SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) :
August 19, 1996
SHARED TECHNOLOGIES CELLULAR, INC.
DELAWARE 1-13732 06-386411
(State or other (Commission (I.R.S.
jurisdiction of File Number) Employer
incorporation) Identification
No.)
100 Great Meadow Road, Suite 102
Wethersfield, CT 06109
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code
(860)-258-2500
Total number of sequentially numbered paged in this
filing, including exhibits hereto: 68
Item 5: Other Events
On August 19, 1996 Shared Technologies Cellular,
Inc. ("STC" or the "Company") completed a $5 million
private placement of equity with International Capital
Partners, Inc. ("ICP"), a Stamford, Conn. based investment
firm and Shared Technologies Fairchild Inc. ("STFI"), an
affiliate of the Company. Proceeds from the offering will be
used primarily for working capital.
The Company received gross proceeds from the
offering of $5 million, including the cancellation of
$1,200,000 of preexisting debt to STFI. A commission of
$125,000 was paid to ICP. Under the terms of the offering,
STC issued 500,000 shares of its newly issued Series B
Convertible Preferred Stock, $.01 par value per share (the
"Series B Stock"). Each share of Series B Stock is convertible
into the Company's Common Stock, $.01 par value,
("Common Stock") at an initial conversion rate of $3 to $4
per share, subject to certain adjustments. For each preferred
share converted, the holder will receive a warrant to purchase
such number of shares of Common Stock as each share of
preferred B Stock is then convertible at an exercise price of
$3.00 per share. The Series B Stock has immediate voting
rights similar to the Common Stock as if the holder held four
(4) shares of Common Stock for each share of such Series B
Stock.
Separately, the Company has engaged the services of ICP to
provide certain financial advisory services to the Company for
a period of one year. In consideration for such services, the
Company has issued a five-year Common Stock Warrant to
ICP for the purchase of 240,000 shares of the Company's
Common Stock at an exercise price of $3.00 per share and on
terms substantially the same as those provided for in the
Common Stock Warrants issued to the purchasers of the
Series B Stock.
Ajit G. Hutheesing, a director of the Company, is Chairman
and Chief Executive Officer of ICP.
Exhibit Description Page No.
No.
4.1 Certificate of Designations, 5
Preferences and Rights of Series
B Convertible Preferred Stock of
Shared Technologies Cellular, Inc.
dated August 19, 1996.
4.2 Series B Convertible Preferred Stock 17
Purchase Agreement between International
Capital Partners, Inc. and the Company
dated August 19, 1996, (agreement
between STFI and the Company is
substantially the same), including form of
Common Stock Warrant.
4.3 Equity Holders Agreement by and among 63
International Capital Partners, Inc., Zesiger
Capital Group, LLC and Shared
Technologies Fairchild Inc. dated August
19, 1996
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.
Shared Technologies Cellular, Inc.
By: /s/ Vincent DiVincenzo
Vincent DiVincenzo
Chief Financial Officer
Date: September 5, 1996
EXHIBIT B:
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND
RIGHTS OF SERIES B CONVERTIBLE PREFERRED
STOCK
OF
SHARED TECHNOLOGIES CELLULAR, INC.
Shared Technologies Cellular, Inc., a corporation organized
and existing under the General corporation Law of the State
of Delaware.
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation (as amended) of
said corporation, and pursuant to the provisions of Section
151 of Title 8 of the Delaware Code of 1953, said Board of
Directors, adopted resolutions providing for the creation of a
series of the Corporation's Preferred Stock with powers,
preferences, rights, qualifications, limitations and restrictions,
which resolutions are as follows:
RESOLVED, that, pursuant to the provisions of 151(g) of
the General Corporation Law of Delaware, and in exercise of
the powers vested in the Board of Directors by paragraph
fourth of the Corporation's Certificate of Incorporation, there
be, and there is hereby, created and reserved a series of the
Corporation's Preferred Stock with a par value of $.01, to be
known and designated as "Series B Convertible Preferred
Stock" (hereinafter, "Series B Preferred"), such series of stock
consisting of One Million Two Hundred Fifty Thousand
(1,250,000) shares, the powers, preferences and relative,
participating, optional or other rights, and the qualifications,
limitations and restrictions thereof, are as follows:
1. Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, the holders of each share of Series
B Preferred shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of any other class or
series of the Corporation's capital stock by reason of their
ownership thereof, an amount per share equal to the sum of
(a) the price at which such share was originally issued by the
Corporation (the "Original Issue Price"), plus (b) an amount
equal to a rate of return on such holder's investment for the
period commencing on the Original Issue Date therefor and
ending on the date full payment shall be tendered to the
holders of the Series B Preferred with respect to such
liquidation, dissolution, or winding up, equal to the product
of (1) the Original Issue Price therefor and (2) Twelve
Percent (12%) per annum. If the assets or surplus funds to be
distributed to the holders of the Series B Preferred are
insufficient to permit the payment to such holders of their full
preferential amount, the assets and surplus funds legally
available for distribution shall be distributed ratably among
the holders of
the Series B Preferred in proportion to the full preferential
amount each such holder is otherwise entitled to receive.
All of the preferential amounts to be paid to the holders of the
Series B Preferred pursuant to this Section 1 shall be paid or
set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any assets of
the Corporation to, the holders of any other class or series of
the Corporation's capital stock in connection with such
liquidation, dissolution or winding up.
2. Conversion. The holders of the Series B Preferred
shall have conversion rights as follows (the "Conversion
Rights"):
a. Right to Convert. Each share of Series B Preferred
shall be convertible at the option of the holder thereof at any
time from the date of first issuance of such shares of Series B
Preferred (the "Original Issue Date") and without the
payment of any additional consideration therefor into that
number of fully paid and non-assessable shares of Common
Stock as is determined by dividing Ten Dollars and No/100
($10.00) by the Conversion Price (determined as hereinafter
provided) in effect at the time of conversion. The Conversion
Price at which shares of Common Stock shall be deliverable
upon conversion (the "Conversion Price") shall be the lesser
of: (i) Four and No/l00 Dollars ($4.00) (this amount, as from
time to time adjusted in the manner hereinafter provided,
being referred to as the "Maximum Conversion Price"), or (ii)
One Hundred Per Cent (100%) (this percentage, as from time
to time adjusted in the manner hereinafter provided, being
referred to as the "Adjusting Percentage") of the average
closing bid price of the Common Stock quoted on the Nasdaq
Stock Market or any exchange on which the Common Stock
is listed (or the closing bid price of the Common Stock quoted
in the Over-the-Counter Market Summary if not on the
Nasdaq system or an exchange) for the forty (40) consecutive
trading days preceding the date of conversion (the "Closing
Price"). In no event shall the Conversion Price be less than
Three and No/100 Dollars ($3.00) (this amount, as from time
to time adjusted in the manner hereinafter provided, being
referred to as the "Minimum Conversion Price"). The
Maximum and Minimum Conversion Prices and the
Adjusting Percentage shall be subject to adjustment (in order
to adjust the number of shares of Common Stock into which
the Series B Preferred is convertible) as hereinafter provided.
b. Mechanics of Conversion. In the event that a holder of
shares of Series B Preferred shall elect to convert the same
into shares of Common Stock, such holder shall give written
notice of such election (a "Conversion Notice") to the
Corporation at the office of the Corporation. Such Conversion
Notice shall state therein the holder's name or the names of
the holder's nominees in which he wishes the certificate or
certificates for shares of Common Stock to be issued, together
with the applicable federal taxpayer identification number.
Such conversion shall be deemed to have been made on the
date that the holder has given the Corporation a Conversion
Notice, and the person or persons entitled to receive the
shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock on such date. A holder who has
given a Conversion Notice shall promptly thereafter surrender
the certificate or certificates evidencing the shares of Series B
Preferred that have been converted, duly endorsed, at the
office of the Corporation or of any transfer agent for the
Series B Preferred, but the failure to promptly surrender such
certificate or certificates shall in no way effect the right or
time of conversion. The Corporation shall, as soon as
practicable after receipt of the certificate or certificates
evidencing the shares of Series B Preferred that have been
converted, issue and deliver to the holder of Series B
Preferred who has given such Conversion Notice, or to his
nominee or nominees, a certificate or certificates for the
number of shares of Common Stock to which he shall be
entitled
c. Adjustments to Conversion Price for Diluting Issues.
(1) Special Definitions. For purposes of this Section
2.c., the following definitions shall apply:
(a) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities.
(I)) "Original Issue Date" shall mean the date on which the
first share of Series B Preferred was issued.
(c) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Series B Preferred) or other
securities directly or indirectly convertible into or
exchangeable for Common Stock.
(d) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or deemed to be issued)
by the Corporation after the Original Issue Date.
(e) "Dilutive Issue" shall mean the issuance by the
Corporation of Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be
issued) without consideration or for a consideration per share
less than the Conversion Price in effect on the date of and
immediately prior to such issue and for which no adjustment
is made pursuant to Section 2.c.(5).
(2) Issue of Options and Convertible Securities Deemed
Issue of Additional Shares of Common Stock. In the event the
Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such
Options or Convertible Securities and the consideration per
share to be paid upon exercise or conversion of such Options
or Convertible Securities is less than the Conversion Price in
effect on the date of, and immediately prior to the issue of
such Options or Convertible Securities, then the maximum
number of shares of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of
such issue or, in case such a record date shall have been fixed,
as of the close of business on such record date, provided that
in any such case in which Additional Shares of Common
Stock are deemed to be issued no further adjustment in the
Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such
Convertible Securities.
(3) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock in a Dilutive Issue. In
the event of a Dilutive Issue, the following adjustments shall
be made:
If the percentage determined by dividing the consideration
per share received by the Corporation in the Dilutive Issue by
the then Closing Price (the "Test Percentage") is less than the
then effective Adjusting Percentage, the Adjusting Percentage
shall be reduced to the Test Percentage and such percentage
shall be the basis for all future adjustments. Upon such
adjustment the Maximum and Minimum Conversion Prices
shall be reduced by the dollar amount equal to the difference
between the Conversion Price on the date of the Dilutive Issue
and the consideration received by the Corporation in such
Dilutive Issue.
The foregoing notwithstanding, no adjustment shall be made
under this Section 2.c.(3):
(a) upon the conversion or exchange of shares of Series
B Preferred into any other instrument or shares of capital
stock prior to January 1, 1998;
(1,) upon the exercise of Warrants held by holders of
Series B Preferred;
(c) upon the issuance of up to ten per cent (10%) of the
then issued and outstanding shares of Common Stock of the
Corporation pursuant to Options granted to officers, directors
or employees of, or consultants to, the Corporation under any
stock option, incentive, bonus or compensation program;
(d) for which adjustment is made in the Conversion
Price pursuant to Section 2.c.(5); or
(e) if the amount of such
reduction would be an amount less than $.05, but any such
amount shall be carried forward and reduction with respect
thereto made at the time of and together with any subsequent
reduction which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $.05
or more.
(4) Determination of Consideration. For purposes of this
Section 2.c., the consideration received by the Corporation for
the issue of any Additional Shares of Common Stock shall be
computed as follows:
(a) Cash and Property: Such consideration shall: (A)
insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued
dividends; and (B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such
issue, as determined in good faith by the Board of Directors.
(1) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to
Section 2.c.(2), relating to Options and Convertible
Securities, shall be determined by dividing (x) the total
amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities or in
the case of Options for Convertible Securities, the exercise of
such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by (y) the maximum
number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(5) Adjustment for Dividends. Distributions.
Subdivisions. Combinations or Consolidation of Common
Stock.
(a) Stock Dividends. Distributions or Subdivisions. In
the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any
dividend, or make any other distribution on the Common
Stock, payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock),
then and in any such event, the Minimum and Maximum
Conversion Prices shall be proportionately decreased to
reflect such dividend, distribution or subdivision as of: (A) in
the case of any such dividend or distribution, immediately
after the close of business on the record date for the
determination of holders of any class of securities entitled to
receive such dividend or distribution, or (B) in the case of any
such subdivision, at the close of business on the date
immediately prior to the date upon which such corporate
action becomes effective.
(b) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Minimum and
Maximum Conversion Prices in effect immediately prior to
such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be
proportionately increased.
(6) Adjustment for Reclassification or Reorganization.
In case of any capital reorganization or reclassification of the
capital stock of the Corporation (other than a reclassification
covered in Section 2. c. (5)(b)), each share of Series B
Preferred shall thereafter be convertible into the number of
shares of stock or other securities or property to which a
holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of such Series B
Preferred would have been entitled upon such reorganization
or reclassification. In any such case, appropriate adjustment
(as determined by the Board of Directors) shall be made in
the application of these provisions set forth with respect to the
rights and interest thereafter of the holders of the Series B
Preferred, to the end that these provisions (including
provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of
the Series B Preferred.
(7) No Impairment. The Corporation will not, by
amendment, of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by
the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 2 and in the
taking of all such action as may be necessary or appropriate
in order to protect the Conversion Rights of the holders of the
Series B Preferred against impairment.
(S) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Adjusting
Percentage and the Minimum and Maximum Conversion
Prices pursuant to this Section 2, the Corporation at its
expense shall promptly compute such adjustment or
readjustment in accordance with these terms and furnish to
each holder of Series B Preferred a certificate setting forth
such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of
any holder of Series B Preferred, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Minimum and
Maximum Conversion Prices and the Adjusting Percentage at
the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the
time would be received upon the conversion of Series B
Preferred.
(9) Notices of Record Date. In the event of (i) any taking
by the Corporation of a record date of the holders of any class
of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a
cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital
reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any
merger or consolidation of the Corporation, and any transfer
of all or substantially all of the assets of the Corporation to
any other corporation, or any other entity or person, or any
voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, the Corporation shall mail to each
holder of Series B Preferred at least twenty (20) days (thirty
(30) days in the case of an acquisition of the Corporation
through a merger or consolidation of the Corporation or the
sale of all or substantially all of its assets and properties) prior
to the record date specified therein, a notice specifying (A)
the date on which any such record is to be taken for the
purpose of such dividend or distribution and a description of
such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to
become effective, and (C) the time, if any, that is to be fixed,
as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other
property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
(10) Common Stock Reserved. The Corporation shall
reserve and keep available out of its authorized but unissued
Common Stock such number of shares of Common Stock as
shall be sufficient to effect conversion of the Series B
Preferred. The number of shares so reserved shall be
determined and revised twice a year, as of January 1 and June
30.
d. Additional Adjustments to Conversion Price. In the
event that within the period beginning on the day after the
date that shares of the Series B Preferred are first issued, and
ending on and including the one hundred eighty-first (181st)
day following the date that shares of the Series B Preferred
are first issued, the Corporation fails to obtain an aggregate of
Five Million and No/100 Dollars ($5,000,000.00) in
Qualified Capital (as hereinafter defined) the Minimum
Conversion Price and the Maximum Conversion Price shall
be reduced by Fifty Cents ($0.50). As used herein, the term
"Qualified Capital" shall mean any combination of the
following (1) the proceeds (net of commissions and selling
expenses) from the sale of capital stock of the Corporation
and (2) up to Two Million Five Hundred Thousand and
No/100 ($2,500,000.00) in aggregate principal amount of a
revolving loan facility entered into with an institutional
lender, provided that such facility (A) commences during the
aforesaid period ending on the one hundred eighty-first
(181st) day following the date that the shares of Series B
Preferred are first issued, (B) has an expiration date of no less
than twelve (12) months from the date such facility first
commences (the "Available Period") and (C) shall entitle the
Corporation to borrow, repay and reborrow such principal
amount during the Available Period under terms and
conditions usual for such facilities.
3. Voting Rights. Except as otherwise expressly provided
herein or as required by law, each
holder of Series B Preferred shall be entitled to vote on all
matters submitted to the shareholders
of the Corporation for a vote, as though the Common Stock
and the Series B Preferred constituted
a single class of stock, provided that the holder of a share of
Series B Preferred shall be entitled
to vote together with the Common Stock as if such holder
held four (4) of shares of Common Stock for each of his
shares of Series B Preferred then convertible in accordance
with Section 2 above.
4. Dividend Rights. There shall be no dividends
payable on the Series B Preferred.
5. Board Participation. The Board of Directors shall consist
of not more than seven (7) members., four (4) of which shall
be elected by holders of Series B Preferred as a class. At least
two (2) of the director(s) elected by holders of Series B
Preferred as a class shall be mandatory member(s) of the
Compensation Committee of the Board of Directors.
6. Optional Redemption.
a. Election. At any time after August 19, 1997, in the
event that the closing bid price for the Common Stock quoted
on the Nasdaq Stock Market or any exchange on which the
Common Stock is listed (or the closing bid price of the
Common Stock quoted in the Over-the-Counter Market
Summary if not on the Nasdaq system or an exchange)
exceeds Seven and No/100 Dollars ($7.00) per share for forty
(40) consecutive trading days, the Corporation may redeem
all but not less than all of the shares of Series B Preferred that
are then issued and outstanding, at a redemption price equal
to the Original Issue Price therefor, upon sending written
notice of such redemption to each holder of the Series B
Preferred in the manner set forth herein on the day
immediately following such forty (40) consecutive trading
days. The Corporation may not redeem any shares of Series B
Preferred unless funds are then legally available for the
redemption of all shares of the Series B Preferred. Holders of
shares of the Series B Preferred shall continue to be entitled
to convert such shares into Common Stock prior to the
Optional Redemption Date (as hereinafter defined).
b. Notice. Notice of redemption shall be sent by
certified or registered mail (return receipt requested), postage
prepaid to each holder of record of shares of Series B
Preferred at such holder's address as it appears on the records
of the Corporation. Such notice shall specify the date set for
redemption (the "Optional Redemption Date"), which date
shall be at least thirty-five (35) days following the date upon
which the Corporation has sent notice of redemption and no
greater than forty-five (45) days following the date upon
which the Corporation has sent notice of redemption. Any
holder of shares of Series B Preferred who converts such
shares during any period in which there is notice of
redemption outstanding under this Section 6 shall be deemed,
for all purposes, to have reduced the number of shares of
Series B Preferred to be redeemed from him by the number of
shares so converted. In the event that a notice of redemption
is given under this Section 6, the Corporation shall be obliged
to redeem all of the shares of the Series B Preferred on the
Optional Redemption Date by payment of the Original Issue
Price or Original Issue Prices therefor as provided herein,
subject to such shares being previously converted by the
holder as provided above. Upon such redemption and
payment as provided herein, the holder of the shares of Series
B Preferred shall have no further right or interest in such
shares.
c. Rights Following Redemption. If, on or before the
Optional Redemption Date the funds necessary for such
redemption shall have been set aside by the Corporation and
deposited with a bank or trust company, in trust for the pro
rata benefit of the holders of the shares of Series B Preferred,
then, notwithstanding that any certificates for such shares
shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding
from and after the Optional Redemption Date, and all rights
of holders of such shares shall forthwith, after the Optional
Redemption Date, cease and terminate, excepting only the
right to receive the redemption funds therefor to which they
are entitled, but without interest. Any interest accrued on
funds so deposited and unclaimed by shareholders entitled
thereto shall be paid to the Corporation from time to time. In
case the holders of shares of Series B Preferred shall not,
within six years after the Optional Redemption date, claim
the amounts so deposited with respect to the redemption
thereof, any such bank or trust company shall, upon demand,
pay over to the Corporation such unclaimed amounts and
thereupon such bank or trust company shall be relieved of all
responsibility in respect thereof to such holder and such
holder shall look only to the Corporation for the payment
thereof. Any funds so deposited with a bank or trust company
which shall not be required for such redemption by reason of
the exercise subsequent to the date of such deposit of the right
of conversion thereof, or otherwise, shall be returned to the
Corporation forthwith.
d. Rights Upon Failure to Redeem. If the Corporation
for any reason fails to redeem any of the shares of Series B
Preferred in accordance with this Section 6 on the Optional
Redemption Date, then notwithstanding anything to the
contrary contained in this Certificate of Incorporation, all
shares of Series B Preferred then outstanding shall continue
to be entitled to the conversion and other rights, preferences
and privileges of the Series B Preferred until such shares have
been redeemed and the Optional Redemption Price has been
paid or otherwise set aside with respect thereto.
7. Mandatory Redemption.
a. Election. In the event that the sum of the
Corporation's EBITDA (as hereinafter defined) for the years
ended December 31, 1996 and December 31, 1997 is less
than Five Million and No/l00 Dollars ($5,000,000.00), each
holder of shares of the Series B Preferred shall have the right
to require the Corporation to redeem such holder's shares at a
per share redemption price (the "Mandatory Redemption
Price") equal to the sum of (i) the Original Issue Price
therefor, plus (ii) a rate of return on investment for the period
commencing on the Original Issue Date therefor and ending
on the Mandatory Redemption Date (as hereinafter defined),
equal to the product of (1) the Original Issue Price therefor
and (2) Twelve Percent (12%) per annum. Each holder
desiring to require the Corporation to redeem such holder's
shares of Series B Preferred shall give written notice thereof
to the Corporation at its principal office at least ten (10) days
before the requested date of redemption (the "Mandatory
Redemption Date"). Upon the Mandatory Redemption Date,
such holder shall surrender the certificate or certificates for
his shares of the Series B Preferred, duly endorsed, at the
office of the Corporation in exchange for payment of
the Mandatory Redemption Price. Upon redemption and
payment as provided herein, such holder shall have no further
interest in the Series B Preferred.
b. Available Funds. If at the time at which redemption
is demanded sufficient funds are not legally available for such
redemption on the Mandatory Redemption Date to redeem all
of the shares of Series B Preferred then required to be
redeemed, any and all such unredeemed shares shall
thereafter be promptly redeemed, at such time and to the
extent that funds of the Corporation become legally available
therefor. The shares of the Series B Preferred that are subject
to redemption but that have not been redeemed and as to
which the Mandatory Redemption Price is not paid due to
insufficient legally available funds, or otherwise, shall
continue to be entitled to the conversion and other rights,
preferences and privileges of the Series B Preferred until such
shares have been redeemed and the Mandatory Redemption
Price has been paid with respect thereto. In the event that
insufficient funds are legally available on any Mandatory
Redemption Date to redeem all shares of Series B Preferred
for which the holders thereof have required redemption, the
number of shares to be redeemed of each holder of shares of
Series B Preferred that has requested redemption on such
Mandatory Redemption Date shall be determined by the
Board of Directors, acting in good faith, considering the
funds available for redemption and the Original Issue Prices
of the shares to be redeemed, and with the intent to redeem a
pro rata number of shares from each holder based upon the
aggregate number of shares held by such holder.
c. EBITDA. As used herein the term "EBITDA" means
the sum of the Corporation's (i) net income (or net loss) from
continuing operations (excluding extraordinary items of
income or expense), plus (ii) all interest expense, plus (iii)
income tax expense, plus (iv) depreciation expense, plus (v)
amortization expense. All calculations shall be in accordance
with generally accepted accounting principles (as in effect
from time to time in the United States of America),
consistently applied, and shall be based upon the
Corporation's audited year end financial statements for the
years for which such calculations are being made.
8. Other Rights and Privileges. So long as any shares of
Series B Preferred shall be
outstanding, the Corporation shall not, without first obtaining
the affirmative vote or written
consent of the holders of more than fifty (50%) percent of the
then outstanding shares of Series
B Preferred:
a. alter, change or amend the preferences, rights,
privileges or powers of, or the restrictions provided for the
benefit of, the Series B Preferred generally;
b. authorize, create or issue any other class of stock or
series of Preferred Stock or other equity securities having any
preference or priority as to dividends or assets upon
liquidation superior to or on a parity with any such preference
or priority of the Series B Preferred;
c. merge into another corporation or entity with the
result that the holders of capital stock of the Corporation after
giving effect to the exercise of all then exercisable Options
and Convertible Securities would own less than fifty (50%)
percent of the capital voting stock of the surviving entity or
sell all or substantially all of the assets of the Corporation;
d. pay or declare any dividend or distribution on any
shares of Common Stock or other securities of the
Corporation;
e. increase or decrease the number of directors
constituting the Board of Directors;
f. apply any of its assets to the redemption, retirement,
purchase or other acquisition directly or indirectly, through
subsidiaries, if any, or otherwise, of any shares of its capital
stock; or
g. effect a recapitalization or reorganization or
reclassification of the capital stock of the Corporation.
IN WITNESS WHEREOF, the undersigned, being the duly
authorized President of the Corporation, has executed and
delivered this Certificate on this 16th day of August, 1996.
SHARED TECHNOLOGIES CELLULAR, INC.
By: ____________________________________
President
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Agreement dated as of August 19, 1996 is by
and among Shared Technologies Cellular, Inc., a Delaware
corporation, with its principal place of business in
Wethersfield, Connecticut (the "Company"), those purchasers
identified in Exhibit A attached hereto (individually, a
"Purchaser" and collectively, the "Purchasers"), and
International Capital Partners, Inc., a Connecticut
corporation with its principal place of business in Stamford,
Connecticut ("ICP").
In consideration of the mutual promises and
covenants contained in this Agreement, and intending to be
legally bound by the terms and conditions of this Agreement,
the parties hereto hereby agree as follows:
Authorization and Sale of Series B Convertible
Preferred Stock and Warrant
Authorization of Series B Preferred Stock.
The Company has duly authorized the sale and issuance of up
to One Million Two Hundred Fifty Thousand (1,250,000)
shares of its Series B Convertible Preferred Stock, $.01 par
value per share (the "Series B Stock"), having the rights,
restrictions, privileges and preferences set forth in the
Certificate of Designations, Preferences and Rights of Series
B Convertible Preferred Stock, a copy of which is attached
hereto as Exhibit B (the "Certificate of Designations"). The
Company has duly filed with the Secretary of State of the
State of Delaware such Certificate of Designations.
Authorization of Warrants. The Company
has duly authorized the issuance of warrants (the
"Warrants") entitling the holder or holders thereof to
purchase an aggregate number of shares of the Company's
Common Stock, $.01 par value (the "Common Stock"), equal
to the aggregate number of shares of common stock issuable
upon conversion of such holder's or holders' shares of Series
B Stock into Common Stock, at a per share exercise price
equal to Three and No/100 Dollars ($3.00). Upon each
conversion of shares of Series B Stock into Common Stock by
any holder thereof, the Company shall issue Warrants to such
holder, entitling such holder to purchase thereunder a number
of shares of Common Stock equal to the number of shares
issued to such holder upon such holder's conversion of such
shares of Series B Stock into Common Stock. Each such
Warrant shall be in the form of Exhibit C, with appropriate
insertions.
Sale of Series B Preferred Stock to the
Purchasers. Subject to the terms and conditions of this
Agreement, the Company hereby sells and issues to each
Purchaser, and each Purchaser hereby severally purchases
from the Company, at a purchase price of $10 per share, the
number of shares of Series B Stock that appears in front of
such Purchaser's name in Exhibit A, for an aggregate of
250,000 shares of the Series B Stock and an aggregate
purchase price of $2,500,000 (the "Aggregate Purchase
Price").
Advisory Fees. Subject to the terms and
conditions of this Agreement, the Company agrees to pay ICP
at the Closing (as hereinafter defined) a cash fee equal to 5%
of the Aggregate Purchase Price (the "Initial Advisory Fee").
In the event that during the period ending on the one hundred
eightieth (180th) day following the Closing, the Company
pays or becomes obligated to pay any broker or financial
intermediatory compensation for any equity financing made
or to be made in the Company (an "Equity Financing") and
the amount of such compensation is greater than 5% of the
gross amount of such Equity Financing, the Company shall
promptly pay ICP such additional compensation (the
"Supplemental Advisory Fees") so that, together with all
amounts previously paid to ICP pursuant to this Section, the
percentage of the Aggregate Purchase Price received by ICP
as compensation pursuant to this Section shall equal the
same percentage of the gross amount of the Equity Financing
that was paid or is payable to such other broker or financial
intermediary.
Use of Proceeds. The Company shall use
the net proceeds from the sale of the Series B Stock for the
purposes of and in a manner consistent with Exhibit D,
attached hereto.
The Closing. The closing (the "Closing") of the sale
and purchase of the Series B Stock pursuant to this
Agreement has taken place simultaneously with the execution
of this Agreement at the Hartford offices of Pepe & Hazard,
counsel for ICP. The date of the Closing is hereinafter
referred to as the "Closing Date." At the Closing, the
Company has delivered to each Purchaser a stock certificate
representing the shares of Series B Stock acquired hereby,
registered in the name of such Purchaser (or its nominee) and
the Purchasers have delivered to the Company the purchase
price for the shares of Series B Stock acquired hereby. The
Company also has delivered: (i) the Initial Advisory Fee to
ICP, (ii) the documents set forth in Section 5 to its
Purchasers, and (iii) the fees and disbursements of ICP's
counsel which were reflected on statements of such counsel
delivered at or before Closing (the Company shall promptly
pay additional fees and disbursements of such counsel which
were not reflected in such statements upon receipt of
supplemental statements from such counsel after the Closing).
Representations and Warranties of the Company.
Except as disclosed in the Disclosure Schedule hereto by
reference to specific sections of this Agreement, the Company
hereby represents and warrants to the Purchasers as follows:
Organization and Corporate Power The
Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware
and is qualified to do business as a foreign corporation in
each jurisdiction in which such qualification is required,
except where the failure to so qualify would not have a
material adverse effect on the condition (financial or
otherwise) of the Company. The Company has all required
corporate power and authority to own its property, to carry on
its business as presently conducted or contemplated, to enter
into and perform the obligations incurred or to be incurred
under this Agreement and the Warrants, and generally to
carry out the transactions contemplated hereby. The copies of
the Restated Certificate of Incorporation, the amendments to
the Certificate of Incorporation, and the Certificate of
Designations (together, the "Certificate") and Bylaws of the
Company, as amended to date, that have been furnished to
counsel for the Purchasers by the Company, are correct and
complete at the date hereof. Except as set forth in the
Disclosure Schedule, the Company is not in violation of (a)
any material agreement or instrument relating to accounts
payable arising in the ordinary course of the Company's
business, or (b) any term of the Certificate or By-laws, or (c)
any term of any other agreement or instrument, or any
judgment, decree, order law, statute, rule, authorization or
government regulation, in each case applicable to the
Company or to which the Company is a party or by which it
or any of its properties is bound.
Authorization. This Agreement is and the
Warrants when issued will be (the Agreement and the
Warrants being collectively referred to as the "Financing
Documents") the valid and binding obligations of the
Company, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights and
remedies of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity.
The execution, delivery and performance of the Financing
Documents have been duly authorized by all necessary
corporate or other action of the Company. The issuance, sale
and delivery of the Series B Stock, in accordance with this
Agreement, the issuance and delivery of the Warrants and the
shares of Common Stock issuable upon conversion of the
Series B Stock and the issuance and delivery of the shares of
Common stock issuable upon the exercise of the Warrants,
have been duly authorized by all necessary corporate action
on the part of the Company, and such Series B Stock,
Warrants and Common Stock have been reserved for
issuance prior to the Closing. The Series B Stock, the
Warrants issuable upon conversion of the Series B Stock and
the shares of Common Stock issuable upon conversion of the
Series B Stock and upon the exercise of the Warrants, when
issued upon such conversion or exercise, will be duly and
validly issued, fully paid and non-assessable. Other than
required filings under applicable state securities laws, no
consent, approval, or authorization of, or designation,
declaration or filing with, any governmental authority or any
other person or entity is required on the part of the Company
in connection with the execution and delivery of the
Financing Documents, or the issuance and delivery of the
Series B Stock and the Warrants in accordance with the terms
of this Agreement or the consummation of any other
transaction contemplated hereby.
Capitalization. The authorized capital stock
of the Company (immediately prior to the Closing) consisted
of (a) 10,000,000 shares of Common Stock, 4,598,402 of
which shares are issued and outstanding, and (b) 5,000,000
shares of Preferred Stock, zero (0) of which are issued and
outstanding, and 1,000,000 of which have been reserved to be
issued and sold pursuant to this Agreement and to other
investors. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and
validly issued and are fully paid and non-assessable and all
securities previously issued and sold by the Company were
issued and sold in compliance with applicable Federal and
state securities laws. Except as set forth in the Disclosure
Schedule, no other shares of the Company's capital stock or
securities convertible into or exchangeable for shares of the
Company's capital stock have been issued or reserved for
issuance, and except as contemplated by the Financing
Documents, (a) no subscription, warrant, option, convertible
security or other right (contingent or otherwise) to purchase
or acquire any shares of capital stock of the Company is
authorized or outstanding, (b) there is not any commitment or
offer of the Company to issue any subscription, warrant (other
than the Warrants), option, convertible security or other such
right to issue or distribute to holders of any shares of its
indebtedness or assets of the Company, (c) the Company has
no obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other
distribution in respect thereof, and (d) there are no
restrictions on the transfer of the Company's capital stock
other than those arising from federal and state securities laws.
Except as contemplated by this Agreement, no person or
entity is entitled to (a) any preemptive or similar right with
respect to issuance of any capital stock of the Company, or (b)
any rights with respect to the registration of any capital stock
of the Company under the Securities act of 1933, as amended.
Stockholder Agreements. The Disclosure
Schedule contains a list of all shareholders holding five per
cent (5%) or more of the issued and outstanding shares of
capital stock of the Company, and of all the holdings of
capital stock of the Company owned beneficially or of record
by officers and directors of the Company. There are no
agreements, written or oral, between the Company and any of
the holders of the Company's capital stock, or between or
among any holders of the Company's capital stock, relating to
the acquisition, disposition or voting of such capital stock.
Subsidiaries. Except as set forth in the
Disclosure Schedule, the Company has no subsidiaries and
does not own directly or indirectly, any interest in any
corporation, association or business entity.
SEC Filings. Except as set forth in the
Disclosure Schedule, the Company has timely filed all reports
and other documents required to be filed pursuant to the
Securities Exchange Act of 1934, as amended (the "1934
Act"), the Securities Act of 1933, as amended (the "1933
Act"), and rules and regulations promulgated thereunder. No
filing made under the 1933 Act, or the 1934 Act contains any
false or misleading statement or omits to include any
statement necessary to make the statements therein contained
not misleading.
Projections; Financial Statements. The
Company has furnished to the Purchasers a correct and
complete copy of the Company's financial projections for the
year(s) ending December 31, 1996 and December 31, 1997, a
copy of which are attached hereto as Exhibit E (the
"Projections"). The Projections were prepared based upon
good faith assumptions and represents the Company's
reasonable estimate of future results based on information
available as to the date of the Projections. Included in the
Disclosure Schedule are (a) the audited balance sheet of the
Company ("Balance Sheet") as of December 31, 1995 (the
"Audited Balance Sheet Date") and related statements of
operations, statements of stockholder's equity and statements
of cash flows for the then year ending, and (b) the Company's
Form 10Q for the period ending June 30,1 996 (collectively,
the "Financial Statements"). The Financial Statements
(including the footnotes thereto) were prepared in accordance
with generally accepted accounting principles consistently
applied during the periods covered thereby, are correct,
complete and in accordance with the books and records of the
Company in all material respects, and fairly and accurately
present the financial position of the Company on the dates of
such statements and the results of its operations for the
periods covered thereby.
Absence of Undisclosed Liabilities. Except
as and to the extent expressly disclosed in the Financial
Statements, the Company does not know of any liabilities of a
type required under generally accepted accounting principles
to be disclosed therein as of the respective dates thereof.
Absence of Certain Developments. Since
the Audited Balance Sheet Date, other than as previously
disclosed to ICP, there has been (a) no material adverse
change in the condition (financial or otherwise) of the
Company or in the assets, liabilities, properties or business of
the Company, (b) no declaration, setting aside or payment of
any dividend or other distribution with respect to, or any
direct or indirect redemption or acquisition of any of the
capital stock of the Company, (c) no waiver of any material
right of the Company or cancellation of any material debt or
claim held by the Company, (d) no loan by the Company to
any officer, or director, employee or stockholder of the
Company, or any agreement or commitment therefor, (e) no
material loss, destruction or damage to any property of the
Company whether or not insured, (f) no labor disputes
involving the Company and no material change in the
personnel of the Company or the terms and conditions of
their employment, and (g) otherwise than for fair value and in
the ordinary course of business no acquisition or disposition
of any assets (or any contract or arrangement therefor), nor
any other transaction by the Company.
Title to Properties. Except as otherwise
disclosed in the Disclosure Schedule, the Company has good
and marketable title to, or a valid leasehold interest in, all of
the properties and assets owned or used by it or located on its
premises, free and clear of all liens, restrictions or
encumbrances. All machinery, equipment and other tangible
assets included in such properties is in good condition and
repair, reasonable wear and tear excepted, and all leases of
real or personal property to which the Company is a party are
fully effective and afford the Company peaceful and
undisturbed possession of the subject matter of the lease. The
Company is not in violation of any zoning, building or safety
ordinance, regulation or requirement or other law, or
regulation applicable to the operation of its owned properties.
The Company, in its capacity as lessee, is not in violation of
any zoning, building or safety ordinance, regulation or
requirement or other law or regulation applicable to the
operation of its leased properties, nor has it received any
notice of violation with which it has not complied, where
such violation would have a material adverse effect on the
Company's condition (financial or otherwise), properties or
business.
Tax Matters. Except as set forth in the
Disclosure Schedule, to its knowledge, the Company has filed
all foreign, federal, state and local income, excise or franchise
tax returns, real estate and personal property tax returns, sales
and use tax returns and other tax returns required to be filed
by it and has paid all taxes owed by it, except taxes which
have not yet accrued or otherwise become due, or for which
adequate provision has been made in the pertinent Financial
Statements. The provision for taxes on the Balance Sheet is
sufficient as of its date for the payment of all accrued and
unpaid federal, state, county and local taxes of any nature of
the Company, and any applicable taxes owing to any foreign
jurisdiction, whether or not assessed or disputed. All taxes
and other assessments and levies which the Company is
required to withhold or collect have been withheld and
collected and have been paid over to the proper governmental
authorities. With regard to the income tax returns of the
Company, the Company, has not received notice of any audit
or of any proposed deficiencies from any taxing authority, and
no controversy with respect to taxes of any type is pending or,
to the knowledge of the Company threatened. There are in
effect no waivers of applicable statutes of limitations with
respect to any taxes owed by the Company for any year.
Contracts and Commitments. Included as
part of the Supplemental Disclosure Schedule to be delivered
to the Purchasers within thirty days following the Closing
will be a list of all agreements of any nature to which the
Company is a party or by which it or any of its properties are
bound which are material to the conduct and operations of its
business and properties. All such agreements are valid,
binding and in full force and effect. Except as will be set
forth in the Supplemental Disclosure Schedule, the Company
(a) is not a party to any material contract, obligation or
commitment, and (b) does not have any (i) employment
contracts other than the employment agreements with its
corporate officers, members of its board of directors, and
certain division directors (collectively, the "Key Employees");
(ii) stock redemption or purchase agreements; (iii) financing
agreements; (iv) licenses; (v) distributor or sales
representative agreements; (vi) agreements with officers,
directors, employees or shareholders of the Company or
persons or organizations related to or affiliated with any such
persons; (vii) leases; (viii) agreements relating to product
development; or (ix) pension, profit-sharing, retirement or
stock option plans. To the Company's knowledge, no Key
Employee is a party to any outstanding contract, obligation or
commitment with any prior employer. Neither the Company
nor any of its employees, officers or directors is a party to any
oral or written contract or agreement prohibiting them from
freely competing or engaging in the business or businesses of
the Company anywhere in the world except for any such
agreements between the Company and its employees. The
Company is not in default under any material contract,
obligation or commitment, and to the best knowledge of the
Company, there is no state of facts which upon notice or lapse
of time or both would constitute such a default. To the best
knowledge of the Company, no Key Employee is in default
under any contract, obligation or commitment with any of
their former employers, the effect of which default could have
a materially adverse effect upon the Company, and to the best
knowledge of the Company, there is no state of facts which
upon notice or lapse of time or both would constitute such a
default. The Company is not a party to any contract or
arrangement which under circumstances now foreseeable is
likely to have a material adverse effect on the business,
properties or prospects of the Company.
Proprietary Rights; Employee Restrictions.
Except as disclosed in the Disclosure Schedule, the Company
has ownership of or license to use all patent, copyright,
trademark or other proprietary rights used or to be used in its
business as presently conducted or contemplated and, to the
best knowledge of the Company, neither the present nor
contemplated business, activities or products of the Company
infringe any such patent, copyright, trademark or other
proprietary rights of others. The Company has not received
any notice or other claim from any person asserting that any
of the Company's present or contemplated activities infringe
or may infringe any such rights of such person. To the best
knowledge of the Company, the Company has the right to
use, free and clear of claims or rights of others, all trade
secrets and know-how, including without limitation:
customer lists, manufacturing processes, hardware designs,
programming processes, software and other trade secrets or
know-how required for or incident to its products or its
business as presently conducted or contemplated. The
Company has taken all steps required to establish and
preserve its ownership of all copyright, trade secret and other
proprietary rights with respect to its products and technology.
The Company is not aware of any infringement by others of
its copyrights, trademarks or other proprietary rights in any of
its products, technology or services, or any violation of the
confidentiality of any of its proprietary information. To the
best knowledge of the Company, the Company is not making
unlawful use of any confidential information or trade secrets
of any past or present employees of the Company. To the best
knowledge of the Company, the activities of the Company's
employees on behalf of the Company do not violate any
agreements or arrangements known to the Company which
any such employees may have with former employers.
Effect of Transactions. The execution,
delivery and performance by the Company of this Agreement
and the offering, issuance and sale of (a) the Series B Stock,
(b) the Warrants and the Common Stock issuable upon
conversion of the Series B Stock and (c) the Common Stock
issuable upon the exercise of the Warrants do not and will not
conflict with or result in any violation of, breach of or default
under any contract, obligation or commitment of the
Company, or any charter provision, by-law or corporate
restriction of the Company, or result in the creation of any
lien, charge, security interest or encumbrance of any nature
upon any of the properties or assets of the Company, except
pursuant to this Agreement, or violate any instrument,
agreement, judgment, decree, order, statute, rule or
governmental regulation applicable to the Company or to
which the Company is a party or by which it or any of its
properties is bound.
Litigation. Except as otherwise disclosed in
the Disclosure Schedule, there is no action, suit, proceeding
or claim or governmental inquiry pending or, to the best
knowledge of the Company, threatened (a) against the
Company or otherwise affecting any of its properties or assets,
or (b) against any director, officer or Key Employee which
may materially and adversely effect the business, properties,
assets or financial condition of the Company or (c) which
may call into question the validity, or materially hinder the
enforceability or performance, of the Financing Documents,
nor, to the best knowledge of the Company, has there
occurred any event or does there exist any condition on the
basis of which such action, suit, proceeding, inquiry or
investigation might properly be instituted.
Securities Laws. Assuming the accuracy of
the representations and warranties of the Purchasers
contained in Section 4, the offer, issuance and sale of (a) the
Series B Stock, (b) the Warrants issuable upon conversion of
the Series B Stock, (c) the Common Stock issuable upon
conversion of the Series B Stock and (d) the Common Stock
issuable upon exercise of the Warrants in accordance with
this Agreement are and will be in compliance with applicable
federal and state securities laws, as presently in effect.
Business. The Company has all necessary
franchises, permits, licenses and other rights and privileges
necessary to permit it to own its property and to conduct its
business as is presently conducted or contemplated, and the
absence of which would have a material adverse effect on the
Company's business.
Books and Records. The minute books of
the Company contain complete and accurate records of all
meetings and other corporate actions of its stockholders and
its Board of Directors and committees thereof. The stock
ledger of the Company is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of capital
stock of the Company.
18
Environmental Compliance. The Company
(a) has never violated, and is presently in compliance with,
all federal, state, and local environmental and health and
safety laws, rules, regulations, ordinances, and by-laws
("Environmental Laws") applicable to its business and
properties; (b) has not generated, manufactured, refined,
transported, treated, stored, handled, disposed of, transferred,
produced, or processed any pollutant, toxic substance,
hazardous waste, hazardous substance, hazardous material,
oil, or petroleum product ("Hazardous Materials") as defined
under any Environmental Law, or any solid waste, and has no
knowledge of the release or threat of release of any Hazardous
Materials from its products, properties or facilities; (c) has
not (i) entered into or been subject to any consent decree,
compliance order, or administrative order with respect to any
environmental or health and safety matter relating to its
business or any of its properties of facilities, (ii) received
notice under the citizen suit provision of any Environmental
Law in connection with its business or any of its properties or
facilities, (iii) received any request for information, notice,
demand letter, administrative inquiry, or formal or informal
complaint or claim with respect to any environmental or
health and safety matter relating to its business or any of its
properties or facilities, or (iv) been subject to or threatened
with any governmental or citizen enforcement action with
respect to any environmental or health and safety matter
relating to its business or any of its properties or facilities,
and has no reason to believe that any matters described in (i)-
(iv) above will be forthcoming. No lien has been imposed on
any of the properties or facilities of the Company by any
governmental agency at the federal state, or local level in
connection with the presence of any Hazardous Materials.
Information Supplied to Purchasers.
Neither this Agreement, the Disclosure Schedule and Exhibits
attached hereto, the other Financing Documents nor any
document, certificate, projection or statement furnished to the
Purchasers by or on behalf of the Company contains any
untrue statement of a material fact, and neither this
Agreement, the Disclosure Schedule and Exhibits attached
hereto, the other Financing Documents nor such other
documents, projections, certificates and statements omits to
state a material fact necessary in order to make the statements
contained herein or therein not misleading.
Brokerage. Except as set forth in Section
1.4 hereof, there are no claims for and no person is entitled to
any brokerage commissions, finder's fees or similar
compensation in connection with the transactions
contemplated by this Agreement from the Company or based
on any arrangement or agreement made by or on behalf of the
Company.
Employee Benefit Plans. The Company
does not maintain or contribute to any employee benefit plans
other than the plans identified on the Supplemental
Disclosure Schedule that the Company shall deliver within
thirty days of the date hereof.. The Company is and has been
in material compliance with the provisions of all laws or rules
or regulations applicable to any employee benefit plan
maintained or contributed to by the Company for the benefit
of its employees and, to the best knowledge of the Company,
there are no claims (other than routine claims for benefits)
pending or threatened with respect to any of such employee
benefit plans. The Company does not maintain or contribute
to, and has never maintained or contributed to, any qualified
retirement plan that is subject to the minimum funding
requirements of Section 412 of the United States Internal
Revenue Code of 1986, as amended. There are no unfunded
obligations of the Company under any retirement, pension,
profit-sharing or deferred compensation plan or program.
The Company is not required to make any payments or
contributions to any employee benefit plan pursuant to any
collective bargaining agreement. The Company has never
maintained or contributed to any employee benefit plan
providing or promising any health or other non-pension
benefits to terminated employees. For purposes of this
Section, the term "Company" includes all entities that have
controlled, have been under the control of, or have been under
common control with, the Company.
Employees. The Company is not aware that
any officer, director, executive or key employee of or
consultant to the Company has any plans to terminate his
relationship to the Company. The Company has complied in
all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages,
laws, equal opportunity, collective bargaining and the
payment of social security and other taxes. None of the
employees of the Company is represented by any labor union
or covered by any collective bargaining agreements, the
Company is not aware of any effort to establish a labor union
or bargaining unit or similar organizational effort with
respect to its employees, and there is no labor strike or other
labor trouble pending or threatened and with respect to the
Company.
Representations and Warranties of the Purchasers.
Each Purchaser represents and warrants to the
Company as follows:
Investment. Such Purchaser is acquiring
the Series B Stock and the shares of Common Stock into
which the Series B Stock are convertible, and such Purchaser
will acquire the Warrants and the shares of Common Stock
issuable upon the exercise of the Warrants, for its own
account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and,
except for transfers permitted without provision of an opinion
of counsel in conformity with the legend appearing on
certificates representing the Series B Stock and that will
appear on the Warrants. Such Purchaser has no present or
contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the
disposition thereof.
Authority. Such Purchaser (if a corporate
entity) has full power and authority to execute, deliver and
perform this Agreement in accordance with its terms. Such
Purchaser has not been organized, reorganized, or
recapitalized specifically for the purpose of investing in the
Company. This Agreement is a valid and binding obligation
of such Purchaser, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights and
remedies of creditors generally and to the exercise of judicial
discretion in accordance with general principles of equity.
Experience. Such Purchaser has adequate
net worth and means to provide for its current needs and
contingencies and the financial capacity to sustain a complete
loss of its investment in the Company.
Accredited Investor. Such Purchaser is an
"accredited investor" as defined in Rule 501 of Regulation D
adopted under the Securities Act of 1933, as amended.
Conditions Precedent to Closing. This Agreement
shall be effective only upon the satisfaction of each condition
precedent contained in this Section. At or prior to the
Closing the Company shall have delivered to the Purchasers
the following, satisfactory in form and substance to each
Purchaser:
1 An opinion from Gadsby &
Hannah, counsel to the Company, dated as of the Closing
date, addressed to the Purchasers, and substantially in the
form attached hereto as Exhibit F;
2 Certified copies of the Certificate
as amended, of the Company as in effect immediately prior to
the Closing, and a certificate, as of the most recent
practicable date, of the Secretary of State of the State of
Delaware as to the Company's corporate good standing;
3 A certificate of the Secretary of the
Company dated as of the Closing Date, certifying as to (i) the
incumbency of officers of the Company executing the
Financing Documents and all other documents executed and
delivered in connection herewith, (ii) a copy of the By-Laws
of the Company, as in effect on and as of the Closing Date,
and (iii) a copy of the resolutions of the Board of Directors of
the Company authorizing and approving the Company's
execution, delivery and performance of the Financing
Documents, all matters in connection with the Financing
Documents, and the transactions contemplated thereby; and
4 All consents and waivers required
in connection with the Company's issuance of the Series B
Stock and the Warrants including, but not limited to, the
consents and waivers of H.J. Meyers & Co., Inc.
Evidence satisfactory to ICP that (a) the
Company is indebted to Shared Technologies Fairchild
Incorporated ("STFI") in the amount of $2,500,000,
(including without limitation a copy of the promissory notes
evidencing such indebtedness), and (b) concurrently with the
issuance and sale and purchase of the Class B Stock by the
Purchasers at the Closing, pursuant to terms and conditions
substantially identical to the terms and conditions contained
in this Agreement (including without limitation with respect
to the issuance of warrants substantial identical to the
Warrants), and otherwise satisfactory to ICP, (i) such
$2,500,000 has been converted into 250,000 shares of Class B
Preferred Stock at the conversion price of $10 per share, and
(2) the right to warrants in connection with the terms of such
indebtedness have been canceled.
6 All other documents, instruments
and agreements that the Purchasers shall reasonably require
in connection with this Agreement.
Certain Covenants of the Company.
. A. The Company covenants and agrees that for so
long as ICP or one or more Purchasers, in the aggregate, own
shares of capital stock comprising more than five percent
(5%) of the of the voting power on matters properly brought
for a vote of the shareholders of the Company ("Voting
Power") (for purposes of this Section 6, ownership of any
options, warrants or convertible securities, including without
limitation the Series B Stock, entitling the holder thereof to
acquire record or beneficial ownership in shares of capital
stock shall be deemed ownership of the Voting Power of an
equivalent number of shares of such capital stock), it will
perform and observe the following covenants and provisions:
Financial Statements. The Company will
maintain books of account in accordance with generally
accepted accounting principles applied on a consistent basis,
keep full and complete financial records and furnish to ICP
and Zesiger Capital Group LLC the following reports:
(a) within fifteen
(15) days after the date of such filing, copies of all documents
filed by the Company with the SEC including, but not limited
to, all reports on Forms 10-K, 10-Q, 8-K and their exhibits;
(b) within ten (10)
days following the end of each calendar month, a divisional
performance report for the month just ended in the format
and form as set forth in Exhibit G, attached hereto, indicating
the performance of each of the Company's divisions and
comparing such performance to the Company's then
applicable business plan targets; and
(c) such other
financial information as the Purchasers may reasonably
request, including, without limitation, certificates of the
principal financial officer of the Company concerning
compliance with the covenants of the Company under this
Section 6.1, other customary information and materials,
including, without limitation, reports of adverse
developments, management letters, communications with
stockholders or directors, press releases, registration
statements and any other reports filed by the Company, or by
any of its officers and directors with respect to the Company,
with a securities exchange or with the Securities and
Exchange Commission.
Payment of Taxes, Compliance with Laws,
etc.. The Company will pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed
upon it or upon its income or property before the same shall
become in default, as well as all lawful claims for labor,
materials and supplies which, if not paid when due, might
become a lien or charge upon its property or any part thereof;
provided, however, that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy, or
claim so long as the validity thereof is being contested by the
Company in good faith by appropriate proceedings and an
adequate reserve therefor has been established on its books.
The Company will use its best efforts to comply with all
applicable laws and regulations in the conduct of its business
including, without limitation, all Environmental Laws.
Insurance. The Company will keep its
insurable properties insured, upon reasonable business terms,
by financially sound and reputable insurers against liability,
and the perils of casualty, fire and extended coverage in
amounts of coverage sufficient in the reasonable business
judgment of the Company to protect the Company. The
Company will also maintain with such insurers insurance
against other hazards and risks and liability to persons and
property which, in the reasonable business judgment of the
Company, is customary in the industry in which the Company
operates for companies of comparable size.
Maintenance of Properties. The Company
will maintain all properties used or useful in the conduct of
its business in good repair, working order and condition as is
reasonably necessary to permit such business to be properly
and advantageously conducted.
Affiliated Transactions. Except with
respect to compensation arrangements with, and the
reimbursement of expenses of, employees of the Company in
the ordinary course of business, all transactions by and
between the Company and any director, officer, employee, or
stockholder of the Company or persons controlled by or
affiliated with such director, officer, employee or stockholder,
shall be conducted on an arms-length basis, shall be on terms
and conditions no less favorable to the Company than could
be obtained from non-related persons and shall be approved
by the Board of Directors after full disclosure of the terms
thereof, for which purpose the interest party, if a director, and
any affiliate of the interested party who is a director, shall not
be entitled to vote.
5
Inspection Rights. At any time during
normal business hours and upon reasonable prior notice to the
Company, the Purchasers or their designated representatives
or agents may (a) visit and inspect the premises and any of
the properties of the Company including its records and books
of account (and make copies thereof and take extracts
therefrom), and (b) discuss the affairs, finances and accounts
of the Company with its officers, directors, employees and
accountants, all at the expense of the Purchasers.
Litigation. The Company promptly (and, in
any event, not later than the date of release of such
information to the public generally) shall notify ICP or their
transferees of any litigation or governmental proceeding or
investigation pending (or, to the best knowledge of the
Company, threatened) against the Company or against any
officer, director, key employee, or principal stockholder of the
Company, that materially adversely affects (or if adversely
determined, could materially adversely affect) its present or
proposed business, properties, assets, or condition (financial
or otherwise) taken as a whole.
Reservation of Conversion Stock. The
Company will, upon any increase in the number of shares of
Common Stock issuable upon conversion of the Series B
Stock reserve additional shares of Common Stock for
issuance upon such conversion, and will reserve additional
shares of Common Stock for issuance upon exercise of the
Warrants, whether or not the Warrants have at such time
been executed and delivered to the Purchaser, so that the
number of shares of Common Stock so issued upon such
conversion or exercise will not at any time be less than the
number of such shares issuable upon such conversion or
exercise.
Merger, Consolidations, Disposal of
Ownership of Subsidiaries, etc. Without the prior written
consent of ICP (acting on instructions from the Purchasers),
the Company will not, and will not permit any of its
subsidiaries to:
(a) consolidate with
or merge with any other corporation or entity;
(b) convey, transfer
or lease substantially all of its assets in a single transaction or
series of transactions to any person or entity; or
(c) sell or otherwise
dispose of any shares of any subsidiary or affiliate, nor will
the Company permit any subsidiary to issue, sell or dispose of
any shares of such subsidiary's own stock.
ICP Designates to Board of Directors. For
so long as ICP or one or more Purchasers, in the aggregate,
own shares of capital stock comprising more than ten percent
(10%) of the Voting Power, at least two (2) members of the
Company's Board of Directors shall at all times be members
designated by ICP (acting on instructions from the
Purchasers) and at least one such ICP-designated member
shall at all times be a member of the Compensation
Committee of the Company's Board of Directors, and for so
long as ICP or one or more Purchasers, in the aggregate, own
shares comprising more than five percent (5%) of the Voting
Power, (a) at least one (1) member of the Company's Board of
Directors shall at all times be members designated by ICP
(acting on instructions from the Purchasers) and such ICP-
designated member shall at all times be a member of the
Compensation Committee of the Company's Board of
Directors and (b) the Company shall have an Executive
Committee of the Board of Directors comprised of one (1)
Management Director (hereinafter defined), one (1) Director
who was designated to be a director by ICP , and one (1)
additional director who has been designated by the other
holders of the Company's Series B Convertible Preferred
Stock.. For purposes of this Section 6.10, (1) ownership of
any options, warrants or convertible securities, including
without limitation the Series B Stock, that upon exercise or
conversion shall entitle the holder thereof to acquire shares of
capital stock, shall be deemed to be ownership of the Voting
Power of the equivalent number of shares of capital stock.;
and (2) "Management Director" shall mean an officer and
full-time employee of the Company, provided however the
Anthony Autorino shall be deemed a Management Director
for so long as he is a member of the Board of Directors of the
Company.
B. In addition to the covenants set forth above,
the Company covenants and agrees that it will perform and
observe the following covenants and provisions:
Additional Capital.
(a) The Company shall, on a
best effort basis, within the period beginning on the day after
the date that shares of the Series B Stock are first issued, and
ending on and including the one hundred eighty-first (181st)
day following the date that shares of the Series B Stock are
first issued (the "Additional Capital Period"), obtain at least
$5,000,000 of additional net equity financing and a revolving
credit facility of at least $2,500,000 in principal amount.
(b) In the event that within
the Additional Capital Period, the Company fails to obtain an
aggregate of Five Million and No/100 Dollars
($5,000,000.00) in Qualified Capital (as hereinafter defined)
then each Purchaser hereunder shall be entitled to a pro rata
reduction to the purchase price for the shares of Series B
Stock acquired by such Purchaser pursuant to this Agreement
(a "Reduction") equal to Fifty Cents ($0.50) for each share
purchased. Each such Adjustment shall be paid to the
Purchaser entitled thereto within five days following the end
of the Additional Capital Period and shall be in the form of
additional shares of Series B Stock to be issued to such
Purchaser. The number of shares to be so issued shall be the
number obtained by dividing the cash value of the Reduction
by Ten and No/100 Dollars ($10.00), with any fractional
amounts resulting from such calculation rounded to the
nearest whole integer. As used herein, the term "Qualified
Capital" shall mean any of the following (1) the proceeds (net
of commissions and selling expenses) from the sale of the
Series B Stock, and (2) up to Two Million Five Hundred
Thousand and No/100 ($2,500,000.00) in aggregate principal
amount of a revolving loan facility entered into with an
institutional lender, provided that such facility (A)
commences during the aforesaid period ending on the one
hundred eighty-first (181st) day following the date that the
shares of Series B Preferred are first issued, (B) has an
expiration date of no less than twelve (12) months from the
date such facility first commences (the "Available Period")
and (C) shall entitle the Corporation to borrow, repay and
reborrow up to the full amount of such principal amount
during the Available Period under terms and conditions usual
for such facilities.
(c) In the event that, during
the respective time periods set forth below, the Company
agrees to issue (irrespective of whether such issuance is to be
at the time of such agreement or at some later date) or issues
warrants entitling the holder thereof to purchase shares of
Series B Stock, the per share exercise price pursuant to each
such warrant shall not be less than the respective amounts set
forth below for each applicable period:
From the date hereof through September 15, 1996 $3.00;
From August 16, 1996 through December 15, 1996 $3.60;
From December 16, 1996 through March 15, 1997 $4.32;
From March 16, 1997 through June 15, 1997 $5.18;
From June 16, 1997 through August 15, 1997 $6.21;
Thereafter $7.45.
(d) In the event that during
the period commencing on the date hereof and ending on
December 31, 1997, the Company shall issue any shares of
capital stock or securities exercisable, convertible, or
exchanged for shares of capital stock (other than shares of
Series B Stock, the Warrants and other warrants for shares of
Series B Stock issued in transactions substantially the same as
the transaction set forth herein) ("Additional Securities"),
each Purchaser shall have the right to convert all or any part
of such Purchaser's shares of Series B Stock into additional
Securities valued at the sum of (i) the price at which each
such share was originally issued by the Company (the
Original Issue Price); and (ii) an amount equal to one percent
(1%) of such Original Issue Price for each calendar month (or
part thereof) between the date hereof and the date of issuance
of such Additional Securities (including in such calculation
the month of this transaction and the month the Additional
Securities are issued). Upon the issuance of such Additional
Securities, the Company shall give each Purchaser written
notice of such action and the Purchasers shall have thirty-five
(35) days after receipt of such notice to elect (by written
notice) their right to convert their shares of Series B Stock.
Prohibition on Additional Equity Financing.
Without the prior written consent of ICP (acting on
instructions from the Purchasers) and an affirmative majority
vote of the Executive Committee of the Company's Board of
Directors, the Company shall not (a) conduct or engage in
any public offering of any of its capital stock (or any options,
warrants, convertible securities or similar instruments
relating to such capital stock) or (b) conduct or engage in any
private offering of any of its capital stock (or any options,
warrants, convertible securities or similar instrument relating
to such capital stock), except for (i) the private offering of the
Series B Stock to the Purchasers and to STFI as contemplated
in this Agreement and (ii) a private offering of no more than
$5,000,000 (net of commissions and selling expenses) of the
Series B Stock, as contemplated by Section 6.11 (a) hereof.
Adjustment to Purchase Price. In the event
that at any time during the period ending twelve (12) months
from the date hereof (the "Adjustment Period"), the Company
enters into any equity financing agreement or arrangement
entitling any person or entity (an "Other Investor") to acquire
any shares of Series B Stock or Common Stock (or any
option, warrant or convertible security that upon exercise or
conversion shall entitle the holder thereof to acquire
ownership of shares of Series B Stock or Common Stock) at a
per share purchase price less than ten dollars ($10) (a "Lower
Price"), then each Purchaser hereunder shall be entitled to a
pro rata adjustment to the purchase price for the shares of
Series B Stock acquired by such Purchaser pursuant to this
Agreement (an "Adjustment"). Such Adjustment shall be the
difference between $10 per share and the Lower Price per
share. Each such Adjustment shall be paid to the Purchaser
entitled thereto in the form of additional shares of Series B
Stock to be issued to such Purchaser, the number of shares to
be issued to be the number obtained by dividing the cash
value of the Adjustment by Ten and No/100 Dollars ($10.00),
with any fractional amount resulting from such calculation
being rounded to the nearest whole integer. Each Adjustment
shall be paid to the Purchaser entitled thereto upon the
consummation of the transaction pursuant to which the Other
Investor or Other Investors have acquired the shares that are
the subject of the Adjustment (irrespective of whether such
consummation occurs after the Adjustment Period).
CEO. Immediately following the date of
Closing, the Company will retain an executive search firm
and take all other necessary action on a best efforts basis to
expeditiously retain a Chief Executive.
Maintenance of Cash Reserves in
Anticipation of Mandatory Redemption. Promptly, at the end
of the fiscal quarter ending September 30, 1997, the
Company, acting through the Executive Committee of the
Company's Board of Directors, shall, in good faith and based
upon all information then available to it, including internally
generated financial statements and its Form 10Q for such
quarter, prepare financial projections indicating whether
holders of shares of the Series B Stock shall be entitled to
require the Company to redeem such shares pursuant to
Section 7 of the Certificate of Designation. In the event that
such projections indicate that such holders shall be entitled to
require such redemptions, the Company, acting through the
Executive Committee of the Board of Directors, shall take all
such reasonable and prudent actions, on a best efforts basis, to
build, conserve and maintain the Company's cash reserves in
order to meet its obligations under Section 7 of the Certificate
of Designations.
16 Anti-Dilution.
(a) For purposes of this Section:
(i) "Common Stock Equivalents" shall
mean (1) any securities which are directly or indirectly
convertible into Common Stock, and (2) any options,
warrants, or rights to purchase Common Stock or securities
which are directly or indirectly convertible into Common
Stock;
(ii) "Dilutive Price" shall mean, for any
issuance of shares of Common Stock or Common Stock
Equivalents, net consideration per share that is less than the
then Trigger Price.
(iii) "Trigger Price" shall mean, at any time
of determination, the price per share that is the midpoint
between the Maximum Conversion Price and the Minimum
Conversion Price (as each such term is defined in the
Certificate). If and as the Maximum Conversion Price and
the Minimum Conversion Price change pursuant to the terms
of the Certificate, the Trigger Price shall also change to that
per share value then representing the midpoint between the
Maximum Conversion Price and the Minimum Conversion
Price, as so changed.
(b) Except for transactions that are exempted
pursuant to subsection (c) of this Section, if the Company
shall at any time or from time to time after August 19, 1996
and prior to August 19, 1997, issue any additional shares of
Common Stock, or issue Common Stock Equivalents, for a
net consideration per share that is a Dilutive Price at the time
of such issuance, each holder of shares of Common Stock that
was converted into Common Stock from shares of Series B
Stock prior to such issuance shall be entitled to receive, at no
additional consideration, that number of additional shares of
Common Stock equal to (i) the product of (1) the number of
such shares of Common Stock resulting from conversion prior
to such issuance, and (2) difference between the Dilutive
Price and the Trigger Price at the time of such issuance,
divided by (ii) the Dilutive Price. The benefits of this Section
shall only be available to a Purchaser hereunder, and not to
any transferee of a Purchaser. The Company shall provide
notice to all Purchasers within ten (10) days of each issuance
of shares of Common Stock that would be an issuance at a
Dilutive Price with respect to any Purchaser. The Company
shall issue the additional shares of Common Stock to each
Purchaser entitled thereto pursuant to this Section within
twenty (20) days of each issuance at a Dilutive Price.
(c) The provisions of this Section shall not apply
with respect to any issuance (i) of Common Stock or
Common Stock Equivalents if such issuance is made pursuant
to an employee incentive plan or a Board of Directors option
plan, in each case approved by the Company's Board of
Directors, provided however that the aggregate number of
shares of Common Stock and Common Stock Equivalents
issued and issuable under all employee incentive plans and
Board of Directors option plans does not exceed ten percent
(10%) of the then issued and outstanding shares of Common
Stock of the Company, or (ii) upon exercise or conversion of
Common Stock Equivalents outstanding on the date hereof.
The issuance of Common Stock Equivalents shall be deemed
the issuance of the shares of Common Stock underlying the
Common Stock Equivalents at the time of such issuance of
Common Stock Equivalents, and no additional issuance to
Purchasers shall be made under this Section with respect to
the issuance of shares of Common Stock upon the exercise or
conversion of Common Stock Equivalents if an issuance of
additional shares has previously been made as above
provided.
Registration Rights.
Certain Definitions. As used in this
Section, the following terms shall have the following
respective meanings:
(a) "Commission" shall mean
the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
(b) "Convertible Securities"
shall mean securities of the Company convertible into or
exchangeable for Registrable Securities, including the Series
B Stock and the Warrants.
(c) "Form S-1" shall mean
Form S-1 issued by the Commission or any substantially
similar form then in effect.
(d) "Form S-2" shall mean
Form S-2 issued by the Commission or any substantially
similar form then in effect.
(e) "Form S-3" shall mean
Form S-3 issued by the Commission or any substantially
similar form then in effect.
(f) "Material Adverse Event"
shall mean an occurrence having a consequence that either
(a) is materially adverse as to the business, properties,
prospects or financial condition of the Company or (b) is
reasonably foreseeable, has a reasonable likelihood of
occurring, and if it were to occur would materially adversely
affect the business, properties, prospects or financial
condition of the Company.
(g) The terms "Register",
"Registered" and "Registration" refer to a registration effected
by preparing and filing a registration statement in compliance
with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such
Registration Statement.
(h) "Registrable Securities"
shall mean all Common Stock not previously sold to the
public (i) issued or issuable to the Purchasers upon conversion
of the Company's Series B Stock or exercise of the Warrants,
as the case may be, or (ii) Common Stock issued pursuant to
stock splits, stock dividends and similar distributions with
respect to such shares.
(i) "Registration Expenses"
shall mean all expenses incurred by the Company in
complying with Sections 7.2 or 7.3 of this Agreement,
including, without limitation, all federal and state
registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any special audits
incident to or required by any such registration, but shall not
include Selling Expenses.
(j) "Securities Act" shall
mean the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at
the time.
(k) "Selling Expenses" shall
mean all underwriting discounts and selling commissions
applicable to the sale of Registrable Securities pursuant to this
Agreement and all expenses of any special counsel for the
Purchasers.
Demand Registration.
(a) Request for Registration
on Form Other Than Form S-3. In the event that the
Company shall receive, at any time after November 16, 1996,
a written request from holders of at least fifty per cent (50%)
of the Registrable Securities as of such time that the Company
effect any Registration with respect to all or a part of the
Registrable Securities on Form S-1 or Form S-2, the
Company shall, as expeditiously as possible, use its best
efforts to effect Registration of the Registrable Securities
specified in such request (but not including by means of a
shelf registration pursuant to Rule 415 under the Securities
Act)("Demand Registration"). The Company shall not be
obligated to effect more than two (2) Registrations pursuant to
this subsection a, nor shall it be required to effect the second
Demand Registration within one hundred eighty (180) days
after the first Demand Registration is no longer effective,
provided that a Registration shall not be counted for this
purpose if the Company elects to sell stock pursuant to a
Registration at the same time as the Registration requested
hereunder (other than in connection with a merger or a
dividend reinvestment plan or pursuant to a Registration
Statement on Form S-4 or S-8) and less than all the
Registrable Securities for which Registration was requested
are included.
Request for Registration on Form
S-3. Subject to the terms of this Agreement, in the event that
the Company receives from holders of at least fifty per cent
(50%) of the Registrable Securities a written request that the
Company effect any Registration on Form S-3 (or any
successor form to Form S-3 regardless of its designation) at a
time when the Company is eligible to register securities on
Form S-3 (or any successor form to Form S-3 regardless of its
designation) for an offering of Registrable Securities, the
Company will as soon as practicable use its best efforts to
effect Registration of the Registrable Securities specified in
such request. The Company shall be obligated to effect
Registration under this Section b on two occasions.
(c) The Company shall not be
required to prepare and file a Registration Statement pursuant
to Section a or b which would become effective within 90
days following the effective date of a Registration Statement
(other than a Registration Statement on Form S-8) filed by
the Company with the Commission pertaining to an
underwritten offering of convertible debt securities or equity
securities for cash for the account of the Company or another
holder of securities of the Company, or if the Company gives
written notice to the Purchasers within 10 days of receipt of a
demand that the Company will initiate within 30 days the
preparation of such Registration Statement and in each such
case the Purchasers were afforded the opportunity to include
Registrable Securities in such Registration pursuant to
Section 7.3 (subject to the limitations thereof).
Notwithstanding the foregoing, holders of Registrable
Securities shall have the right to demand Registration at least
once in any calendar year.
(d) Registration of Other
Securities in Demand Registration. A Registration pursuant
to Section a may include securities other than Registrable
Securities included in such Registration only with the prior
written consent of the holders of 50% of the Registrable
Securities, subject to registration rights that exist as of the
date hereof.
(e) Underwriting in Demand
Registration.
(1) Notice of
Underwriting. If the Purchasers intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as part of
their request made pursuant to this Section 7.2.
(2) Selection of
Underwriter in Demand Registration. Subject to the
obligations of the Company to H.J. Meyers & Co., Inc., the
Company, together with the Purchasers engaged in a
Registration, shall enter into an underwriting agreement with
the representative ("Underwriter's Representative") of the
underwriter or underwriters selected for such underwriting by
the Purchasers engaged in the Registration and agreed to by
the Company, which agreement shall not be unreasonably
withheld provided such underwriter is experienced and
reputable.
If a Purchaser disapproves
of the terms of the underwriting, it may elect to withdraw
therefrom by written notice to the Company and the
underwriter delivered at least fifteen (15) days prior to the
effective date of the Registration Statement. The securities so
withdrawn shall also be withdrawn from the Registration
Statement. (The fact that holders of 50% of the Registrable
Securities are no longer participating shall not give the
Purchasers any additional demand rights under Section
7.2(a))
(f) Blue Sky in Demand
Registration. In the event of any Registration pursuant to
Section 7.2, the Company will exercise its best efforts to
Register and qualify the securities covered by the Registration
Statement under such other securities or Blue Sky Laws of
such jurisdictions as the Purchasers shall reasonably request
and as shall be reasonably appropriate for the distribution of
such securities; provided, however, that (i) the Company shall
not be required to qualify to do business or to file a general
consent to service of process in any such states or
jurisdictions, and (ii) notwithstanding anything in this
Agreement to the contrary, in the event any jurisdiction in
which the securities shall be qualified imposes a non-
waivable requirement that expenses incurred in connection
with the qualification of the securities be borne by selling
shareholders, such expenses shall be payable pro rata by
selling holders.
Piggyback Registration.
(a) Notice of Piggyback
Registration and Inclusion of Registrable Securities. Subject
to the terms of this Agreement, in the event the Company
decides to Register any of its Common Stock (either for its
own account or the account of a security holder exercising
demand registration rights), other than (i) pursuant to a
Registration Statement which exclusively relates to the
Registration of securities under an employee stock option,
purchase, bonus or other benefits plan, a dividend
reinvestment plan or a merger or consolidation or (ii) a
Registration relating solely to a transaction under Rule 145
promulgated by the Commission, the Company will: (1)
promptly give the Purchasers written notice thereof (which
shall include a list of the jurisdiction in which the Company
intends to attempt to qualify such securities under the
applicable Blue Sky or other state securities laws) and (2)
include in such Registration (and any related qualification
under Blue Sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request delivered to the Company by the
Purchasers within 15 days after delivery of such written
notice from the Company.
(b) Underwriting in
Piggyback Registration.
(1) If the
Registration of which the Company gives notice is a
Registered public offering including an underwriting, the
Company shall so advise the Purchasers as part of the written
notice given pursuant to Section a. In such event the right of
the Purchasers to Registration shall be conditioned upon such
underwriting (as it is agreed to by the Company) and the
inclusion of a Purchaser's Registrable Securities in such
underwriting to the extent provided in this Section 7.3. The
Purchasers shall, together with the Company, enter into an
underwriting agreement with the Underwriter's
Representative for such offering.
(2) Marketing
Limitation in Piggyback Registration. In the event the
Underwriter's Representative advises the Company and the
Purchasers in writing that market factors (including, without
limitation, the aggregate number of shares of Common Stock
requested to by Registered, the general condition of the
market, and the status of the persons proposing to sell
securities pursuant to the Registration) require a limitation of
the number of shares to be underwritten, the Underwriter's
Representative (subject to the allocation priority set forth in
clause 3 below) may exclude some or all of the Registrable
Securities from such registration and underwriting.
(3) Allocation of
Shares in Piggyback Registration. In the event that the
Underwriter's Representative limits the number of shares to
be included in a Registration pursuant to Section 2, each
Purchaser requesting Registration shall be entitled to include
a portion of the Registrable Securities requested to be
included in such registration pro rata (based on the number of
shares requested to be included) with all other requesting
Purchasers and other persons who are exercising similar
written piggyback registration rights requesting registration.
(4) Withdrawal in
Piggyback Registration. If any Purchaser disapproves of the
terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the
underwriter delivered at least fifteen (15) days prior to the
effective date of the Registration Statement. Any Registrable
Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such Registration.
(c) Blue Sky in Piggyback
Registration. In the event of any Registration of Registrable
Securities pursuant to Section 7.3, the Company will exercise
its best efforts to Register and qualify the securities covered
by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as the Company shall
otherwise be registering or qualifying; provided, however,
that notwithstanding anything in this Agreement to the
contrary, in the event any jurisdiction in which the securities
shall be qualified imposes a non-waivable requirement that
expenses incurred in connection with the qualification of the
securities be borne by selling shareholders, such expenses
shall be payable pro rata by selling shareholders.
Additional Requirements.
Expenses of Registration. All
Registration Expenses incurred in connection with the
Registration pursuant to Section a, all Registrations on Form
S-3 pursuant to Section b, and all Registrations pursuant to
Section 7.3 shall be borne by the Company. Notwithstanding
the above, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to
Section a if the registration request is subsequently withdrawn
at the request of the Purchasers requesting such Registration
(whereafter such Purchasers shall bear such expense);
provided further, however, that if at the time of such
withdrawal, the Purchasers have learned of a Material
Adverse Event with respect to the condition, business or
prospects of the Company not known to the Purchasers at the
time of their request, then the Purchaser shall not be required
to pay any of such expenses. Selling Expenses to be borne by
the holders of the Registrable Securities Registered shall be
borne pro rata on the basis of the number of Registrable
Securities.
(b) Registration Procedures.
The Company will keep the registering Purchasers advised as
to the initiation and completion of such Registration. At its
expense the Company will: (a) use its best efforts to keep such
Registration effective for a period of 180 days if the
Registration is on Form S-1, 270 days if the Registration is on
Form S-3, or until the registering Purchasers have completed
the distribution described in the Registration Statement
relating thereto, whichever first occurs; and (b) furnish such
number of prospectuses (including preliminary prospectuses)
and other documents as the registering Purchasers from time
to time may reasonably request.
Information Furnished by Purchasers. It
shall be a condition precedent to the Company's obligations
under this Agreement that the Purchasers furnish to the
Company such information regarding the Purchasers and the
distribution proposed by the Purchasers as the Company may
reasonably request.
Indemnification.
(a) Company's
Indemnification of the Purchasers. To the extent permitted by
the law, the Company will indemnify each of the Purchasers,
its directors, officers, stockholders, partners or other
beneficial owners and legal counsel, and each person
controlling such Purchasers, with respect to which
Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any
underwriter against all claims, losses, damages or liabilities
(or actions in respect thereof) to the extent such claims,
losses, damages or liabilities arise out of or are based upon
any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or other document
(including any related Registration Statement) incident to any
such Registration, qualification or compliance, or are based
on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation
by the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection
with any such Registration, qualification or compliance; and
the Company will reimburse each Purchasers, each of such
Purchaser's directors, officers, stockholders, partners or other
beneficial owners, each such underwriter and each person
who controls any such Purchasers or underwriter, for any
legal and any other expenses reasonably incurred in
connection with investigation or defending any such claim,
loss, damage, liability or action; provided, however, that the
indemnity contained in this Section a shall not apply to
amounts paid in settlement of any such claim, loss, damage,
liability or action if settlement is effected without the consent
of the Company (which consent shall not unreasonably be
withheld); and provided further, that the Company will not be
liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based upon any
untrue statement or omission based upon written information
furnished to the Company by any Purchasers, underwriter or
controlling person and stated to be for use in connection with
the offering of securities of the Company.
(b) Purchaser's
Indemnification of Company. To the extent permitted by law,
each Purchaser will, if Registrable Securities held by such
Purchaser are included in the securities as to which such
Registration, qualification or compliance is being effected
pursuant to this Agreement, indemnify the Company, each of
its directors and officers, stockholders, each legal counsel and
independent accountant of the Company, each underwriter, if
any, of the Company's securities covered by such a
Registration Statement, and each person who controls the
Company or such underwriter within the meaning of the
Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or
based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any such
Registration Statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
any violation by such Purchaser of any rule or regulation
promulgated under the Securities Act applicable to such
Purchaser and relating to action or inaction required of such
Purchaser in connection with any such Registration,
qualification or compliance; and will reimburse the Company,
such directors, officers, partners, persons, law and accounting
firms, underwriters or control persons for any legal and any
other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such
Registration Statement, prospectus, offering circular or other
document in reliance upon and in conformity with written
information furnished to the Company by such Purchaser and
stated to be specifically for use in connection with the offering
of securities of the Company.
Indemnification Procedure.
Promptly after receipt by an indemnified party under this
Section 7.6 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party under this Section
7.6, notify the indemnifying party in writing of the
commencement thereof and generally summarize such action.
The indemnifying party shall have the right to participate in
and to assume the defense of such claim; provided, however,
that the indemnifying party shall be entitled to select counsel
for the defense of such claim with the approval of any parties
entitled to indemnification, which approval shall not be
unreasonably withheld, provided further, however, that if
either party reasonably determines that there may be a
conflict between the position of the Company and the
Purchasers in conducting the defense of such action, suit or
proceeding by reason of recognized claims for indemnity
under this Section 7.6, then counsel for such party shall be
entitled to conduct the defense to the extent reasonably
determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying
party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend
such action, shall relieve such indemnifying party, to the
extent so prejudiced, of any liability to the indemnified party
under this Section 7.6, but the omission so to notify the
indemnifying party will not relieve such party of any liability
that such party may have to any indemnified party otherwise
other than under this Section 7.6.
Limitations on Additional Registration
Rights. The Company shall not, without the prior written
consent of the holders of 50% of the then-outstanding Series
B Stock (which consent shall not be unreasonably withheld),
enter into any agreement with any holder or prospective
holder of any securities of the Company providing for the
granting to such holder of any right to Register or cause the
Registration of any securities of the Company, unless (i) such
rights are in all respects subordinate to those of the holders of
Series B Stock; or (ii) such rights are in all respects not
greater than or senior to those of the holders of Series B Stock
and the recipients of such rights are purchasing Common
Stock or securities exercisable for or convertible into
Common Stock at a price no less than the current Conversion
Price of the Series B Stock as defined in the Certificate.
Current Public Information. At all times
the Company will file all reports required under the Securities
Act or the Securities Exchange Act of 1934 and the rules and
regulations thereunder, and will take such further action as
may be reasonably required to enable any holder of "restricted
securities" (as defined in Rule 144 adopted by the
Commission under the Securities Act) to sell such securities
pursuant to Rule 144, as amended from time to time, or any
similar rule or regulation hereafter adopted by the
Commission.
Miscellaneous.
Transfer of Rights.
(a) Transfer of Rights. The
rights granted to the Purchasers under Sections 6 and 7 may
be transferred to any, person or entity acquiring or which
would own after such transfer, at least 25,000 shares of Series
B Stock or Common Stock; provided, however, that the
Company must receive written notice of said transfer, stating
the name and address of said transferee or assignee and
identifying the securities with respect to which such rights are
being assigned.
(b) Transferees. Any
transferee (other than a Purchaser) to whom rights under
Sections 6 and 7 are transferred shall, as a condition to such
transfer, deliver to the Company a written instrument by
which such transferee agrees to be bound by the obligations
imposed by Sections 6 and 7 hereof to the same extent as if
such transferee were a Purchaser hereunder. Upon the
execution of such instrument, such transferee shall be treated
as a Purchaser for all purposes hereunder.
(c) Subsequent Transferees.
A transferee to whom rights are transferred pursuant to this
Section 8.1 may not again transfer such rights to any other
person or entity, other than as provided in (a) or (b) above.
Delays or Omissions. No delay or omission
to exercise any right, power or remedy accruing to any holder
of any Series B Stock or any shares of Common Stock
issuable upon conversion of the Series B Stock, upon any
breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder nor
shall it be construed to be a waiver of any such breach or
default or of any similar breach or default therefore or
thereafter occurring, or an acquiescence therein. Any waiver,
permit, consent or approval of any kind or character on the
part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any
provisions of conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
Adjustments. Except as otherwise
specifically provided, all applicable provisions of this
Agreement shall be automatically adjusted to reflect any stock
dividend, stock split or combination or other such
recapitalization.
Successors and Assigns. Except as
otherwise expressly provided herein, the provisions of this
Agreement shall bind and inure to the benefit of the
respective successors, assigns, heirs, executors, and
administrators of the parties hereto.
Survival of Representations and Warranties.
The representations, warranties, covenants, promises and
agreements contained in this Agreement shall survive and
remain in full force and effect for one (1) year after the
Closing, without regard to any investigation made at any time
by the Purchasers or on their behalf.
Expenses. The Company shall reimburse to
the Purchasers the legal fees of Pepe & Hazard, counsel to the
Purchasers, and other professional and out-of-pocket expenses
incurred by the Purchasers. In addition, the company shall
bear its own legal and other expenses in connection with the
transactions contemplated by this Agreement.
Notices. All notices, requests, consents and
other communications under this Agreement shall be in
writing and shall be delivered by hand, by telecopier, by
overnight mail or mailed by first class certified or registered
mail, return receipt requested, postage prepaid:
(a) If to the Company:
Shared Technologies Cellular, Inc.
100 Great Meadow Road
Wethersfield, CT 06109
Attn: Legal Department
(or at such other address as may have been furnished in
writing by the Company to the Purchasers)
with a copy to:
Gadsby & Hannah
125 Summer Street
Boston, MA 02110
Attn: Harold J. Carroll, Esq.
(b) If to the Purchasers, at the
respective addresses set forth on Exhibit A hereto, or at such
other address as may have been furnished to the Company in
writing by the Purchasers
(or at such other address as may have been furnished in
writing by the Purchasers to the Company).
Brokers. The Company and the Purchasers
represent and warrant to each other no finder or broker was
retained in connection with the transactions contemplated by
this Agreement, and each of them shall indemnify and hold
harmless the other party from and against any and all claims,
liabilities or obligations with respect to brokerage or finders'
fees or commissions or consulting fees in connection with the
transactions contemplated by this Agreement, asserted by any
person on the basis of any statement or representation alleged
to have been made by such indemnifying party.
No Conditions to Effectiveness; Entire
Agreement. There are no conditions to the effectiveness of
this Agreement. This Agreement, together with the
instruments and other documents contemplated to be executed
and delivered in connection herewith, contains the entire
agreement and understanding of the parties hereto, and
supersedes any prior agreements or understandings between
or among them, with respect to the subject matter hereof.
Amendments and Waivers. Except as
otherwise expressly set forth in this Agreement, any term of
this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively),
only with the written consent of the party against whom such
amendment or waiver is to be enforced. No waivers of or
exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further continuing waiver of any such
term, condition or provision.
Counterparts. This Agreement may be
executed in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
Governing Law. This Agreement shall be
governed by and interpreted and construed in accordance with
the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Agreement as an instrument as of
the date first above written.
Shared Technologies Cellular, Inc.
By:
Name:
Its
Purchaser,
By: Zesiger Capital Group LLC
Attorney-in-fact for investors
identified in Exhibit A
By: Albert L. Zesiger
Managing Director
International Capital Partners, Inc.
By: Ajit G. Hutheesing
Chairman
EXHIBIT A
Purchasers
EXHIBIT B
Series B Stock
EXHIBIT C
Projections
EXHIBIT D
Opinion
TABLE OF CONTENTS
Page
1.Authorization and Sale of Series B Convertible Preferred
Stock and Warrant Page 1 of 28
1.1 Authorization of Series B Preferred Stock
Page 1 of 28
1.2 Authorization of Warrants Page 1 of 28
1.3 Sale of Series B Preferred Stock to the
Purchasers Page 1 of 28
1.4 Advisory Fees Page 2 of 28
1.5 Use of Proceeds Page 2 of 28
2. The Closing Page 2 of 28
3. Representations and Warranties of the
Company Page 2 of 28
3.1 Organization and Corporate Power Page 2
of 28
3.2 Authorization Page 3 of 28
3.3 Capitalization Page 3 of 28
3.4 Stockholder Agreements Page 4 of 28
3.5 Subsidiaries Page 4 of 28
3.6 SEC Filings Page 4 of 28
3.7 Projections; Financial Statements Page 4
of 28
3.8 Absence of Undisclosed Liabilities Page 5
of 28
3.9 Absence of Certain Developments Page 5
of 28
3.10 Title to Properties Page 5 of 28
3.11 Tax Matters Page 5 of 28
3.12 Contracts and Commitments Page 6
of 28
3.13 Proprietary Rights; Employee Restrictions
Page 7 of 28
3.14 Effect of Transactions Page 7 of 28
3.15 Litigation Page 7 of 28
3.16 Securities Laws Page 8 of 28
3.17 Business Page 8 of 28
3.18 Books and Records Page 8 of 28
3.19 Environmental Compliance Page 8
of 28
3.20 Information Supplied to Purchasers
Page 8 of 28
3.21 Brokerage Page 9 of 28
3.22 Employee Benefit Plans Page 9 of 28
3.23 Employees Page 9 of 28
4. Representations and Warranties of the
Purchasers Page 9 of 28
4.1 Investment Page 10 of 28
4.2 Authority Page 10 of 28
4.3 Experience Page 10 of 28
4.4 Accredited Investor Page 10 of 28
5. Conditions Precedent to Closing Page 10
of 28
6. Certain Covenants of the Company Page 11
of 28
6.1 Financial Statements Page 11 of 28
6.2 Payment of Taxes, Compliance with Laws,
etc. Page 12 of 28
6.3 Insurance Page 12 of 28
6.4 Maintenance of Properties Page 12 of 28
6.5 Affiliated Transactions Page 12 of 28
6.6 Inspection Rights Page 13 of 28
6.7 Litigation Page 13 of 28
6.8 Reservation of Conversion Stock Page 13
of 28
6.9 Merger, Consolidations, Disposal of
Ownership of Subsidiaries, etc. Page 13
of 28
6.10 ICP Designates to Board of Directors
Page 14 of 28
6.11 Additional Capital Page 14 of 28
6.12 Prohibition on Additional Equity Financing.
Without the prior written consent of ICP
(acting on instructions from the Purchasers)
and an affirmative majority vote Page 15
of 28
6.13 Adjustment to Purchase Price Page 16
of 28
6.14 CEO Page 16 of 28
6.15 Maintenance of Cash Reserves in
Anticipation of Mandatory Redemption
Page 16 of 28
6.16 Anti-Dilution Page 17 of 28
7. Registration Rights Page 18 of 28
7.1 Certain Definitions Page 18 of 28
7.2 Demand Registration Page 19 of 28
7.3 Piggyback Registration Page 21 of 28
7.4 Additional Requirements Page 22 of 28
7.5 Information Furnished by Purchasers
Page 23 of 28
7.6 Indemnification Page 23 of 28
7.7 Limitations on Additional Registration
Rights Page 24 of 28
7.8 Current Public Information Page 25
of 28
8. Miscellaneous Page 25 of 28
8.1 Transfer of Rights Page 25 of 28
8.2 Delays or Omissions Page 25 of 28
8.3 Adjustments Page 26 of 28
8.4 Successors and Assigns Page 26 of 28
8.5 Survival of Representations and Warranties
Page 26 of 28
8.6 Expenses Page 26 of 28
8.7 Notices Page 26 of 28
8.8 Brokers Page 27 of 28
8.9 No Conditions to Effectiveness; Entire
Agreement Page 27 of 28
8.10 Amendments and Waivers Page 27 of 28
8.11 Counterparts Page 27 of 28
8.12 Governing Law Page 27 of 28
EXHIBIT C
[Note: Terms used in this Exhibit but not defined in this
Exhibit shall have the meanings ascribed to them in the
Agreement (as defined in the text of this Exhibit)]
COMMON STOCK WARRANT
Date: ________ ___, ____
NEITHER THIS WARRANT, NOR THE STOCK TO BE
ISSUED UPON EXERCISE HEREOF, HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 SECURITIES ACT"), OR
QUALIFIED OR REGISTERED UNDER ANY STATE
SECURITIES LAWS (THE "STATE SECURITIES LAWS"),
AND THIS WARRANT HAS BEEN, AND THE COMMON
STOCK TO BE ISSUED UPON EXERCISE HEREOF WILL
BE, ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR FOR RESALE IN CONNECTION WITH,
ANY DISTRIBUTION THEREOF. NO SUCH SALE OR
OTHER DISPOSITION MAY BE MADE WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 SECURITIES ACT AND COMPLIANCE WITH THE
APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE ISSUER AND ITS COUNSEL,
THAT SAID REGISTRATION IS NOT REQUIRED
UNDER THE 1933 SECURITIES ACT AND THAT
APPLICABLE STATE SECURITIES LAWS HAVE BEEN
COMPLIED WITH.
TRANSFER AND VOTING OF THE SHARES
PURCHASABLE BY THIS WARRANT ARE SUBJECT TO
THE TERMS OF AN EQUITY HOLDERS AGREEMENT
DATED AUGUST 19, 1996 AMONG THE HOLDER AND
OTHER INVESTORS, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE CORPORATION.
This certifies that __________ ("Purchaser"), [specify if
individual or type of entity and address/place of business], or
any party to whom this Warrant is assigned in compliance
with the terms hereof (Purchaser and any such assignee being
hereafter sometimes referred to as "Holder"), is entitled to
subscribe to and purchase, during the period commencing at
the date first set forth above and ending at 5 p.m. Hartford,
Connecticut, local time, on the fifth (5th) anniversary of such
date, the number of shares of fully paid and nonassessable
common stock (the "Common Stock") of Shared
Technologies Cellular, Inc. (the "Company"), a Delaware
corporation with its principal place of business at 100 Great
Meadow Road, Wethersfield, Connecticut, that have an
aggregate purchase price equal to the Aggregate Price (as
defined below). The purchase price of each such share shall
be the Warrant Price as defined below. This Warrant will be
initially exercisable for [specify number of shares equal to
number shares issued/issuable to Holder upon conversion of
his shares of Series B Stock] shares of Common Stock. This
Warrant is issued to Purchaser pursuant to the Agreement (as
defined below).
ARTICLE I
DEFINITIONS
"Aggregate Price" shall mean [specify as product of (a)
number shares issued/issuable to Holder upon conversion of
his shares of Series B Stock, multiplied by (b) Three and
No/100 Dollars($3.00)].
"Agreement" shall mean that certain Stock Purchase
Agreement among the Company, Purchaser, and certain
investors in the Company's Series B Convertible Preferred
Stock entered into on even date herewith.
"Certificate of Designations" means the Company's
Certificate of Designations, Preferences and Rights of Series
B Convertible Preferred Stock, a copy of which is attached as
Exhibit B to the Stock Purchase Agreement
"Common Stock Equivalents" shall mean Convertible
Securities and Rights.
"Convertible Securities" means any securities which are
directly or indirectly convertible into Common Stock.
"Effective Price" means the quotient obtained by dividing (i)
Minimum Consideration by (ii) Maximum Shares Upon
Exercise.
"Maximum Shares Upon Exercise" means the maximum
number of shares of Common Stock issuable under a
Common Stock Equivalent upon complete exercise and full
conversion of all Rights or Convertible Securities represented
thereby, computed without regard to contingent adjustments
to the number of shares issuable upon exercise and conversion
(other than adjustments caused solely by the passage of time
which increase the number of shares issuable upon exercise
and conversion).
"Minimum Consideration" means the minimum aggregate
consideration paid or payable at any time for the purchase of
the Common Stock Equivalents during the term of the
Common Stock Equivalents, and upon complete exercise and
full conversion of the Common Stock Equivalents, computed
without regard to contingent adjustments to exercise or
conversion price (other than adjustments caused solely by the
passage of time which reduce such minimum aggregate
consideration).
"Rights" means any options, warrants, or rights to purchase
Common Stock or Convertible Securities.
"Series B Convertible Preferred Stock" means the Series B
Convertible Preferred Stock described in the Certificate of
Designations.
"Stock Purchase Agreement" means that certain Stock
Purchase Agreement among the Company, Purchaser, and
certain investors in the Company's Series B Convertible
Preferred Stock entered into on August 19,1996.
"Warrant Price" shall mean the price of a share of Common
Stock, as such amount may be adjusted from time to time.
The initial Warrant Price is Three and No/100 Dollars
($3.00).
ARTICLE II
EXERCISE AND PAYMENT
.13 Cash Exercise. The purchase rights represented by
this Warrant may be exercised by Holder, in whole or in part,
by the surrender of this Warrant at the principal office of the
Company, and by the payment to the Company, by certified,
cashier's or other check acceptable to the Company, of an
amount equal to the aggregate Warrant Price of the shares
being purchased.
.14 Net Issue Exercise. In lieu of exercising this
Warrant pursuant to Section 2.1, Holder may elect to receive
shares of Common Stock equal to the value of this Warrant
(or of any portion thereof remaining unexercised) by
surrender of this Warrant at the principal office of the
Company together with notice of such election, in which
event the Company shall issue to Holder a number of shares
of the Company's Common Stock computed using the
following formula:
X = Y (A-B)
A
Where X = the number of shares of Common
Stock to be issued to Holder.
Y = the number of shares of Common
Stock purchasable under this Warrant (at the date of such
calculation).
A = the fair market value of one share
of the Company's Common Stock (at the date of such
calculation).
B = Warrant Price (as adjusted to the
date of such calculation).
.15 Fair Market Value. For purposes of this Section 2,
fair market value of one share of the Company's Common
Stock shall mean:
.15
(i) The average of the closing prices of the
Company's Common Stock quoted in the Over-The-Counter
Market Summary (if not on the Nasdaq system) or the closing
price quoted on the Nasdaq Stock Market or any exchange on
which the Common Stock is listed, whichever is applicable,
as published in the Eastern Edition of The Wall Street
Journal for the ten (10) trading days prior to the date of
determination of fair market value; or
(ii) If the Company's Common Stock is not
traded over-the-counter or on an exchange, the per share fair
market value of the Common Stock shall be as determined by
an independent appraiser appointed in good faith by the
Company's Board of Directors. The cost of such appraisal
shall be borne by the Company.
.16 Stock Certificate. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares
of Common Stock so purchased shall be delivered to Holder
within a reasonable time and, unless this Warrant has been
fully exercised or has expired, a new Warrant representing
the Aggregate Price with respect to which this Warrant shall
not have been exercised shall also be issued to Holder within
such time.
.17 Automatic Exercise.
(i) To the extent this Warrant is not previously
exercised, and if the fair market value of one share of the
Company's Common Stock is greater than the Warrant Price,
as adjusted, this Warrant shall be deemed automatically
exercised in accordance with Section 2.2 hereof (even if not
surrendered) immediately before its expiration. For purposes
of such automatic exercise, the fair market value of one share
of the Company's Common Stock upon such expiration shall
be the fair market value determined pursuant to Section 2.3
above.
(ii) In the event that the Company exercises its
right under Section 6 of the Certificate of Designations
adopted by the Company on August 16, 1996 (which
Certificate specifies the rights and privileges of the Series B
Stock) to redeem all of the Series B Stock, this Warrant shall
be deemed automatically exercised in accordance with
Section 2.2 hereof (even if not surrendered) as of the date
upon which such redemption occurred.
(iii) To the extent this Warrant or any portion
thereof is deemed automatically exercised pursuant to this
Section 2.5, the Company agrees to notify Holder within a
reasonable period of time of the number of shares of the
Company's Common Stock, if any, Holder is to receive by
reason of such automatic exercise.
.18 Stock Fully Paid; Reservation of Shares. The
Company covenants and agrees that all Common Stock which
may be issued upon the exercise of the rights represented by
this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with
respect to the issue thereof (excluding taxes based on the
income of Holder). The Company further covenants and
agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company
will at all times have authorized and reserved for issuance a
sufficient number of shares of its Common Stock as would be
required upon the full exercise of the rights represented by
this Warrant.
.19 Fractional Shares. No fractional share of Common
Stock will be issued in connection with any exercise hereof,
but in lieu of a fractional share upon complete exercise
hereof, Holder may purchase a whole share at the then
effective Warrant Price.
ARTICLE III
CERTAIN ADJUSTMENTS OF NUMBER OF
SHARES PURCHASABLE AND WARRANT
PRICE
The number and kind of securities purchasable upon
the exercise of this Warrant and the Warrant Price shall be
subject to adjustment from time to time upon the happening
of certain events, as follows:
.20 Reclassification, Consolidation or Merger. In case
of: (i) any reclassification or change of outstanding securities
issuable upon exercise of this Warrant; (ii) any consolidation
or merger of the Company with or into another corporation
(other than a merger with another corporation in which the
Company is a continuing corporation and which does not
result in any reclassification, change or exchange of
outstanding securities issuable upon exercise of this Warrant);
or (iii) any sale or transfer to another corporation of all, or
substantially all, of the property of the Company, then, and in
each such event, the Company or such successor or
purchasing corporation, as the case may be, shall execute a
new Warrant which will provide that Holder shall have the
right to exercise such new Warrant and purchase upon such
exercise, in lieu of each share of Common Stock therefore
issuable upon exercise of this Warrant, the kind and amount
of securities, money and property receivable upon such
reclassification, change, consolidation, merger, sale or
transfer by a holder of one share of Common Stock issuable
upon exercise of this Warrant had this Warrant been
exercised immediately prior to such reclassification, change,
consolidation, merger, sale or transfer. Such new Warrant
shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided
in this Section 3 and the provisions of this Section 3.1, shall
similarly apply to successive reclassifications, changes,
consolidations, mergers, sales and transfers.
Subdivision or Combination of Shares. If the Company shall
at any time while this Warrant remains outstanding and
unexercised in whole or in part: (i) divide its Common Stock,
the Warrant Price shall be proportionately reduced; or (ii)
combine shares of is Common Stock, the Warrant Price shall
be proportionately increased.
.22 Adjustment for Issue or Sale of Shares at Less Than
the Warrant Price. If, in a transaction other than an issuance
excepted from these provisions as set forth below or an
issuance that causes an adjustment under Sections 3.1 or 3.2,
the Company shall at any time or from time to time, issue any
additional shares of Common Stock without consideration or
for a net consideration per share less than the Warrant Price
in effect immediately prior to such issuance, then, and in each
case, the Warrant Price shall be lowered to an amount equal
to the lowest per share price received, or deemed received, by
the Company as consideration for such Shares.
For purposes of this Section 3.3:
(i) There shall be no adjustment under this
Section 3.3 for any sales or issuances: (a) in a transaction in
which an adjustment will be made pursuant to Section 3.1 or
3.2; (b) of Common Stock or Common Stock Equivalents not
in excess of ten per cent (10%) of the then issued and
outstanding shares of Common Stock of the Company, if such
issuance is made pursuant to an employee incentive plan
approved by the Company's shareholders and Board of
Directors; (c) upon exercise or conversion of Common Stock
Equivalents outstanding on the original date of issuance of
this Warrant, or (d) upon the conversion or exchange of
shares of the Series B Convertible Preferred Stock into any
other instrument or shares of capital stock prior to January 1,
1998;
(ii) The issuance of Common Stock Equivalents
shall be deemed an issuance at such time of the shares of
Common Stock underlying the Common Stock Equivalents.
If the Effective Price shall be less than the Warrant Price at
the time of such issuance, then an adjustment in the Warrant
Price shall be made upon each such issuance in the manner
provided in this Section 3.3. No adjustment of the Warrant
Price shall be made under this Section 3.3 upon the issuance
of shares of Common Stock upon the exercise or conversion
of Common Stock Equivalents if an adjustment has
previously been made as above provided. Any adjustment of
the Warrant Price shall be disregarded, if, as and when such
Common Stock Equivalents expire or are canceled without
being exercised so that the Warrant Price effective
immediately upon such cancellation or expiration shall be
equal to the Warrant Price in effect at the time of the issuance
of the expired or canceled Common Stock Equivalents, with
such additional adjustments as would have been made to the
Warrant Price had the expired or canceled Common Stock
Equivalents not been issued.
Other Action Affecting Common Stock. If the Company
takes any action with respect to its capital structure affecting
its Common Stock after the date hereof other than an action
described in either of Sections 3.1 and 3.2 hereof, which
would have a material effect upon Holder's rights hereunder,
the Warrant Price shall be adjusted in such manner and at
such time as the Board of Directors of the Company shall in
good faith determine to be equitable under the circumstances.
.24 Time of Adjustments to the Warrant Price. All
adjustments to the Warrant Price and the number of shares
purchasable hereunder, unless otherwise specified herein,
shall be effective as of the earlier of:
(i) the date of issue (or date of sale, if earlier)
of the security causing the adjustment;
(ii) the effective date of a division or
combination of shares;
(iii) the record date of any action of holders of
the Company's capital stock of any class taken for the purpose
of dividing or combining shares or entitling shareholders to
receive a distribution or dividends.
.25 Notice of Adjustments. In each case of an
adjustment in the Warrant Price and the number of shares
purchasable hereunder, the Company, at its expense, shall
cause the Chief Financial Officer of the Company to compute
such adjustment and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such
adjustment is based. The Company shall promptly mail a
copy of each such certificate to Holder pursuant to Section 6.9
hereof.
.26 Duration of Adjusted Warrant Price. Following each
adjustment of the Warrant Price, such adjusted Warrant Price
shall remain in effect until a further adjustment of the
Warrant Price.
.27 Adjustment of Number of Shares. Upon each
adjustment of the Warrant Price pursuant to Sections 3.1, 3.2
or 3.4, the number of shares of Common Stock purchasable
hereunder shall be adjusted to the nearest whole share, to the
number obtained by dividing the Aggregate Price by the
Warrant Price as adjusted. No adjustment to the number of
shares of Common Stock purchasable hereunder shall be
made upon an adjustment of the Warrant Price pursuant to
Section 3.3.
ARTICLE IV
TRANSFER, EXCHANGE AND LOSS
.28 Transfer. This Warrant is transferable on the books
of the Company at its principal office by the registered Holder
hereof upon surrender of this Warrant properly endorsed,
subject to compliance with federal and state securities laws.
The Company shall issue and deliver to the transferee a new
Warrant or Warrants representing the Warrants so
transferred. Upon any partial transfer, the Company will
issue and deliver to Holder a new Warrant or Warrants with
respect to the Warrants not so transferred. Notwithstanding
the foregoing, Holder shall not be entitled to transfer a
number of shares or an interest in this Warrant representing
less than five percent (5%) of the aggregate shares initially
covered by this Warrant. Any transferee shall be subject to
the same restrictions on transfer with respect to this Warrant
as the Purchaser.
.29 Securities Laws. Upon any issuance of shares of
Common Stock upon exercise of this Warrant, it shall be the
Company's responsibility to comply with the requirements of:
(1) the 1933 Securities Act; (2) the Securities Exchange Act
of 1934, as amended; (3) any applicable listing requirements
of any national securities exchange; (4) any state securities
regulation or "Blue Sky" laws; and (5) requirements under
any other law or regulation applicable to the issuance or
transfer of such shares. If required by the Company, in
connection with each issuance of shares of Common Stock
upon exercise of this Warrant, the Holder will give: (i)
assurances in writing, satisfactory to the Company, that such
shares are not being purchased with a view to the distribution
thereof in violation of applicable laws, (ii) sufficient
information, in writing, to enable the Company to rely on
exemptions from the registration or qualification
requirements of applicable laws, if available, with respect to
such exercise, and (iii) its cooperation to the Company in
connection with such compliance.
.30 Exchange. This Warrant is exchangeable at the
principal office of the Company for Warrants to purchase the
same Aggregate Price purchasable hereunder, each new
Warrant to represent the right to purchase such Aggregate
Price as Holder shall designate at the time of such exchange.
Each new Warrant shall be identical in form and content to
this Warrant, except for appropriate changes in the number of
shares of Common Stock covered thereby, the Aggregate
Price of such shares, the percentage stated in Section 4.1
above, and any other changes which are necessary in order to
prevent the Warrant exchange from changing the respective
rights and obligations of the Company and the Holder as they
existed immediately prior to such exchange.
.31 Loss or Mutilation. Upon receipt by the Company of
evidence satisfactory to it of the ownership of, and the loss,
theft, destruction or mutilation of, this Warrant and (in the
case of loss, theft, or destruction) of indemnity satisfactory to
it, and (in the case of mutilation) upon surrender and
cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant.
ARTICLE V
HOLDER RIGHTS
.32 No Shareholder Rights Until Exercise. No Holder
hereof, solely by virtue hereof, shall be entitled to any rights
as a shareholder of the Company. Holder shall have all rights
of a shareholder with respect to securities purchased upon
exercise hereof at the time of cash or net issue exercise
pursuant to Sections 2.1 and 2.2 hereof, or at the time of
automatic exercise hereof (even if not surrendered) pursuant
to Section 2.5 hereof.
ARTICLE VI
MISCELLANEOUS
.33 Additional Covenants by the Company. The
Company further covenants and agrees that it will:
a. Give each Holder prompt written
notice of any intended changes to the composition of its
capital structure, whether by issuance of new securities or
otherwise;
b. Give each Holder written notice of
any shareholders' meeting and will allow a representative of
each Holder to attend such meetings;
c. Allow, upon reasonable notice and
at reasonable times, the inspection of its minute book and
other corporate records by a representative of the Holder;
d. Not engage, other than on arm's
length terms, in any transaction with any of its shareholders
or affiliates (as such term is defined under Rule 144 issued by
the Securities and Exchange Commission under the 1933
Securities Act, as amended);
e. Provide Holder, within fifteen (15)
days after the date of such filing, copies of all documents filed
by the Company with the Securities and Exchange
Commission including but not limited to all reports on Forms
10-K, 10-Q, 8-K and their exhibits.
.34 Governmental Approvals. The Company will from
time to time take all action which may be necessary to obtain
and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and
securities acts filings under federal and state laws, which may
be or become requisite in connection with the issuance, sale,
and delivery of this Warrant, and the issuance, sale and
delivery of the shares of Common Stock or other securities or
property issuable or deliverable upon exercise of this Warrant.
.34
.35 Governing Laws. It is the intention of the parties
hereto that except as set forth below, the internal laws of the
state of Connecticut, U.S.A. (irrespective of its choice of law
principles) shall govern the validity of this warrant, the
construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
Notwithstanding the foregoing, the corporation laws of the
State of Delaware shall govern the procedural and substantive
matters pertaining to the due authorization, issuance, delivery
and exercise of this Warrant and the shares of Common Stock
upon exercise hereof. Except as set forth below, the parties
hereby agree that any suit to enforce any provision of this
Warrant arising out of or based upon this Warrant or the
business relationship between any of the parties hereto shall
be brought in the United States District Court for the District
of Connecticut or the Superior Court in Hartford,
Connecticut. Each party hereby agrees that such courts shall
have personal jurisdiction and venue with respect to such
party, and each party hereby submits to the personal
jurisdiction and venue of such courts. In addition to the
foregoing jurisdiction, Holder at its sole option, may
commence any such suit in any jurisdiction in which the
Company has a business office or is incorporated.
.36 Binding Upon Successors and Assigns. Subject to,
and unless otherwise provided in, this Warrant, each and all
of the covenants, terms provisions, and agreements contained
herein shall be binding upon, and inure to the benefit of the
permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
.37 Severability. If any one or more provisions of this
Warrant, or the application thereof, shall for any reason and
to any extent be invalid or unenforceable, the remainder of
this Warrant and the application of such provisions to other
persons or circumstances shall be interpreted so as best to
reasonably effect the intent of the parties hereto. The parties
further agree to replace any such void or unenforceable
provisions of this Warrant with valid and enforceable
provisions which will achieve, to the extent possible, the
economic, business and other purposes of the void or
unenforceable provisions.
.38 Default, Amendment and Waivers. This Warrant
may be amended upon the written consent of the Company
and the Holder. The waiver by a party of any breach hereof
for default in payment of any amount due hereunder or
default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding
breach or default.
.39 No Waiver. The failure of any party to enforce any
of the provisions hereof shall not be construed to be a waiver
of the right of such party thereafter to enforce such
provisions.
.40 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Warrant, the prevailing party shall
be entitled to recover, as an element of the costs of suit and
not as damages, reasonable attorneys fees to be fixed by the
court (including without limitation, costs, expenses and fees
on any appeal). The prevailing party shall be the party entitle
to recover its costs of suit, regardless of whether such suit
proceeds to final judgment. A party not entitled to recover its
costs shall not be entitled to recover attorneys' fees. No sum
for attorneys' fees shall be counted in calculating the amount
of a judgment for purposes of determining if a party is
entitled to recover costs or attorneys' fees.
.41 Notices. Whenever any party hereto desires or is
required to give any notices, demand, or request with respect
to this Warrant, each such communication shall be in writing
and shall effective only if it is delivered by personal service,
sent by telecopy or mailed, United States certified mail,
overnight service, postage prepaid, return receipt requested,
addressed as follows:
Company: Shared Technologies Cellular, Inc.
Attn: President
100 Great Meadow Road
Wethersfield, CT 06109
Fax No. (203) 258-2401
Holder: ___________________
___________________
___________________
___________________
Fax No. (___) ________
Such communication shall be effective when they are
personally delivered, or telecopied, to the addressee thereof;
but if sent by certified mail in the manner set forth above,
they shall be effective one (1) business days after being
deposited in the United States mail. Any party may change
its address for such communications by giving notice thereof
to the other party in conformity with this Section.
.42 Time. Time is of the essence of this Warrant.
.43 Construction of Agreement. This Warrant has been
negotiated by the respective parties hereto and their attorneys
and the language hereof shall not be construed for or against
any party.
No Endorsement. Holder understands that no federal or state
securities administrator has made any finding or
determination relating to the fairness of investment in the
Company or purchase of the Common Stock hereunder and
that no federal or state securities administrator has
recommended or endorsed the offering of securities by the
Company hereunder.
.45 Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person, persons,
entity or entities may require.
.46 Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further
instruments, documents and agreements and to give such
further written assurances, as may be reasonably requested by
any other party to better evidence and reflect the transactions
described herein and contemplated hereby, and to carry into
effect the intents and purposes of this Warrant.
COMPANY:
SHARED TECHNOLOGIES CELLULAR, INC.
By:
Title:
EQUITY HOLDERS AGREEMENT
This Equity Holders Agreement ("Agreement') is made as of
August 19, 1996 by and
among International Capital Partners, "Inc. and its affiliates
(collectively, "ICP") Zesiger
Capital Group LL. and its investors set forth in Exhibit A
hereto (collectively, together with
ICP, "Stockholders") and SHARED TECHNOLOGIES
FAIRCHILD INC. ("STF').
Stockholders and STF are referred to herein collectively as
the "Equity Holders".
RECITALS
The following facts set forth the background to this
Agreement:
A. Stockholders and STF, collectively, upon consummation
of the transactions contemplated under (1) that certain Series
B Convertible Preferred Stock Purchase Agreement (the" ICP
Stock Purchase Agreement') entered into on the date hereof
by and among Stockholders and Shared Technologies
Cellular, Inc., a Delaware corporation with its principal place
of business in Wethersfield, Connecticut ("STC"), and (2) a
certain stock purchase agreement between STF and STC
dated the date hereof (the "STF Stock Purchase Agreement"),
are the holders of record of shares comprising over Fifty
Percent (50%) of the voting power on matters properly
brought for a vote of the shareholders of STC ("Voting
Power"; and each share entitling the holder thereof to Voting
Power being individually referred to as a "Share" and
collectively as the "Shares").
B. Stockholders and STF desire to enter into certain
understandings regarding the management and control of the
STC and the constitution of its Board of Directors.
NOW, THEREFORE, in consideration of the mutual
covenants hereinafter set forth, Stockholders and STF agree
as follows:
1. Management of the Company
1.1 Board of Directors. Each of the Equity Holders
agrees that from and after the date hereof such Investor will
vote (or cause to be voted) all of the Shares owned or held of
record by such Investor so as to effect the following:
a. The election of a Board of Directors of STC
consisting of seven (7) members;
b. The election of no more than two (2) management
directors (the "Management Directors") as such term is
defined in Section 1.2 herein;
c. For so long as one or more of the Stockholders own
Shares comprising (i) more than ten percent (10%) of the
Voting Power, the election of two (2) directors as designated
by International Capital Partners, Inc. ("ICP"), and (ii) more
than five percent (5%) of the Voting Power, the election of
one (1) director as designated by ICP (each director so
designated by ICP being hereinafter referred to as an "ICP
Director"). For purposes of this subsection, ownership of
options, warrants or convertible securities that upon exercise
or conversion shall entitle the holder thereof to acquire
Shares shall be deemed to be ownership of the Voting Power
of the equivalent number of Shares;
d. For so long as STF owns Shares comprising more
than five percent (5%) of the Voting Power, the election of
one (1) director as designated by STF (the "STF Director").
For purposes of this subsection, ownership of options,
warrants or convertible securities that upon exercise or
conversion shall entitle the holder thereof to acquire Shares
shall be deemed to be ownership of the Voting Power of the
equivalent number of Shares); and
e. The election of directors of STC who shall cause the
Board of Directors of STC to form an Executive Committee
comprised of one (1) Management Director, one (1) ICP
Director, and one (1) additional director as designated by the
other holders of the Company's Series B Convertible
Preferred Stock.
1.2 Management Director. For the purposes of Section 1
herein, the term "Management Director" shall mean an
officer and full-time employee of STC, provided however that
Anthony Autorino shall be deemed a Management Director
for so long as he is a member of the Board of Directors of
STC. In the event that a Management Director elected in
accordance with Section 1. lb., ceases to be either an officer
or Full-time employee of STC, such Management Director
shall be removed as a Director and his position filled with a
qualified Management Director under the procedure set forth
for the filling of vacancies on the Board of Directors as set
forth in the Bylaws of STC.
2. Director Indemnification. In the event that any
director contemplated by this Agreement shall be made or
threatened to be made a party to any action, suit or
proceeding with respect to which he may be entitled to
indemnification by the Company pursuant to its Certificate of
Incorporation or otherwise, he shall be entitled to be
represented in such action, suit or proceeding by counsel of
his choice (subject to the provisions of any applicable
insurance policy) and the reasonable expenses of such
representation shall be reimbursed by the Company to the
extent provided in or authorized by said Certificate of
Incorporation or other provision and permitted by applicable
law.
3. Entire Agreement Amendment and Waiver. This
Agreement contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and
supersedes all prior negotiations, commitments, agreements
and understandings heretofore had between them with respect
thereto. This Agreement may be amended, and compliance
with any provisions of this Agreement may be omitted or
waived, by the written agreement of all parties. A waiver on
one occasion shall not constitute a waiver on any further
occasion.
4. Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and
shall be delivered by hand, by telecopier, by overnight mail or
mailed by first class certified or registered mail, return receipt
requested, postage prepaid:
a. if to the Stockholders:
International Capital Partners, Inc.
300 First Stamford Place
Stamford, CT 06902
Attn: Legal Department
and
Zesiger Capital Group LLC
320 Park Avenue
New York, New York 10022
Attn: Albert L. Zesiger
(or at such other address as may have been furnished in
writing by ICP to STF). With a copy to:
Pepe & Hazard
Goodwin Square
Hartford, CT 06103
Attn: Walter W. Simmers, Esq.
b. if to STF:
Shared Technologies Fairchild Inc.
100 Great Meadow Road
Wethersfield, CT 06109
Attn: Legal Department
(or at such other address as may have been furnished in
writing by STF to ICP).
With a copy to:
Gadsby & Hannah
125 Summer Street
Boston, MA 02110
Attn: Harold J. Carroll, Esq.
5. Counterparts. This Agreement may be executed in
more than one counterpart, each of which shall be deemed to
be an original and all of which, together, shall constitute one
and the same instrument.
6. Applicable Law. This Agreement shall be governed
by, and construed and enforced in accordance with, the
internal laws of Delaware without regard to its conflict of law
rules.
7. Specific Enforcement. The Equity Holders
acknowledge and agree that the recovery of money damages
will not constitute an adequate remedy for breach of the
provisions of this Agreement. Accordingly, each Investor
agrees that the provisions of this Agreement may be
specifically enforced against them in addition to any other
remedies available for breach of this Agreement, and each
such Investor hereby waives the defense in any equitable
proceeding that there is an adequate remedy at law for any
such breach.
8. Transferees, Successors and Assigns. This
Agreement shall be inure to the benefit of and shall be
binding upon each Investor's transferees, successors and
assigns. Each Investor agrees that it will not sell, transfer or
assign any of the Shares (or any options, warrants,
convertible securities or rights pursuant to which the holder
thereof shall be entitled to acquire or would otherwise become
the beneficial owner of such Shares), nor grant any security
agreement or pledge with respect to such Shares (each a
"Transfer") unless prior to such Transfer (a) the proposed
purchaser, transferee, assignee, secured party or pledgee of
such Shares agrees in writing to be bound by the terms of this
Agreement and executes an amendment to this Agreement for
that purpose, and Q)) an original of such agreement and
amendment are delivered to the Investor who is not
consummating such Transfer upon the consummation of such
Transfer. Any Transfer of Shares in violation of this
Agreement shall be void and unenforceable. The certificates
representing the Shares held by the Equity Holders will bear a
legend to the following effect:
"Transfer and Voting of the Shares represented by this
Certificate are subject to the terms of an Equity Holders
Agreement dated August 19, 1996, among the holder and
other Equity Holders, a copy of which is on file at the
principal office of the Corporation."
9. Termination. This Agreement shall terminate upon
the registration of any of the Shares held by any of the parties
hereto pursuant to an effective registration statement covering
such Shares pursuant to the Securities Act of 1933.
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first above written.
ZESIGER Capital GROUP LLC
Attorney-in-fact for the investors as set forth in
Exhibit A hereto
By: ______________________
Name:
Its ______________________
(Duly Authorized)
International Capital Partners, Inc. and its affiliates
By: _____________________
Name:
Its ______________________
(Duly Authorized)
SHARED TECHNOLOGIES FAIRCHILD, INC.
By: ______________________
Name:
Its ______________________
(Duly Authorized)
