof, as applicable with respect to
Common Stock Equivalents (as defined below), at any time while this Warrant is
outstanding, shall issue shares of Common Stock or rights, warrants, options or
other securities or debt that is convertible into or exchangeable for shares of
Common Stock ("Common Stock Equivalents"), entitling any person to acquire
shares of Common Stock at a price per share less than the Exercise Price (if the
holder of the Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights issued in connection with such issuance, be entitled
to receive shares of Common Stock at a price less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then the Exercise Price shall be multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Common Stock or such Common Stock Equivalents plus
the number of shares of Common Stock which the offering price for such shares of
6
<PAGE>
Common Stock or Common Stock Equivalents would purchase at the Exercise Price,
and the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of shares
of Common Stock so issued or issuable, provided, that for purposes hereof, all
shares of Common Stock that are issuable upon conversion, exercise or exchange
of Common Stock Equivalents shall be deemed outstanding immediately after the
issuance of such Common Stock Equivalents. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. However, upon
the expiration of any Common Stock Equivalents the issuance of which resulted in
an adjustment in the Exercise Price pursuant to this Section, if any such Common
Stock Equivalents shall expire and shall not have been exercised, the Exercise
Price shall immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which it would have
been (but reflecting any other adjustments in the Exercise Price made pursuant
to the provisions of this Section after the issuance of such Common Stock
Equivalents) had the adjustment of the Exercise Price made upon the issuance of
such Common Stock Equivalents been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such Common Stock Equivalents actually exercised.
The foregoing shall not apply to any transaction involving (i) issuances of
securities as consideration in a merger, consolidation or acquisition of assets,
or in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or as consideration for the
acquisition of a business, product or license by the Company, (ii) the issuance
of securities pursuant to an underwritten public offering, (iii) the issuance of
securities upon the exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof, or (iv) the
grant of additional options or warrants, or the issuance of additional
securities, under any duly authorized Company stock option or restricted stock
plan for the benefit of the Company's employees or directors.
(e) In case of any (1) merger or consolidation of the Company with or into
another Person, or (2) sale by the Company of more than one-half of the assets
of the Company (on a book value basis) in one or a series of related
transactions, the Holder shall have the right thereafter to exercise this
Warrant for the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following such
merger, consolidation or sale, and the Holder shall be entitled upon such event
or series of related events to receive such amount of securities, cash and
property as the Common Stock for which this Warrant could have been exercised
immediately prior to such merger, consolidation or sales would have been
entitled, The terms of any such merger, sale or consolidation shall include such
terms so as continue to give the Holder the right to receive the securities,
cash and property set forth in this Section upon any conversion or redemption
following such event. This provision shall similarly apply to successive such
events.
(f) For the purposes of this Section 9, the following clauses shall also be
applicable:
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(i) RECORD DATE. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (A) to receive a
dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) TREASURY SHARES. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered an
issue or sale of Common Stock.
(g) All calculations under this Section 9 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(h) If:
(i) the Company shall declare a dividend (or any other distribution)
on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash dividend on
or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation
or merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
or
(v) the Company shall authorize the voluntary dissolution, liquidation
or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
8
<PAGE>
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
10. PAYMENT OF EXERCISE PRICE. The Holder shall pay the Exercise Price in
one of the following manners:
(a) CASH EXERCISE. The Holder may deliver immediately available funds; or
(b) CASHLESS EXERCISE. At any time after the earlier to occur of the
Effectiveness Date (as defined in the Registration Rights Agreement) and the
date the initial registration statement filed pursuant to the Registration
Rights Agreement is declared effective by the Commission, when a registration
statement covering the resale of the Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective, the Holder may surrender
this Warrant to the Company together with a notice of cashless exercise, in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
A = the average of the closing sale prices of the Common Stock for
the five (5) trading days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. CERTAIN EXERCISE RESTRICTIONS.
(a) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules promulgated
thereunder) in excess of 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon such exercise and held by such
Holder after application of this Section. Since the Holder will not be obligated
to report to the Company the number of shares of Common Stock it may hold at the
time of an exercise hereunder, unless the exercise at issue would result in the
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issuance of shares of Common Stock in excess of 4.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular exercise hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of this Warrant is exercisable shall be the
responsibility and obligation of the Holder. If the Holder has delivered a Form
of Election to Purchase for a number of Warrant Shares that, without regard to
any other shares that the Holder or its affiliates may beneficially own, would
result in the issuance in excess of the permitted amount hereunder, the Company
shall notify the Holder of this fact and shall honor the exercise for the
maximum portion of this Warrant permitted to be exercised on such Date of
Exercise in accordance with the periods described herein and, at the option of
the Holder, either keep the portion of the Warrant tendered for exercise in
excess of the permitted amount hereunder for future exercises or return such
excess portion of the Warrant to the Holder. The provisions of this Section may
be waived by a Holder (but only as to itself and not to any other Holder) upon
not less than 61 days prior notice to the Company. Other Holders shall be
unaffected by any such waiver.
(b) A Holder may not exercise this Warrant to the extent such exercise
would result in the Holder, together with any affiliate thereof, beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules promulgated thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon such exercise
and held by such Holder after application of this Section. Since the Holder will
not be obligated to report to the Company the number of shares of Common Stock
it may hold at the time of an exercise hereunder, unless the exercise at issue
would result in the issuance of shares of Common Stock in excess of 9.999% of
the then outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the
Holder shall have the authority and obligation to determine whether the
restriction contained in this Section will limit any particular exercise
hereunder and to the extent that the Holder determines that the limitation
contained in this Section applies, the determination of which portion of this
Warrant is exercisable shall be the responsibility and obligation of the Holder.
If the Holder has delivered a Form of Election to Purchase for a number of
Warrant Shares that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the exercise for the maximum portion of this Warrant permitted to be
exercised on such Date of Exercise in accordance with the periods described
herein and, at the option of the Holder, either keep the portion of the Warrant
tendered for exercise in excess of the permitted amount hereunder for future
exercises or return such excess portion of the Warrant to the Holder. The
provisions of this Section may be waived by a Holder (but only as to itself and
not to any other Holder) upon not less than 61 days prior notice to the Company.
Other Holders shall be unaffected by any such waiver.
12. FRACTIONAL SHARES. The Company shall not be required to issue or cause
to be issued fractional Warrant Shares on the exercise of this Warrant. The
number of full Warrant Shares which shall be issuable upon the exercise of this
Warrant shall be computed on the basis of the aggregate number of Warrant Shares
10
<PAGE>
purchasable on exercise of this Warrant so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section, be issuable on
the exercise of this Warrant, the Company shall pay an amount in cash equal to
the Exercise Price multiplied by such fraction.
13. NOTICES. Any and all notices or other communications or deliveries to
be provided by the Holder, including, without limitation, any Form of Election
to Purchase, shall be in writing and delivered personally, by facsimile or sent
by a nationally recognized overnight courier service, addressed to the attention
of the Chief Financial Officer of the Company addressed to 1811 Chestnut Street,
Suite 120, Philadelphia, Pennsylvania 19103 or to facsimile number (215)
972-8183, or to such other address or facsimile number as shall be specified in
writing by the Company for such purpose. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the Holder at the facsimile
telephone number or address of the Holder appearing on the books of the Company,
or if no such facsimile telephone number or address appears, at the principal
place of business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile and the
party giving such notice has a confirmation of transmission setting forth the
date and time of transmission, which was produced by the facsimile machine at
the facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time), (ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile and the party giving such notice has a
confirmation of transmission setting forth the date and time of transmission,
which was produced by the facsimile machine at the facsimile telephone number
specified in this Section later than 8:00 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) upon
receipt, if sent by a nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
14. WARRANT AGENT. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. This Warrant may be
amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or cause under this Warrant. This
Warrant shall inure to the sole and exclusive benefit of the Company and the
Holder.
(c) The corporate laws of the State of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
GLOBAL TECHNOLOGIES, LTD.
By: /s/ Patrick J. Fodale
------------------------------------
Name: Patrick J. Fodale
Title: Vice President
12
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Global Technologies, Ltd.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Class A common stock, $.01 par value per share, of Global
Technologies, Ltd. (the "Common Stock") and , if such Holder is not utilizing
the cashless exercise provisions set forth in this Warrant, encloses herewith
$________ in cash, certified or official bank check or checks, which sum
represents the aggregate Exercise Price (as defined in the Warrant) for the
number of shares of Common Stock to which this Form of Election to Purchase
relates, together with any applicable taxes payable by the undersigned pursuant
to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR
TAX IDENTIFICATION NUMBER
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
(Please print name and address)
Dated: ___________________ , ___ Name of Holder:
(Print)
(By:)
(Name:)
(Title:)
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
Check box, if applicable:
[ ] The Holder intends to sell the shares
of Common Stock issuable hereunder
pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended.
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<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon 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 Global Technologies,
Ltd. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Global Technologies, Ltd. with full power
of substitution in the premises.
Dated:
- ---------------, ----
---------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
---------------------------------------
Address of Transferee
---------------------------------------
---------------------------------------
In the presence of:
- --------------------------
================================================================================
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Among
GLOBAL TECHNOLOGIES, LTD.
and
THE INVESTORS SIGNATORY HERETO
Dated as of February 16, 2000
================================================================================
<PAGE>
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as
of February 16, 2000, among Global Technologies, Ltd., a Delaware corporation
(the "COMPANY"), and the investors signatory hereto (each such investor is a
"PURCHASER" and all such investors are, collectively, the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company, shares of the
Company's Series C Convertible Preferred Stock, par value $.01 per share (the
"PREFERRED STOCK"), which are convertible into shares of the Company's Class A
common stock, par value $.01 per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and the Purchasers agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1. THE CLOSING.
(a) THE CLOSING. (i) Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchasers and the Purchasers
shall, severally and not jointly, purchase an aggregate of 1,000 shares of
Preferred Stock (the "SHARES") for an aggregate purchase price of $10,000,000;
each Purchaser agreeing to purchase the amount of Shares for the purchase price
so indicated on the signature page attached hereto. The closing of the purchase
and sale of the Shares (the "CLOSING") shall take place at the offices of
Robinson Silverman Pearce Aronsohn & Berman LLP ("ROBINSON SILVERMAN"), 1290
Avenue of the Americas, New York, New York 10104, immediately following the
execution hereof or such later date as the parties shall mutually agree but in
any event, no later than February 29, 2000. The date of the Closing is
hereinafter referred to as the "CLOSING DATE."
(ii) At the Closing, the parties shall deliver or shall cause to be
delivered the following: (A) the Company shall deliver to each Purchaser (1)
stock certificates, registered in the name of such Purchaser, representing a
number of Shares equal to the quotient obtained by dividing the purchase price
indicated below such Purchaser's name on the signature page to this Agreement by
10,000, (2) a Common Stock purchase warrant, in the form of EXHIBIT D
(collectively, the "WARRANTS"), registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire a number of
shares of Common Stock equal to 15% of such Purchaser's purchase price for the
Shares being acquired by it, divided by the Exercise Price (as defined in the
Warrants), (3) the legal opinion of Mesirov Gelman Jaffe Cramer & Jamieson LLP,
outside counsel to the Company in the form of EXHIBIT C, and (4) an executed
Registration Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT") and
the Transfer Agent Instructions, in the form of EXHIBIT E, delivered to and
acknowledged by the Company's transfer agent (the "TRANSFER AGENT
INSTRUCTIONS"); and (B) each Purchaser shall deliver (1) the purchase price
indicated below such Purchaser's name on the signature page to this Agreement in
<PAGE>
United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose, and (2) an
executed Registration Rights Agreement.
1.2. TERMS OF PREFERRED STOCK. The Preferred Stock shall have the rights
preferences and privileges set forth in EXHIBIT A, and shall be incorporated
into a Certificate of Designation (the "CERTIFICATE OF Designation") to be filed
prior to the Closing by the Company with the Secretary of State of Delaware, in
form and substance mutually agreed to by the parties.
1.3. CERTAIN DEFINED TERMS. For purposes of this Agreement, "ORIGINAL ISSUE
DATE" and "TRADING DAY" shall have the meanings set forth in EXHIBIT A;
"BUSINESS DAY" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York or the Commonwealth of Pennsylvania are authorized or required
by law or other governmental action to close; "PERSON" means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company has no subsidiaries other than as set forth in SCHEDULE 2.1(A)
(collectively the "SUBSIDIARIES"). Each of the Subsidiaries is an entity, duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent Instructions or the Warrants (collectively, the "TRANSACTION DOCUMENTS"),
(y) have or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
2
<PAGE>
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents.
(c) CAPITALIZATION. The number of authorized, issued and outstanding
capital stock of the Company is set forth in SCHEDULE 2.1(C). Except as
disclosed in SCHEDULE 2.1(C), the Company owns all of the capital stock of each
Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of the Common Stock entitled to preemptive or similar
rights arising out of any agreement or understanding with the Company by virtue
of any of the Transaction Documents. Except as a result of the purchase and sale
of the Shares and the Warrants and except as disclosed in SCHEDULE 2.1(C), there
are no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
(d) ISSUANCE OF THE SHARES AND THE WARRANTS. The Shares and the Warrants
are duly authorized and, when issued and paid for in accordance with the terms
hereof, will be duly and validly issued, fully paid and nonassessable, free and
clear of all liens, encumbrances and rights of first refusal of any kind
(collectively, "LIENS"). The Company has on the date hereof and will, at all
times while the Shares and the Warrants are outstanding, maintain an adequate
reserve of duly authorized shares of Common Stock, reserved for issuance to the
holders of the Shares and the Warrants, to enable it to perform its conversion,
exercise and other obligations under this Agreement, the Certificate of
Designation and the Warrants. Such number of reserved and available shares of
Common Stock is not less than the sum of (i) 200% of the number of shares of
Common Stock which would be issuable upon conversion in full of the Shares,
assuming that the Shares are outstanding for three years and all accrued
dividends are added to the Stated Value (as defined in the Certificate of
Designation), and that the Conversion Price (as defined in the Certificate of
Designation), applicable to such conversion equals $15.00, and (ii) the number
of shares of Common Stock issuable upon exercise of the Warrants (such number of
shares of Common Stock as contemplated in clauses (i)-(ii), the "Initial
Minimum"). All such authorized shares of Common Stock shall be duly reserved for
issuance to the holders of the Shares and the Warrants. The shares of Common
Stock issuable upon conversion of the Shares and upon exercise of the Warrants
are collectively referred to herein as the "UNDERLYING SHARES." The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as, the
"SECURITIES." When issued in accordance with the Certificate of Designation and
the Warrants, the Underlying Shares will be duly authorized, validly issued,
fully paid and nonassessable, free and clear of all Liens against the Company.
3
<PAGE>
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), 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 (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any Subsidiary
is required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing of the Certificate of Designation with the
Secretary of State of Delaware, (ii) the filings required pursuant to Section
3.9, (iii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Underlying
Shares by the Purchasers (the "UNDERLYING SHARES REGISTRATION STATEMENT"), (iv)
the application(s) to the Nasdaq National Market ("NASDAQ") for the listing of
the Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed) in the
time and manner required thereby, (v) applicable Blue Sky filings and (vi) in
all other cases where the failure to obtain such consent, waiver, authorization
or order, or to give such notice or make such filing or registration could not
have or result in, individually or in the aggregate, a Material Adverse Effect
(collectively, the "REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) except as set forth in Schedule
2.1(g), could, individually or in the aggregate, have or result in a Material
Adverse Effect.
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(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred which has not
been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the representations and
warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor any Person acting on its
behalf has taken or is, to the knowledge of the Company, contemplating taking
any action which could subject the offering, issuance or sale of the Securities
to the Purchasers to the registration requirements of the Securities Act
including soliciting any offer to buy or sell the Securities by means of any
form of general solicitation or advertising.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed all reports
required to be filed by it under the Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC DOCUMENTS" and, together with the
Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
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. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required. The financial statements of the Company included
in the SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since October 28, 1999, except as specifically disclosed in the SEC Documents,
(a) there has been no event, occurrence or development that has resulted or that
5
<PAGE>
could reasonably be expected to result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or otherwise required to be disclosed in
filings made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) except for the three-for-two
stock split effected by way of a dividend of one share for each two shares
outstanding, to become effective as of February 29, 2000 (the "Stock Dividend"),
the Company has not declared or made any payment or distribution of cash or
other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) INVESTMENT COMPANY. The Company is not, and is not an Affiliate (as
defined in Rule 405 under the Securities Act) of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for certain fees payable to Reedland Capital
Partners, an institutional division of Financial West Group, member NASD and
SIPC, by the Company, no fees or commissions will be payable by the Company to
any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person acting on
the Company's behalf has solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(n) FORM S-3 ELIGIBILITY. The Company is eligible to register securities
for resale with the Commission under Form S-3 promulgated under the Securities
Act.
(o) SENIORITY. No class of equity securities of the Company is senior to
the Shares in right of payment, whether upon liquidation or dissolution, or
otherwise.
(p) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except as set forth in
the SEC Documents, the Company has not, in the two years preceding the date
hereof, received notice (written or oral) from the NASDAQ or any other stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange or
market. The Company is, and has no reason to believe that it will not in the
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<PAGE>
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(q) PATENTS AND TRADEMARKS. The Company and its Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their respective business
as described in the SEC Reports and which the failure to so have would have a
Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS").
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or its Subsidiaries violates or
infringes upon the rights of any Person, to the best knowledge of the Company.
All such Intellectual Property Rights are enforceable to the best knowledge of
the Company and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
(r) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set forth on
SCHEDULE 6(B) to the Registration Rights Agreement, the Company has not granted
or agreed to grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the Commission or
any other governmental authority which have not been satisfied. No Person, has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the Transaction
Documents.
(s) REGULATORY PERMITS. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(t) TITLE. The Company and the Subsidiaries have good and marketable title
in fee simple to all real property owned by them which is material to the
business of the Company and its Subsidiaries and good and marketable title in
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all Liens, except
for Liens 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 and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in compliance
and do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(u) ABSENCE OF CERTAIN PROCEEDINGS. Except as described in the SEC Reports,
(i) there is no Action pending or, to the knowledge of the Company, threatened
against the Company, in any such case wherein an unfavorable decision, ruling or
finding could have or result in a Material Adverse Effect; (ii) neither the
Company nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving (A) a claim of violation of or liability
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under federal or state securities laws or (B) a claim of breach of fiduciary
duty; (iii) the Company does not have pending before the Commission any request
for confidential treatment of information and the Company has no knowledge of
any expected such request that would be made prior to the Effectiveness Date (as
defined in the Registration Rights Agreement); and (iv) there has not been, and
to the best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.
(v) LABOR RELATIONS. No material labor problem exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company.
(w) DISCLOSURE. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Purchasers or its agents or counsel
with any information that constitutes or might constitute material non-public
information. The Company understands and confirms that the Purchasers shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. All disclosure provided to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Schedules
to this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
2.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization (which is set forth below such Purchaser's name on the signature
page to this Agreement) with the requisite corporate or partnership power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
purchase by such Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser
at the address for notice set forth below such Purchaser's name on the signature
page to this Agreement, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of
such Purchaser, enforceable against it in accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, the Registration Rights Agreement and the Warrant, at all times to
sell or otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and state
securities laws. While it is the intention of such Purchaser to hold the
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Securities, nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any amount of time.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is, and at each exercise date
under its respective Warrants, it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act. Such Purchaser has not been formed
solely for the purpose of acquiring the Securities.
(d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment.
(e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such Purchaser is
able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it has reviewed
the Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the Securities
as a result of or subsequent to any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(h) RELIANCE. Such Purchaser understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
(i) TRADING IN COMMON STOCK. Such Purchaser does not maintain a short
position in the Common Stock as of the Closing Date.
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The Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1. TRANSFER RESTRICTIONS. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Company, without requiring a legal opinion as
described in the immediately preceding sentence, hereby consents to and agrees
to register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by a Purchaser to an
Affiliate of such Purchaser or to one or more funds or managed accounts under
common management with such Purchaser, and any transfer among any such
Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement. Each Purchaser shall indicate its intention
to sell Underlying Shares under Rule 144 promulgated under the Securities Act by
checking the appropriate box in the conversion notice or exercise notice (as
applicable).
(b) The Purchasers agree to the imprinting, so long as is required by this
Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
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Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Shares and exercise of the Warrants or other
issuances of Underlying Shares as contemplated hereby, by the Certificate of
Designation or the Warrants occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Underlying Shares Registration Statement at such time,
if, in the opinion of counsel to the Company, such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the day that the
Underlying Shares Registration Statement is declared effective by the Commission
(the "EFFECTIVE DATE"). The Company agrees that, in the event any Underlying
Shares are issued with a legend in accordance with this Section 3.1(b), it will,
within three (3) Trading Days after request therefor by a Purchaser, provide
such Purchaser with a certificate or certificates representing such Underlying
Shares, free from such legend at such time as such legend would not have been
required under this Section 3.1(b) had such issuance occurred on the date of
such request. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of transfer set forth in this Section.
3.2. ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the issuance
of the Underlying Shares upon (i) conversion of the Shares in accordance with
the terms of the Certificate of Designation, and (ii) exercise of the Warrants
in accordance with their terms, will result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Underlying Shares upon (x) conversion of the Shares in accordance with the terms
of the Certificate of Designation, and (y) exercise of the Warrants pursuant to
the terms thereof, is unconditional and absolute, subject to the limitations set
forth herein, in the Certificate of Designation or pursuant to the Warrants,
regardless of the effect of any such dilution.
3.3. FURNISHING OF INFORMATION. As long as the Purchasers own Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
causing its attorneys to render and deliver any legal opinion required in order
to permit a Purchaser to sell Underlying Shares under Rule 144 upon notice of an
intention to sell or other form of notice having a similar effect. Upon the
request of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
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3.4. INTEGRATION. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of the NASDAQ.
3.5. INCREASE IN AUTHORIZED SHARES. If on any date the Company would be, if
a notice of conversion or exercise (as the case may be) were to be delivered on
such date, precluded from (a) issuing (a) 200% of the number of Underlying
Shares as would then be issuable upon a conversion in full of the Shares, and
(b) the number of Underlying Shares issuable upon exercise in full of the
Warrants and Redemption Warrants, if any, (as defined in the Certificate of
Designation) (the "CURRENT REQUIRED MINIMUM"), in either case, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall use its
best efforts to promptly (but, in any case, within 60 Business Days from such
date) prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's certificate or articles of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as reasonably requested
by the Purchasers in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its issuance,
conversion exercise and reservation of shares obligations as set forth in this
Agreement, the Certificate of Designation and the Warrants and Redemption
Warrants, if any, (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the Current
Required Minimum, is deemed for purposes hereof to be a reasonable number). In
connection therewith, the Board of Directors shall (a) adopt proper resolutions
authorizing such increase, (b) recommend to and otherwise use its best efforts
to promptly and duly obtain stockholder approval to carry out such resolutions
(and hold a special meeting of the stockholders no later than the earlier to
occur of the 60th day after delivery of the proxy materials relating to such
meeting and the 90th day after request by a holder of Securities to issue the
number of Underlying Shares in accordance with the terms hereof) and (c) within
five Business Days of obtaining such stockholder authorization, file an
appropriate amendment to the Company's certificate or articles of incorporation
to evidence such increase.
3.6. RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company shall
(i) in the time and manner required by NASDAQ and such other exchange, market or
quotation system on which the Common Stock is traded, prepare and file with the
NASDAQ (and such other national securities exchange or market or trading or
quotation facility on which the Common Stock is then listed) an additional
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing in the NASDAQ (as well as on
any such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares issuable upon conversion in full of the then
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outstanding Shares and upon exercise of the then unexercised portion of the
Warrants and Redemption Warrants, if any, exceeds 85% of the number of
Underlying Shares previously listed on account thereof with NASDAQ (and any such
other required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock for
issuance upon the conversion of the Shares in full and upon exercise in full of
the Warrants and Redemption Warrants, if any, in accordance with this Agreement,
the Certificate of Designation and the Warrants, respectively, in such amount as
may be required to fulfill its obligations in full under the Transaction
Documents, which reserve shall equal no less than the then Current Required
Minimum.
3.7. CONVERSION AND EXERCISE PROCEDURES. The Transfer Agent Instructions,
Conversion Notice (as defined in the Certificate of Designation) and Notice of
Exercise under the Warrants set forth the totality of the procedures with
respect to the conversion of the Shares and exercise of the Warrants, including
the form of legal opinion, if necessary, that shall be rendered to the Company's
transfer agent and such other information and instructions as may be reasonably
necessary to enable the Purchasers to convert their Shares and exercise their
Warrants as contemplated in the Certificate of Designation and the Warrants (as
applicable).
3.8. FINANCING LIMITATIONS; SUBSEQUENT REGISTRATIONS. (a) Except for (i)
the granting of options or warrants to employees, officers and directors, and
the issuance of shares upon exercise of options granted, under any stock option
plan heretofore or hereinafter duly adopted by the Company, (ii) shares of
Common Stock issuable upon exercise of any currently outstanding warrants and
upon conversion of any currently outstanding convertible securities of the
Company, in each case disclosed in SCHEDULE 2.1(C), (iii) shares of Common Stock
issuable upon conversion of Shares and upon exercise of the Warrants in
accordance with the Certificate of Designation or the Warrants, (iv) issuances
of securities as consideration in a merger, consolidation or acquisition of
assets, or in connection with any strategic partnership or joint venture (the
primary purpose of which is not to raise equity capital), or as consideration
for the acquisition of a business, product or license by the Company, and (v)
the issuance of securities pursuant to an underwritten public offering, the
Company shall not, directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition) any of the Company's, but not any of
its Affiliates', equity or equity-equivalent securities including the issuance
of any debt or other instrument at any time over the life thereof convertible
into or exchangeable for Common Stock, or any other transaction intended to be
exempt or not subject to registration under the Securities Act until the earlier
to occur of (i) one year following the Closing Date or (ii) following the
Effective Date, the date after which the Per Share Market Value (as defined in
the Certificate of Designation) exceeds the Threshold Price (as defined in the
Certificate of Designation) for twenty consecutive Trading Days.
(b) Except for (x) Underlying Shares, (y) other "Registrable Securities"
(as such term is defined in the Registration Rights Agreement) to be registered,
and securities of the Company permitted pursuant to Section 6(c) of the
Registration's Rights Agreement to be registered, in the Underlying Shares
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Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i) - (iv) of
Section 3.8(a), the Company shall not, for a period of not less than 90 Trading
Days after the Effective Date, without the prior written consent of the
Purchasers, register any securities of the Company. Any days after the Effective
Date that a Purchaser is unable to sell Underlying Shares under the Underlying
Shares Registration Statement shall be added to such 90 Trading Day period.
3.9. CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall: (i)
on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby within ten
(10) Business Days after the Closing Date, and (iii) timely file with the
Commission a Form D promulgated under the Securities Act as required under
Regulation D promulgated under the Securities Act and provide a copy thereof to
the Purchasers promptly after the filing thereof. The Company shall, no less
than two (2) Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers. Unless
required by law, no such filing or disclosure may be made that mentions the
Purchasers by name without the prior consent of the Purchasers. The Company and
the Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement, filings or
other communications without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law, in which such
case the disclosing party shall provide the other party with prior notice of
such public statement, filing or other communication.
3.10. USE OF PROCEEDS. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes (which shall include
advances by the Company to the Subsidiaries) and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation. Notwithstanding the foregoing, on January 1, 2000, the Company
exercised a call option to repurchase 387,610 shares of Common Stock owned by
certain shareholders pursuant to an agreement with such shareholders. This
repurchase is scheduled to close on February 28, 2000. Up to $1,800,000 of the
net proceeds from the sale of the Securities will be used to satisfy the
Company's obligations pursuant to such repurchase.
3.11. REIMBURSEMENT. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by the Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which a Purchaser is a named party, the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
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for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearings,
trials, and other proceedings relating to the subject matter of this Agreement.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
3.12. CERTAIN TRADING RESTRICTIONS. Each Purchaser agrees not to enter into
any Short Sales (as defined herein) during the following periods: (i) at any
time prior to the Effective Date and (ii) 30 calendar days prior to a Reset Date
(as defined in the Certificate of Designation). For purposes of this Section
3.12, a "Short Sale" by a Purchaser shall mean a sale of Common Stock by such
Purchaser that is marked as a short sale and that is made at a time when there
is no equivalent offsetting long position in Common Stock held by the Purchaser.
For purposes of determining whether there is an equivalent offsetting long
position in Common Stock held by a Purchaser, Underlying Shares that are
issuable on conversion of the shares of Preferred Stock or exercise of the
Warrants (as the case may be) for which a conversion or exercise notice (as the
case may be) has been delivered by a Purchaser on or prior to a Trading Day
shall be deemed to be held long by such Purchaser on such Trading Day.
ARTICLE IV
MISCELLANEOUS
4.1. FEES AND EXPENSES . At the Closing, the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Robinson
Silverman $40,000 for the preparation and negotiation of the Transaction
Documents. The amount contemplated by the immediately preceding sentence shall
be retained by the Purchasers and shall not be delivered to the Company at the
Closing. Other than the amount contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
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4.2. ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together with
the Exhibits and Schedules thereto and the Transfer Agent Instructions contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
4.3. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile and the party giving
such notice has a confirmation of transmission setting forth the date and time
of transmission, which was produced by the facsimile machine at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile and the party giving
such notice has a confirmation of transmission setting forth the date and time
of transmission, which was produced by the facsimile machine at the facsimile
telephone number specified in this Agreement later than 8:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Global Technologies, Ltd.
1811 Chestnut Street, Suite 120
Philadelphia, PA 19103
Facsimile No.: (215) 972-8183
Attn: Chief Financial Officer/General Counsel
With copies to: Mesirov Gelman Jaffe Cramer & Jamieson LLP
1735 Market Street
Philadelphia, PA 19103
Facsimile No.: (215) 994-1121
Attn: Richard P. Jaffe
If to a Purchaser: To the address set forth under such Purchaser's
name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4. AMENDMENTS; WAIVERS. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
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either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
4.5. HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement in accordance
with the terms thereof.
4.7. NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8. GOVERNING LAW. The corporate laws of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof.
4.9. SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Shares and the Warrants.
4.10. EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11. SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12. REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
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incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
4.13. INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
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SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Preferred Stock Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
GLOBAL TECHNOLOGIES, LTD.
By: /s/ Patrick J. Fodale
-------------------------------------
Name: Patrick J. Fodale
Title: Vice President
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ADVANTAGE FUND II LTD.
By: /s/
----------------------------------------
Name:
Title:
Purchase Price for Shares to be acquired at
Closing:$6,000,000
Address for Notice:
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Facsimile: 011-599-9732-2008
Attention: W.R. Weber
Jurisdiction of organization:
British Virgin Islands
With copies to:
Genesee International Inc.
10500 NE 8th Street
Suite 1920
Bellevue, WA 98004
Facsimile: (425) 462-4645
Attention: Christopher Purrier
Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and
(212) 541-1432
Attn: Eric L. Cohen, Esq.
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SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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KOCH INVESTMENT GROUP LTD.
By: /s/
----------------------------------------
Name:
Title:
Purchase Price for Shares to be acquired at
Closing: $4,000,000
Address for Notice:
4111 East 37th Street North
Wichita, Kansas 67270
Facsimile: (316) 828-7947
Attention: Josh Taylor
Jurisdiction of organization: Delaware
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